January 20, 2012 Nigeria Petroleum Industry INTRODUCTION Discussions on the history of petroleum in Nigeria often refer from

the mid 1950 s when high quality and lighter petroleum was first discovered at Oloibiri in ce ntral Niger Delta. Exploratory activities for hydrocarbon however began some fif ty years earlier. Before the Amalgamation of the Northern and Southern Protector ates in 1914, records of near-surface seepages of bitumen had been documented. B itumen, otherwise referred to as heavy or unconventional oil, is a heavier and l ess matured hydrocarbon. Following the sightings of these pools in the north-eas terly stretch of the Southern Protectorate, in what is today parts of Ekiti, Ond o and Edo States, surveyors of the German-interest, Nigeria Bitumen Corporation, began prospecting activities in 1908 and, in the next four years, drilled 14 we lls. Their operations were however cut short following the outbreak of World War I and Germanys wartime national strategy of intensifying its domestic human reso urces. Multinational Entrant Shell DArcy of the Royal Dutch Shell Group, the merger of a British marine transp ort company, founded by the Jew Samuel Marcus and originally involved in the col lection of sea shells from which its name was derived, and a Dutch petroleum int erest based in Indonesia, was granted prospection license for the entire territo ry of Nigeria by the colonial authorities some three decades after. Between 1938 , the year of granting of the license, until the later years leading up to Indep endence, the company scoured the territory in search of then usable hydrocarbon. Its exploratory activities began, naturally, from the bitumen catchment in west ern Nigeria, before they veered North and later East, presumably owing more to p olitics than to geology. The earliest reference activities were the drilling of some 28 wells and 25 core holes, however dry, within a 250km radius of its then head office at Owerri in the Eastern region. Precisely on June, 1956, the compan y, now Shell-British Petroleum, struck oil of commercially viable quantity in th e marsh Niger Delta in Oloibiri, 20 kilometres southeast of Yenagoa, in today Ba yelsa State, and later in Bomu, 30 kilometres northeast of Port Harcourt, in tod ay Rivers State, respectively. Following Shell were two groups the one American and the other European. The for mer began and concentrated operations in shallow offshore areas. Exxonmoil, then Mobil Exploration Nigeria, which began operations in 1955 but would strike its oil only 15 years later at Idoho Field, offshore Akwa Ibom State while American Overseas Petroleum (later Texaco Overseas Nigeria) and Gulf (later Chevron Niger ia Limited) headed for the western delta and made discoveries in 1963, the forme r at Kolouma and the other at Okan Field, both offshore Escravos in Delta State. The companies have since merged and are present-day Chevron. Another American i nterest of less significance was Philip Oil Company which began exploring in the western delta in 1965 and later joined operations with Agip. The second group, second stage European interest of Safrap and Agip, began explo ration onshore north of Oloibiri. The former which later became Total struck oil at Obagi in Rivers State two years after the granting of its concession in 1964 and Italys Eni Agip just ten kilometres north at Ebocha, Rivers State, a year la ter. These constitute and complete the league of interests that have since defin ed Nigerias petroleum industry. Overtime this group which are now five hold 98% of oil reserve and operating ass ets. Company Name at Inc Yr of Inc Date of First Oil Date of Production Initial produ ction capacity Shell Shell DArcy/ Shell-BP (four months later) 1938 1956 1958 5,100bpd Exxonmobil MEN 1955 1970 Chevron Gulf Chevron AOC/ Texaco Total Safrap/Elf 1962 1963 Agip Agip 1963 1965 1970 Table I. Early multinationals

Civil War and Industry Within eight years of first production, the industry recorded positive growth. P roduction rose close to 500,000 bpd, with Shell contributing 87%. In 1961, the B onny Terminal was completed and the Port Harcourt Refinery with a refining capac ity for 60, 000bpd was commissioned in 1965. The surge was however adversely con straint following the Nigerian Civil War of 1967 to 1970. The challenge for the industry was as much of the war itself as in the ethnic-pe rmutation of the seceding region. Some 70% of the active production wells and 80 % of valuable industry infrastructure and facilities fell in the land of the non -Ibo minorities ethnic nations which had before Independence been making demands for a state of their own. The war thus opened a situation for robust strategic politics on who the federal or leadership of the seceding region controlled the industry. Up till then, Nigeria governments interest has been confined to collection of roy alties and taxes which was shared between the federal government and