By Ifeanyi Nwabugwu
The Federal Government has made significant impact in the downstream petroleum industry, especially in tackling the spite of pipeline vandalism, which initially hampered petroleum products distribution, and equally achieved zero fuel scarcity throughout 2013.
Among these efforts was the Federal Government’s tight security on the entire pipeline network across the country and the use of the Nigerian Army Engineering Corps to repairs some of the vandalised pipelines. The other one was the prompt payment of verified subsidy claims to marketers, which enabled them to import fuel to meet the national demand.
The Nigerian National Petroleum Corporation (NNPC) and Major Oil Marketers Association of Nigeria (MOMAN), which comprises Mobil, Total, Oando, Forte and Conoil, pointed out that the sector, which was buffeted from all corners by incidents of oil theft and pipeline vandalism, was able to maintain unprecedented sanity in the supply and distribution of fuel nationwide.
Both NNPC and MOMAN disclosed that Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, , against all odds, was able to banish the ugly perennial episodes of long fuel queues in the filling stations, especially during Muslim and Christian festivities, through the reform of the downstream and payment of subsidy claims.
The free flow of petroleum products was also sustained and propelled within the period as the sub-sector witnessed the full activation of handful of reform programmes, which ultimately led to the recorded reduction in national consumption of petrol from 60 million litres per day as witnessed in 2011 to 40 million litres per day leading to savings in billions of Naira.
General Manager, Media Relations Department, Group Public Affairs Division of NNPC, Dr. Omar Farouk Ibrahim, pointed out that based on the directive of Alison-Madueke, NNPC and its downstream subsidiary company, the Pipelines and Products Marketing Company (PPMC), embarked on an aggressive revamp of key downstream facilities including PPMC depots and product supply pipelines, which have hitherto remained moribund.
As at the last count, Ibrahim stated, only three out of the 23 PPMC inland storage depots spread across Nigeria were awaiting repair works, adding that the dilapidated depots and ancillary pipelines in Aba, Benin, Suleja, Gombe, the PPMC product evacuation and reception jetty in Okrika, among others, had been turned around for the better.
Other steps taken to ultimately improve efficiency in supply, according to him, included the deployment of the horizontal directional Drilling technology as a solution to pipeline vandalism, especially in flashpoint areas like Arepo and Ije-Ododo, and the approval of the Sub-sea By-pass Line project aimed at getting imported heavy crude to the Kaduna Refining and Petrochemical Company (KRPC).
Some of these pipelines and depots, it was gathered, had been abandoned for upwards of 10 years, but Alison-Madueke, with her aggressive efforts, gave marching orders to clear the pipelines right of way and fix the pipelines for efficient distribution of products across country.
The Nigerian Army Engineering Corps was immediately awarded the contract to clear the pipelines right of way across the country, while work was completed on the Atlas Cove – Mosimi – Ibadan axis and Port Harcourt – Bonny line.
To supplement the effort of the inland depots the PPMC, the Federal Government also maintained a sustainable basis large stock of products at sea on massive vessels, especially in the offshore Lagos area, which served as supply buffer on 32 days product sufficiency level at forward consumption.
Ibrahim disclosed that though the NNPC had succeeded in keeping the country wet, the efforts came with a huge price, as the cost was exacerbated by the fact that the huge demurrage associated with maintaining the amada of storage vessels on high sea, which was not contemplated in the prevailing template as provided by the Petroleum products pricing regulatory agency PPPRA.
The result, he explained, was the outstanding shortfall of $10.8 billion, which came to the fore during the recent meeting of stakeholders to reconcile the phantom missing $ 49.8 billion as alleged by the Central Bank of Nigeria (CBN).
He further said that the disputed $10.8 billion was the result of subsidy claims, unrecovered crude/product losses, and cost of strategic petroleum storage, which is currently not captured in the PPPRA template for refunds.
The Executive Secretary of MOMAN, Mr. Obafemi Thomas Olawore, said that there would have been scarcity of Premium Motor Spirit (PMS) during the Christmas period, as the marketers were not ready to import and fuel, but the quick intervention of the Minister of Finance to pay the verified subsidy claims saved the situation.
