BUSINESS IOCs divestment will reduce oil workforce by half -Gambo
What is your take on the current level of oil theft and pipeline vandalism in the country?
By government’s own admission, more than 10% of Nigeria’s total crude oil production i.e. about 200,000 barrels, is stolen every day, this is almost double the total production of our neighbour, Ghana. The nation, therefore, loses between $6 billion yearly to crude oil theft and another N165 billion to theft of refined products. As if this is not enough, there is also the brazen vandalism of pipelines which has adversely affected the supply of crude to the refineries, resulting in low or no output from our four refineries.
Can the sector cope with the growing level of insecurity in the country?
Related to oil theft and pipeline vandalism is the insecurity of lives and property in Nigeria. Terrorism ravages the north while kidnapping and armed robbery reigns in the south. Life in Nigeria has become nasty, brutish and short with general insecurity of our members, our families and other citizens. This general insecurity has also seriously increased the cost of doing business in our industry and impacted negatively on each one of us as our collective bargaining results in the last few years will attest. You will recall that we made a strong worded statement when Boko Haram killed some young Nigerian pupils in their hostels some months back… it’s a pity the security challenges is becoming a monster today. I have always, and will continue to hold the northern elites, in particular, and all Nigerians, in general, for the advent of Boko Haram. Look at it, there is abject poverty in the north that does not reflect the decades in which the northerners ruled Nigeria. Today we have millions of northern youths who are disillusioned, they are willing to work but there is no work. All the industries are dead, no textile factories, cotton and ground nut pyramids is a thing of history. Millions don’t know where their next mill will come from, and they see our military and political
Seyi Gambo is National Public Relations Officer of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). In this interview, he speaks on issues in the nation’s oil and gas industry. Excerpts:
elites perpetuating corruption, going free and throwing it at you. These youths are easy prey to many influences, including illiterate clerics and mischievous politicians. If we cannot protect the industry that gives us more than 80% of our revenue, what can we protect? Ethipoia’s major source of income is the Ethopian Airlines, the smooth operation of that airline is never disrupted. But, what do we have here? Instead of the Navy to patrol our territorial waters and arrest illegal vessels freighting our crude away, we resort to giving contracts to patrol such a sensitive space to Tompolo, an ex militant.
The spate of divestment by international oil companies in recent times is worrisome, even though the NNPC says it will promote local content. What in your view is the implication of the development to the sector?
The combined effect of insecurity, oil theft and pipeline vandalism has made the international oil companies (IOCs) to tweak their business strategy. You will recall that in 2003 many of these companies planned to massively invest in the Nigerian upstream oil and gas sector for the period 2004-2010. This was based on an ambitious aspiration by the Nigerian government to increase national oil reserves from circa 30 billion barrels in 2003 to 40 billion barrels in 2010, and daily national production from circa 2 million barrels, per day, to 4 million barrels, per day, in 2010. However, from February 2006, the militancy in the Niger Delta escalated and forced many of the multinational oil and gas companies to shut their operations in the Niger Delta. The planned investments by some of these companies, some of which had already kicked-off, could no longer be realised. As militancy reduced, oil theft and pipeline vandalism became the order of the day. Based on the pattern of the militant attacks coupled with some incentives by the government for deep water investments, many IOCs began to shift from onshore (land and swamp) operations to deep-water operations. In fact, many of these companies have divested and are divesting some of their onshore and swamp assets. The implication of this for the industry is better imagined. If nothing is done to urgently arrest the situation, PENGASSAN may lose some 50% of its members in the next three years.
Underfunding is a serious concern in the sector. Would you say the development has, to some extent, slowed down the growth of the nation’s oil and gas sector?
Our members in the upstream will recall how in October 2013, the government cut the programme budget by almost 40%. This is even when expenditure had already taken place based on an already scaled down budget. Year on year, it is clear that the government is not keen about reinvesting in the strategic oil and gas industry. Politicians are keener about sharing the proceeds from oil and gas but close their eyes to the urgent need for growth and development of the industry.
The government is set to privatise the nation’s refineries. What are the implications of the sale of these assets?
It should be very clear even to the blind that the government is determined to privatise our four refineries. Already, we can see that they are not committed to honouring the agreement signed with NUPENG and PENGASSAN on the issue, early this year. In order to lay the ground for the privatisation, government ensured the refineries are unable to produce. According to data from the NNPC, the combined average capacity utilisation of the nation’s four refineries fell from 30.87 per cent in December 2012 to a paltry 6.46 per cent in November 2013.
Blinded by its privatisation glaucoma, government fails to see that much of the gains ascribed to privatisation by the proponents of the policy are actually gains from other reforms. For instance, the government did not privatise NITEL for MTN, Econet (now Airtel) etc. to sprout and grow. They simply created the enabling environment and the GSM market blossomed. This is also our argument regarding the planned sale of the refineries. We have consistently advised government to create the enabling environment that will enable private businesses invest in refineries. For instance, we suggested in our PIB presentation, that effective incentives should be granted to allow for the development of private refineries, alongside the existing refineries. Let me tell you categorically, that hell will be let lose if these refineries are sold without the endorsement of the unions who are holding it in trust for Nigerians. Did Obasanjo sell NITEL till today before MTN, ECONET and Glo come to revolutionalise the sector? Let government keep to the agreement we signed with NUPENG and PENGASSAN as regards first doing the TAM of the refineries which money was budgeted for and released, then we can talk of the model of privatization, if need be. This is how MOU was signed with ASUU and we all know the history of that matter. We are all Nigerians, equal stakeholders in this country. Nobody can treat us as second class citizens in our fatherland. We are ready to fight this government, just as we took on the military government, for the sake of our children, the next generation. Somehow, I have a deep seated feeling that some people want President Goodluck to fail. Why court wahala when there is no need for it?
The delay in the passage of PIB is said to be one of the reasons for the slow growth of the industry. Where do we go from here?
You will recall that the Petroleum Industry Bill (PIB) was presented to the National Assembly (NASS) in July 2012. Public hearings were concluded by the House of Representatives in July 2013 and the Senate in November 2013, from then till now, not much has been done by the lawmakers. Meanwhile, investors have continued to adopt a wait-and-see attitude, refraining from making any new investment, pending the passage of the bill. Since 2009 when the Yar’adua government first introduced the PIB, no new Final Investment Decision (FID) has been taken on any oil and gas project in Nigeria, not even on the government-promoted, Brass LNG project. While we are dithering in Nigeria, there are new oil discoveries all over Africa, drawing in investors just as new technology is making hitherto unreachable and uneconomic hydrocarbon deposits accessible in Europe and North America thus, attracting investors to those environments. I was really ashamed one day when I heard the Senate President saying we won’t be intimidated by the International Oil Companies. Okay, don’t be intimidated, but for heaven’s sake, pass the PIB and let everybody know the rules of the game!