Eastern reg ion government at a ratio of 50:50. Six weeks before the war, the federal govern ment split the Region into three states, the minorities forming the two addition al and with about 95% of discovered oil. With Shells Bonny Export Terminal and th e Refinery at Port Harcourt, two most strategic industry facilities, now in mino rities Rivers State, the federal government may have made an indispensible calcu lation. But with pronounced Ibo population in the minorities towns particularly Port Harcourt with attendant sympathies, the secessionist government at Enugu, s till had significant leverage over the industry. The three major petroleum interests producing in the eastern delta had to explor e ingenious mechanisms to stay in business. It was not unexpected for Shell and Total, due to the associating of their parent-interests of Britain and France in the war, to evolve war-time expedient practical strategies. Not wanting to be i dentified too deeply with the interest of their owners, they included in their s tay-in-business expedient plans the making of remittances in royalties and taxes to the both governments as well as allowing to be supplied to the belligerents parties their produce. More than its suspicion of the French-interest Total providing support for the s ecessionists, the federal government was no less concerned about Shells double-fa ced practice. It realised it needed greater control over the industry. Strategic ally however there was no immediate need either from it or the secessionists to alter the status quo. Neither the total collapse of the industry nor massive des truction of industry facilities would have served either party any end. They kne w that a major determinant in who triumphed lay in who had control or leverage o ver industry infrastructures. However the war adversely slowed the surging growt h of the industry that production, which stood at 420,000 bpd in late 1966 to ea rly 1967, dipped 75% into the war. With the major industry infrastructure towns of Bonny and Port Harcourt securely in its hand, the federal government initiated its first major step at controlli ng the industry. In November 1969, it promulgated the Petroleum Act investing en tire ownership and control of all petroleum resources from the land, territorial waters, continental shelf and the Exclusive Economic Zone in the State; ensure its partisanship through the Ministry of Petroleum in refinery, product sales an d marketing; dispensing with the federal-state revenue-sharing formula; and a nu mber of far-reaching responsibilities. OPEC Demands This development marked the dawn of a domestic definable role in the sector. An earlier industry regulation has been the sharing agreement between the multinati onals and the federal government. The agreement provided for a split of 50:50, w here profit was determined solely by the companies. This Act and the prerequisit e requirements to join the Organisation of Petroleum Exporting Country (OPEC) be came the two defining circumstances that gave rise to increased government parti cipation in the industry and the commencement of a new regime that has continued , with later modifications and fine-tuning, for close on forty years. In 1971, the federal government established the Nigerian National Oil Corporatio n (NNOC) to meet a revue of ambitions objectives which include direct participat

ion in the entire spectrum of the petroleum business from exploration, productio n, refining, transportation to distribution; managing oil leases over large swat hs of land; encouraging indigenous manpower development; developing allied indus tries such as fertilizer; and so. Of immediate concern was the acquisition of eq uities in the multinationals. Beginning with Agip in 1971 and spanning a short p eriod of four years, the federal government through NNOC acquired between 33.3 % to 55% stake in all the companies. Company Stake Yr of Acquisition Agip 33.3% 1971 Safrap 35% 1971 Shell-BP 35/55% 1973/1974 Mobil 35 1971 Chevron 35 1973 Texaco 55 1975 Table 2. NNOC acquisitions as at May, 1975 Niger Delta and Petroleum Occurrence Petroleum occurs mainly in enormous sedimentary rock accumulations called basins . Nigeria has between seven and nine basins, namely Illumideen or Sokoto Basin, extending through the north-western reach into the Republic of Niger; the Chad B asin, covering the Lake Chad area; the Benue Trough, of the Benue River area; th e Bida Basin, leftwards of the Benue; Anambra Basin generally accepted to compri se Anambra River area and the smaller Afikpo Syncline to the east; Dahomey Embay ment which stretches through south-western Nigeria into Benin Republic and Togo; and the Niger Delta Complex (Basin). Depending on author, this classification a s well as nomenclature may vary with, sometimes, one or two basins subsumed in o thers. Geographically, the Niger Delta, like the Nile and Amazon deltas, is characteris ed by the definitive triangular- or