Olawore said: “By first week of December, 2013, the stock at Apapa had gone down. That time, we were depending only on NNPC to give us products. But immediately we got payment in the second week of the month, we were able to make some immediate spots arrangement to bring in Premium Motor Spirit (PMS).
“That is why there is no scarcity during the period. We are saying kudus to the Minister of Finance. We want her to keep it up and please not to delay the subsidy claims for too long. But we thank her for what she has done so far and we urge her to pay us as at when due, bearing in mind that the guideline said 45 days,” he added.
Alison-Madueke attributed the success to President Goodluck Jonathan’s Transformational Agenda in the downstream sub-sector, which led to strategic reform initiatives in the management of petroleum products supply and distribution.
She said: “In spite of these savings, we have also been able to maintain stability of products supply, while putting in place, stringent regulatory conditions which would make it difficult for dubious marketers to short change the system.”
According to her, the Federal Government had done extremely well in the area of halting fuel subsidy scams in the country, stressing that government’s efforts at transparency and accountability were yielding positive results.
She said the reforms were carried out to address the issue of pervasive malpractices in the oil and gas sector, so as to engender public trust and belief in government’s sincerity in the downstream operational activities.
She identified some of the reform initiatives to include, restoring credibility in the process of products supply and distribution, and the conduct of a prequalification exercise for traders/suppliers initiated in the form of technical audit of suppliers of petrol into the Nigerian market.
She enumerated other measures to include the conduct of monthly and mid-quarter Import Performance Review meetings with stakeholders and resolution of marketers’ complaints through effective mediation.
According to her, these measures have stemmed the erosion of marketer’s confidence in the fuel importation regime, with its attendant payment uncertainties occasioned by budget approval delays.
War against oil theft, pipeline vandalism
The Federal Government’s war against crude oil theft and pipeline vandalism in the country topped the agenda in 2013, as the government involved multifaceted approaches to achieve it. At first, it warned foreign countries to desist from buying illegal crude oil from Nigeria and gave a directive to Joint Task Force to tackle pipeline vandals in the Niger Delta.
The Vice President, Namadi Sambo, disclosed that the Federal Government had put in place stringent measures to bring the nuisance to an end, revealing that the Federal Executive Council (FEC) approved the development of a special laboratory for forensic on oil products in Nigeria, which would assist in tackling the problem squarely.
The Nigerian Minister of Petroleum Resources, Diezani Alison-Madueke, also said: “We felt it is necessary to seek partnership with the U.S. because it has affected our economy in several ways and the degradation that it causes as well. The U.S. President, as you have heard, responded to that partnership.
“As you can see, a high-powered delegation has come to discuss and they have been able to discuss with a number of people and everybody and entity related to this oil theft. We are very hopeful that as they go back, we will continue with the discussion and come with a very salient solution to help us push back the scourge of oil theft once and for all,” she added.
President Goodluck Jonathan took seriously the fight against oil theft, as he also employed all strategies to end the menace. Among his efforts towards tackling the nuisance was his charge to Extractive Industries Transparency Initiative (EITI), when its chairperson, Ms Clare Short, visited him, to do more to support Nigeria’s efforts to stop the exportation of stolen crude oil from the country.
While specifically calling on EITI to join the Federal Government in working to ensure that refineries that receive stolen crude oil from Nigeria are identified and punished, he said: “The efforts of EITI in criminalising ‘blood diamonds’ from African mines have helped in curtailing that illegal business. I urge you to also support Nigeria as we confront the forces stealing Nigerian crude oil.
“The theft of crude oil from Nigeria involves the collusion of foreigners and the stolen crude is refined abroad. EITI can use its mechanisms to help us track down the thieves and those who receive the stolen crude oil,” he stated.
The Federal Government promised not to relent on its war against oil theft, as it had directed the Joint Task Force in the Niger Delta, which is charged with patrolling onshore oil fields, to not only destroy the illegal refineries, but also clamp down on the perpetrators of the menace.
