Nigeria’s oil can be a blessing

Apr 18, 2006 02:00 AM

by Cosmas Bolaji-Ajayi Ibadan

For some time now, evaluating the state of the Nigerian nation has become the pass-time and self-imposed prerogative of the Western press. The Charles Taylor saga, the alleged third term agenda of President Olusegun Obasanjo, with its embarrassing aftermath, the shabbily organised national census, and other eventful circumstances in the country have fired the embers of their news instincts.
However, none of these events have been negatively impacting on the country's image as the hostage-taking incidents at the Niger Delta, prompting pundits to reason that oil, with its disguised blessing, might be Nigeria's curse.

The gravity and far-reaching effect of this peddled assumption was amplified by an article titled: "Think Jamaica is bad? Try Nigeria", by Diane Abbot. The article had this to say of the country:
"Nigeria's greatest blessing has been oil; but it has also been its greatest curse. It is the sixth biggest oil producer in the world. Oil accounts for 95 % of exports by value and 80 % of government revenue amounting to billions and billions of pounds.”

“But the discovery of oil has been an ecological disaster for the Niger Delta (one of the most populous parts of the country) where the oil is extracted. Shell and other Western Oil companies have, in collusion with successive military dictatorships, raped the region. Petrol contamination of the water table has made local water undrinkable. Farming and fishing grounds have been ruined and gas flaring in the Delta is cited as Africa's single biggest contribution to greenhouse gas emissions.”
"It is symbolical of the brutally exploitative nature of the oil industry in Nigeria that the natural gas by-product (which other oil producers like Trinidad liquefy and market) is simply burnt in giant flares which cause incalculable environmental damage."

As much as these excerpts attempt a description of the searing metamorphosis of a blessing to a curse, they also put in relief of the challenges facing the oil and gas industry in Nigeria. In a country that is enjoying 50 years of oil discovery and a glut in the oil and gas market, the challenges are captured in the paradox of abundant oil reserves and scarcity for domestic utilisation; and in the ironic twist of foreign affluence and domestic deprivation.
What are these challenges? They include the dwindling oil activities in the Niger Delta, which have not enabled Nigeria to take full advantage of the fast rising global demand for oil; the absence of heavy industrial base to optimally utilise its abundant natural gas; the wanton flaring of this gas, and its accompanying health, environmental hazards and a huge loss of revenue; the incapacitated state and inadequacy of existing refineries, stifling the optimum development of the downstream sector; the absence of effective legislative measures to control exploration activities and fight corruption; the human resource question of providing realistic domestic or local content for an industry that provides over 90 % of the national foreign exchange.

Over the years, the rhetorics of petro-economics have been drowned by the harsh realities of incessant fuel price hikes, artificial scarcity and turbulence in the Niger Delta. And together they present a testimonial of woeful failure to the government. Yet, to gauge the government's performances on pockets of unfortunate circumstances is to be uncharitable to an administration that inherited the consequences of the malfeasance of past regimes. Perhaps, that is the burden of leadership.
Saddled with this burden, the present administration might have thought that to prevent a situation of “business as usual” in the oil and gas sector, there was need to make the Ministry of Petroleum a protectorate of the Presidency, under the supervision of an Honourable Minister of State for Petroleum. It is no surprise that the person most apt for that position happens to be Dr Edmund Daukoru, a thoroughbred professional, by education and experience, an oil technocrat par excellence.

Though dark clouds abound in the oil and gas industry, the efforts put in by this administration, to transform the industry, is creating some silver linings. Following the recommendations in the report of the Oil and Gas Implementation Committee (OGIC), made available to the National Council on Privatisation (NCP), a report implementation committee was inaugurated in 2005 to launch reforms in the oil industry.
Will the reforms put Kerosene in the stoves of the poor man? Will they dispel fears of future fuel scarcity and their concomitant crises? Will they stop ecological degradation and environmental pillaging of the Niger Delta? Will these reforms snowball into better service for Nigerians?

Perhaps, beyond any response to normative quests, they may attempt to. To bridge the gap between scarcity and abundance, government has set in motion modalities for the full liberalisation of the downstream sector to add value to upstream activities.
This is necessary for two major reasons:
Firstly, to augment the current 445,000 bpd total installed capacity of the existing refineries, which by every indication is grossly inadequate to satisfy domestic consumption.
Secondly, to revitalise depreciating government-owned facilities with attractive new private capital.

In this regard, this administration has expressed commitment to privatise two of the three government-owned refineries, in a bid to encourage the establishment of new privately-owned refineries. So far, the government has granted 22 licenses to investors since the deregulation exercise commenced for the establishment of refineries.
After meeting the laid down engineering and financial guidelines, 17 licensees of the 22 have been granted approval to construct refineries.

While the OGIC recommendation is being fashioned into a legislative framework to be debated by all stakeholders, there are ongoing legislative efforts towards the growth of the oil and gas industry. A notable aspect of these legislative efforts, whichare in tandem with the government's fight against corruption, is the Extractive Industries Transparency Initiative (EITI).
With oil and gas as its focus, this initiative entails a high profile stakeholder enlightenment programme pursued to create alliances with civil society and advocacy groups in a crusade against corruption. With this sharp practices and fraudulent activities that characterise the industry can be checked.

Another area government is expressing its resolve to phenomenally transform the industry is in its drive to commercialise the nation's gas resources, as contained in a new gas policy that has attracted foreign investors from Korea, China and India. To maximise the benefits accruable to the gas sector, this administration established a symbiosis between gas and power, such that gas would be used for power generation.
To this end, while it put a date to gas flaring at 2008, it gave a 2007 deadline that set power generation capacity of over 10,000 MW from independent power plants to be run by gas.

In furtherance of this initiative, it embarked on a sub-regional gas distribution network through the establishment of the West African Gas Pipelines System to transmit Nigeria's gas to its neighbours in the ECOWAS region.
In the same vein, feasibility studies are ongoing between Nigeria and Algeria for a proposed 4,000-km gas pipeline project that will convey Nigeria gas through Niger, Algeria to the markets of southern Europe. All this initiatives find accommodation in a new gas law, awaiting enactment at the National Assembly, which when in force, will address the issue of appropriate gas pricing.

Where does the restive Niger Delta youth stand to gain in all this?
Being a consummate petroleum administrator and true Niger Deltan, Daukoru knows too well the damages done to oil facilities and the violent youth restiveness in the oil zones. When, in the media, he canvassed that all avenues available for free expression and dialogue be used in settling the problem of youth restiveness, he seemed to have foreseen the consequences.
His vision re-echoes Arthur Koppel's fictional Apocalypse Brigade, where a mega-oil company had to establish its own army of security operatives (parallel to the home country's) to guide its oil installations. In which case we will all become losers.

This administration may be unpopular, the challenges may be overwhelming, the actors too engrossed to bring about a change for the better, however, reforms in the oil and gas sector may be the national expurgation that may turn the curse of oil into a blessing.

Source: This Day
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