delta-shaped wetland lined with streams pour ing into a larger body of water. Niger Delta Basin however is more extensive and defined by its sedimentary basin, not by its surface geography. It is estimated to measure 75, 000 square kilometres and 12 kilometres at its th ickest central part. To the west, the delta is bounded by the Okitipupa High and to the east, the accepted extension is the Calabar flank of the Cameroun Highla nds. In the north, there is no uniformity to its reach. Some geologists have sug gested Onitsha in Anambra State or Idah in Kogi State. Its petroleum significance is defined by its three sedimentary formations, a for mation being massive sedimentary layer formed about the same time and with simil ar geologic conditions. The top formation is called Benin Sand, the intermediate which forms the reservoir rock is the Agbada Formation and the underlying is th e Akata. Hydrocarbon is believed to have been formed in the underlying and migra ted to the intermediate formation while the top serves as the cap to disallow it s seeping to the surface since petroleum is light and can. Origin of Petroleum Geologists are not wholly agreed on the origin and formation of petroleum. Two p ositions are advanced. The now increasingly abandoned one, called inorganic orig in, hypothesizes that heavy-molecularly hydrocarbon exist deep in the earth crus t and are the source of petroleum. The generally accepted position theorises that petroleum is formed in a long pro cesses beginning with decomposition of vegetation in relatively shallow waters w hich was subsequently buried in a finer-grained sedimentary rock environment inv olving limited oxygen, pressure, continuous depositions. Increased heat and pres sure from overburdens and further sedimentation cause crude-saturated shales to form from which oil are expelled. This raw crude moves through adjacent rock lay ers until it becomes trapped underground in porous rocks called reservoirs. Quality of Nigerian petroleum All petroleum types are essentially a mixture of families of hydrocarbons (chemi cal compounds of hydrogen and carbon) ranging from its lightest gases to heavy l iquids and waxy solids. They are the product of prehistoric marine animals and t errestrial plants. The permutation of its constituents in terms of gaseous, liqu id and waxy fractions suggest a cursory determinant to its quality.

Crude oil is classified by its qualities of sweetness and lightness. When it has low sulphur impurities, it is said to be sweet, a term which originated from it s mild sweet taste, since originally, crude oil was tasted by early marketers. I ts lightness has to do with its viscosity, the ability to flow or remain liquid at room temperature. The standardization is not uniform. In countries with traditional lighter or swe eter petroleum, the mark up is usually slightly higher. This allows that not all blends may necessarily be classified in one pot in all yardsticks. For instance the American Petroleum Institute whose definition is that used by the commodity market New York Mercantile Exchange (NYMEX) defines light as crude having 32* t o 42* API value while definitions by Canadian standard are for below 27* API and Mexicos PEMEX rates those crude between 27* to 38*. The definitions underscore t he value accorded the viscosity of crude oil. Canada broader classification is a s a result of its traditional heavier grades. Generally crude oil is considered light if its API is value is higher and sweet if the sulphur content is lower. The generally accepted figures are for sweet cr ude oil is if sulphur content are less or equal to 0.5% by weight and sour if su lphur content are greater than 0.5% and However, exceptionally high grades like Nigerias twenty three grades, generally t raded as Bonny Light, Qua Ibo, Forcados and Penington are by all benchmark class ified sweet and light. The Nigerian blends show no significant variation s in their properties and are believed to have been formed from similar geologic conditions with respect to th eir generation and migration. The Bonny Light is lighter and sweeter than the best known trading classificatio n of WTI, Brent Crude and the Dubai Light. It is highly sought after because of a number of positive reasons. It yields higher volume of lower, lighter-molecula r fractions of fuels, manifest minimal corrosiveness to refinery infrastructures , has minimal sulphuric impurities and hence lower environmental impact during o r after refining. Twenty three grades recognised as Nigerian include Abo Light, Agbami, Akpo, Amen am, Antan , Bonga, Bonny Light, Brass Blend, EA, Erha, Escravos Light, Forcados, Ima, Obe, Okono, Okoro, Okwori, Oso Condensate, Oyo, Pennington, Qua Iboe , Ukp okiti, Yoho Light. In global classification, they all belong in the sweet and li ght classes and in export they are blended to reflect the name and classificatio n according to export terminals of Bonny Light, Qua Ibo, Escravoz Blend, Brass R iver, Forcados and Penington. Grade Name API value Sulphur Content ( as % of mass) Agbami 47.2 0.044 Amenam Blend 38.2 0.12 Amenam/Mars Blend 33.5 0.94 Antan Blend 26.4 0.27 Bonga 29.1 0.26 Bonny Light 33.4 0.16 Brass River 37.2 0.14 EA Crude 35.1 0.08 Erha 31.8 0.21 Escravoz 34.2 0.17 Forcadoz 30.8 0.16 Odudu 30.5 0.15 Okono 41.9 0.06 Oso Condensate 45.7 0.06 Pennington 35 0.08 Qua Iboe 36.3 0.14 Ukpokiti 41.7 0.08 Yoho 39.3 0.08 Nigerian crude oil grades Reserve and Value Nigerias actual reserve, depending on the authorities, has been estimated at betw een 28.5 to 33.5 billion barrels petroleum and 165 to 185 trillion standard cubi