Opening of bid round for 31 marginal oil fields
The Federal Government, in 2013, opened second marginal oil field licensing round, after more than 10 years that the first marginal field bid round was conducted, promising transparency and accountability in the process.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said it was aimed at deepening the participation of indigenous oil companies in the upstream sector of the oil and gas industry.
According to her, it was also aimed at generally increasing exploration and production activities in the oil and gas sector, stating that a total of 31 fields were on offer with 16 of them located onshore, while the remaining 15 were in the continental shelf.
Alison-Madueke said that the Federal Government was not only committed to transparency in the bid process, but it would also encourage companies interested in the assets to form a consortia, which would enable them to leverage upon each other’s strengths.
She said: “Over the next two weeks, the Department of Petroleum Resources will undertake a road show in different parts of the country about the programme. This will be followed by a three-and-a-half months of competitive bidding process in line with the Federal Government’s commitment to openness and transparency in the conduct of business activities in the country.”
The Minister of Petroleum Resources pointed out that the marginal field operations, which currently accounted for about one per cent of the nation’s production, had also recorded huge discoveries in excess of 100 million barrels to the nation’s reserve base.
Alison-Madueke noted that out of the eight assets, which had so far been divested by the international oil companies, four were held by active marginal field operators, who had continued to demonstrate a remarkable technical ability in operating significantly larger assets.
She said: “In their operations, the companies have addressed corporate social responsibility as a critical element, by providing for stakeholder participation as part of their success factors. In addition, their development strategy is in line with the nation’s gas flare policy and global environmental guidelines on green house emissions, by ensuring full utilisation of their associated gas. Indeed, one of them has established a modular refinery for diesel production, which is the first of its kind in the country.”
Announcement of planned privatisation of refineries
As part of the reform programme of the Federal Government, Minister of Petroleum Resources, Mrs Diazeni Alison- Madueke, in 2013, disclosed that the Federal Government would privatise all of the nation’s four refineries over the next 18 months to set stage for a more efficient downstream industry.
Alison- Madueke revealed that the decision was part of the fallouts of the Dr Kalu Idika Kalu Committee, which the Federal Government set up to review the state of the nation’s refineries, particularly since the refineries have not been producing up to their optimal capacities for over two decades.
Though the minister did not say how much equity the Federal Government would be expected to retain in the companies after the sale, she explained that a special committee set up by her ministry to review the recommendation had already held very crucial meetings with President Goodluck Jonathan and that the implementation of the privatization programme of the refineries would be completed over the next 18 months.
Alison-Madueke pointed out that though it was a very popular and uneasy decision, the Federal government was determined to proceed with the project of privatizing the refineries to make the downstream sector of the Nigerian petroleum industry more efficient and competitive.
According to her, a national oil company of Nigeria would be incorporated under CAMA to handle supervision and regulation of the downstream and upstream sector, pointing out that the assets of the industry would now be managed by a new national Asset Management Corporation (NAMC) that would specially be created for that purpose with two loans.
The Head of Public Communications of Bureau of Public Enterprises (BPE), Mr. Chigbo Anichebe, added that the privatisation plans were currently at the preliminary stage, where the blueprint of the policy would be decided.
Anichebe said: “We are working with the NNPC and Ministry of Petroleum Resources on the privatisation of the four refineries. We are just in the preliminary discussion with them and very soon, we will make public the work plan for the privatisation processes, including the engagement of advisers to advise us on the transaction.
“Once the work plan is fine-tuned, hopefully by the end of the year or early January next year, the work plan as well as the schedule will be unveiled to all stakeholders, including the media,” he stressed.
According to him, the privatisation would be handled in line with the usual strategy of the bureau, which was to sell a certain percentage of shares and reserve a certain percentage for the workers, host communities and Nigerians at large.
He urged Nigerians not to be apprehensive about the refineries’ sale because only capable and visionary investors would be considered in the privatisation process.
He further said: “The criteria should be that the buyers have the financial muscle and technical know-how to run these companies. We don’t bother about where they come from, as long as they are coming with clean money to invest in our economy. So, when we are doing our evaluation of investors for the transaction, that is what we will look at.’
By Ifeanyi Nwabugwu