c feet of natural gas. The National Petroleum Investment Mnangeent Serrvices (NA PIMS), NNPC subsidiary, invested with the responsibility of managing the nationas invetament interst puts the figures at 35.88 bbl of crude oil and condensate, 1 84.00 Tscf , comprising 98.00 TSCF of Associated Gas and 86.00 TScf of No-Associ ated. Its production capacity commenced from 5,100 bpd in 1958 through a maximal of 3. 35 million bpd but with actual 2.8 million bpd highest production level. Gas pro duction rate is 5.78bscf/d. Production depletion rate is 15% though reserve has in general grown due largely to continues exploration and appraisal drilling and the surge seaward. Exploration success rate is between 11-65%, which is amongst the best in the world. Production cost for a barrel is put at 3.5% for onshore and 5.0% for the offshor e. The Nigerian or Niger Delta reservoir system is characterized by multifarious sm all high-yielding onshore fields spread across the reach of the region and const itutes about 62% of overall national production as at 2010. It however has relat ive shallow wells that allows for easy extraction of petroleum. Nigeria has 159 oil fields and upwards of 1480 wells have been active at peak production at cert ain points of its production history. The average cost of production in the onshore is put, by current 2010 estimates, at $5 per barrel. Its quality is extremely high and valued higher than global b enchmark blends. It rates in terms of pricing at least $2 higher than the United States of Americas benchmark West Texas Intermediate (WTI) and $1 above Europes N orth Sea Brent. The monetary value of its representing member, the Bonny Light, shows a high fav orable return in the region of 1.4% (to its closest OPEC reference mate, the Mur ham) to 2.3% for Venezuelas BCF-17. Generally, it is priced in the bracket of the West Texas Intermediate (WTI) and the Brent which are actually at about $2/ $3 and $1 to $2 per barrel, respectively, to the OPEC Basket. The OPEC Basket is th e average of light sweet crude oil such as Algerias Saharan Blend and Libyas Es Si da and heavier sour crude oils such as Dubais Fateh and Iran Heavy. Nigeria has six export terminals of which Shell operates two at Bonny and Forcad os, Exxonmobil owns the Qua Iboe in Akwa Ibom State, while Chevron operates the Ezcravos and Penington terminals in Delta State. Agip owns the Brass terminal in Bayelsa State. Export Terminal Capacity Operator/Owner Bonny Shell Escravos 3.6 million barrels/ 570,000 m3. Chevron Brass 3,558,000 bbl/ 2,100,000 m3 Agip Pennington Chevron Qua Iboe Exxonmobil Forcados 13 million bbl/ 2,100, 00m3 Shell Leave a Comment January 16, 2012 Week Two of Protest People read wrongly when they see Occupy Nigeria as a protest against fuel pump price increase. It is more than that. It is the pent-up of a people pained by en during venal leadership. Why its directed more at the President Jonathan person is because the Nigerian see his policy as a stabbing betrayal, kind of Caesars Etu B rute! because they saw him, during the elections, as not part of the military-pol itician order, but as one of their own, risen from the under $2-a-day 90%. His s elling catchphrase was A Breath Of Fresh Air from the cesspit that had been Nigeri a.Until the new democratic advent, Nigerias once dear president was like many an underpaid lecturer at the Rivers State College of Education struggling teaching the few days govt acquiesce to add a few nairas to the teachers pittance. My exs au nt is a former student of Jonathan. Her memories of our president suggest a fewcloth, quiet and overtly apolitic teacher eternally committed to the noble but N igeria-despised chalk-and-blackboard profession of my forbears. I see the everyd

ay Nigerian ache for that teacher Jonathan, at least in heart, and couldnt unders tand why or when they lost this once good man to the establishment. Leave a Comment January 14, 2012 Introduction of my new work: Nigeria Petroluem Indutsry 1956-2010 Chapter I INTRODUCTION Discussions on the history of petroleum in Nigeria often refer from the mid 1950 s when high quality and lighter petroleum was first discovered at Oloibiri in ce ntral Niger Delta. Exploratory activities for hydrocarbon however began some fif ty years earlier. Before the Amalgamation of the Northern and Southern Protector ates in 1914, records of near-surface seepages of bitumen had been documented. B itumen, otherwise referred to as heavy or unconventional oil, is a heavier and l ess matured hydrocarbon. Following the sightings of these pools in the north-eas terly stretch of the Southern Protectorate, in what is today parts of Ekiti, Ond o and Edo States, surveyors of the German-interest, Nigeria Bitumen Corporation, began prospecting activities in 1908 and, in the next four years, drilled 14 we lls. Their operations were however cut short following the outbreak of World War I and Germanys wartime national strategy of intensifying its domestic human reso urces. Multinational Entrant Shell DArcy of the Royal Dutch Shell Group, the merger of a British marine transp ort company, founded by the Jew Samuel Marcus and originally involved in the col lection of sea shells from which its name was derived, and a Dutch petroleum int erest based in Indonesia, was granted prospection license for the entire territo ry of Nigeria by the colonial authorities some three decades after. Between 1938 , the year of granting of the license, until the later years leading up to Indep endence, the company scoured the territory in search of then usable hydrocarbon. Its exploratory activities began, naturally, from the bitumen catchment in west ern Nigeria, before they veered North and later East, presumably owing more to p olitics than to geology. The earliest reference activities were the drilling of some 28 wells and 25 core holes, however dry, within a 250km radius of its then head office at Owerri in the Eastern region. Precisely on June, 1956, the compan y, now Shell-British Petroleum, struck oil of commercially viable quantity in th e marsh Niger Delta in Oloibiri, 20 kilometres southeast of Yenagoa, in today Ba yelsa State, and later in Bomu, 30 kilometres northeast of Port Harcourt, in tod ay Rivers State, respectively. Following Shell were two groups the one American and the other European. The for mer began and concentrated operations in shallow offshore areas. Exxonmoil, then Mobil Exploration Nigeria, which began operations in 1955 but would strike its oil only 15 years later at Idoho Field, offshore Akwa Ibom State while American Overseas Petroleum (later Texaco Overseas Nigeria) and Gulf (later Chevron Niger ia Limited) headed for the western delta and made discoveries in 1963, the forme r at Kolouma and the other at Okan Field, both offshore Escravos in Delta State. The companies have since merged and are present-day Chevron. Another American i nterest of less significance was Philip Oil Company which began exploring in the western delta in 1965 and later joined operations with Agip. The second group, second stage European interest of Safrap and Agip, began explo ration onshore north of Oloibiri. The former which later became Total struck oil at Obagi in Rivers State two years after the granting of its concession in 1964 and Italys Eni Agip just ten kilometres north at Ebocha, Rivers State, a year la ter. These constitute and complete the league of interests that have since defin ed Nigerias petroleum industry. Leave a Comment December 19, 2011 Compatriots Rise! Arise bombers of Boko Haram from the markets of Maiduguri O compatriot

from Jos previously just now whirling in the strong, new wind rushing down like incensed horseback raider s to pact fierce Sangos illegitimates by the roads calling Ogun, O! gun, O! gone o! gone bankers bleeding red vaults but Nigeria calls obey and they arrive (dont wait: eye-witness profits nothing be i-witness) announced in sirens great men in black ready To serve our Fatherland in crackling safety-catches catching safety in their liberty which hangs in the air ominous of innocent drea ms of The labour of our heroes past all ballistics, once distinct in good and evil are conspired with energy, zeal, passion, closed eyes To serve with heart and might elses but not One nation bound in freedom, peace and unity Leave a Comment December 17, 2011 Subsidy and the Real Cost of Fuel By Dr. Izielen Agbon On December 10, 2011, if you stopped at the Mobil filling station on Old Aba Roa d in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsi dized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon. They are therefore determined to remove their subsidy and sell the gallon at $3. 52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refin ed from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from t he Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nige rian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 li tre of petrol in Nigeria . We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a l itre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Po rt Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the findin g /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel. Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price o f 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution

Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charg es etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petro l at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is t herefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 pe r litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official pric es are too high. Let us continue with some basic energy economics. The government claims we are currently operating our refineries at 38.2% efficie ncy. When we refine a barrel of crude oil, we get more than just petrol. If we r efine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum pr oducts. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 g allons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 ga llons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel. This is not enough to meet internal national demand. So, we send the remaining o f our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shi pping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per da y to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raf finage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sourc es) in a swap deal. The landing cost of a litre of petrol is N123.32 and the dis tribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30. 6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined. Using a netback calculation method, we can easily calculate the true cost of a l itre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gas oline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS p rice of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0 .306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the inte rnational cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. T he net cost of swapped petroleum products would therefore be $142.32 -$107 or $3 5.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per b arrel of petrol or N34.45 per litre. This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian gover nment pretends the price of swapped crude oil is $0 per barrel (N0 per litre) wh ile the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the subsidy is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.5 4 per barrel), then the take-off price of the swapped crude oil should be at int ernational price ($107 per barrel). This is basic economic logic outside the ide ological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free. So let us conclude this basic economic exercise. If the true price of 38.2% of o ur petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33. 36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribu nd refineries).

There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President sho uld go with their economists. They should send economists and political scientis ts as representatives to the Senate Committee investigating the petroleum subsid y issue. There are many expert economists and political scientists in ASUU who w ill gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market. The government should explain at what price the swapped crude oil was sold and w here the money accruing from these sales have been kept. We have done this simpl e economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy an d the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, student s, market women, youths, unemployed, NGO and civil society as a whole should pre pare for a long harmattan season of protracted struggle. They should not just em bark on 3 days strike/protests after which the government reduces the hiked petr oleum prices by a few Nairas. They must embark upon in a sustainable struggle th at will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south. Izielen Agbon Izielen Agbon writes from Dallas, Texas. izielenagbon@yahoo.com Leave a Comment December 17, 2011 Hello world! Welcome to WordPress.com. After you read this, you should delete and write your own post, with a new title above. Or hit Add New on the left (of the admin dashb oard) to start a fresh post. Here are some suggestions for your first post. 1. You can find new ideas for what to blog about by reading the Daily Post. 2. Add PressThis to your browser. It creates a new blog post for you about any interesting page you read on the web. 3. Make some changes to this page, and then hit preview on the right. You c an always preview any post or edit it before you share it to the world. 1 Comment Recent Posts o Nigeria Petroleum Industry o Week Two of Protest o Introduction of my new work: Nigeria Petroluem Indutsry 1956-2010 o Compatriots Rise! o Subsidy and the Real Cost of Fuel o Hello world! Categories o Uncategorized Archives o January 2012 o December 2011 Blog at WordPress.com. | Theme: Titan by The Theme Foundry. Follow Follow nigeriapetroleumbusiness Get every new post delivered to your Inbox. Enter your email address [Sign me up]