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OIL AND GAS -: The Nigerian Experience How to Improve On It.


The Nigerian Experience Nigerian Experience in Oil and Gas Exploration and Production has been a Very Crude Affair or could be described as a Costly o!ersault for o"er #$years of Oil and Gas exploration and production in Nigeria. Presently% Nigeria has &ell o"er '() Oil and Gas field &ith a pro"en Oil reser"es standing at o"er $* billion barrels &ith a pro"en Natural gas reser"es at o"er ($trillion standard cubic feet. +or o"er #$years Oil has been a ,ey dri"e in the econo!ic de"elop!ent of Nigeria &ho solely depends on Oil as its !ain source of re"enue generation for the country. adly today% Oil has not being a propeller for gro&th in Nigeria% rather our leader through their ineptitude ha"e turned &hat could ha"e been a blessing into a night!are. Oil disco"ery and production &hich has !ade Oil producing countries in the &orld a po&er to rec,on &ith in the co!ity of nations could best be described as a Costly o!ersault on Nigeria. Nigeria no doubt% has continued to !a,e billions of dollars fro! Oil. -f one should calculate &hat has accrued to the country in ter!s of re"enue since ./#*% the figure arri"ed at is no doubt staggering. 0et one &ill as,% 1hat 2uality of 3ife has Oil &ealth brought to Nigeria4 5here is nothing on ground to sho& that Nigerians are reaping the benefits of the Oil &ealth despite being the (th largest producer of crude Oil and its recent initiati"e in Gas exportation. 6ather% &hat the country has to sho& the &orld is unprecedented le"els of une!ploy!ent. Nigeria still re!ains one of the poorest countries in the &orld. 5he acti"ities of Oil exploration and production has lead to ad"erse en"iron!ental i!pact on the soil% forest and &aters of the Niger 7elta co!!unities% ad"ersely affecting traditional occupation such as fishing% far!ing% s!all8scale agro base acti"ities a!ong others. 5he &aste associated &ith flaring of the natural gas in the Niger 7elta ha"e continue to spread diseases and 9alnutrition to the co!!unities and this contributed to cli!ate change &hich could effect other countries &ithin African ub8 region if not ended i!!ediately. 5here is poor infrastructural de"elop!ent in the country &hich has ad"ersely affected the :uality of life due to shortages of essential goods and infrastructure. Our roads are full of holes big enough to s&allo& our "ehicles; hardly could any part of Nigeria boost of a stable uninterrupted po&er supply in a day because electricity &hich is the bedroc, of any de"elop!ent is in &orst state. Oil and Gas attended re"enue has not been deployed for the benefit of the states &here these resources are co!ing fro!. tates li,e 7elta tate% <ayelsa% A,&a -bo!% Port =arcourt etc% &hich are suppose to be the boo!ing capitals of a tropical Oil ,ingdo!s that spout as !uch as #) Alas,a% are no& the decaying co!!ercial centre of the Niger 7elta. 5hey are presently to be seen as hand!ade slu!s. -nfrastructural de"elop!ents in these states are an eye sore. 5he Go"ernors of these Oil and Gas Producing tates ha"e not done anything to help the situation. 7espite billions of Naira allocated to these tates on !onthly basis and the s!all nu!ber of Ci"il ser"ants in these tates% &e find it hard to understand &hat these billions of Naira are being spend on because the Go"ernors ha"e nothing to sho& for the trust reposed on the! by the Electorate and they ha"e sha!efully failed to offer their people di"idend of de!ocracy.

2 5his cri!inal neglect on the part of our Go"ern!ent in the Oil and Gas producing tates has brought about a !onster created by the un&anton !is!anage!ent of these resources > MILITAN !" -n a bid to !a,e their "oices be heard and to cha!pion the cause of their co!!unities% to send do&n the !essage to the Go"ern!ent and -nternational co!!unities o"er the neglects% exploitation and da!ages the Oil co!panies are doing to their co!!unities? Villages due to Oil and Gas Exploration and Production% these 9ilitants ha"e resulted to ,idnapping since Go"ern!ent ha"e failed the! in all effort to get the! to stop the da!ages done to the! and their li"elihood. 5oday% the Nigerian 9ilitary forces cannot !atch the type of sophisticated ar!s in the to&ns and Villages across the Niger 7elta tates. 5hese ha"e resulted in shut do&n of Production and ha"e ad"ersely affected the Nigerian econo!y. 5his !ade the Nigerian Go"ern!ent co!e up &ith the ideal of A!nesty to these !ilitants in the Oil producing tates in the Niger 7elta. Go"ern!ent insincere ai! is to tric, as usual these !ilitants into belie"ing that the Go"ern!ent &ants to dialog% but the truth if you should as, !e is that Go"ern!ent is only concerned about the shortages these !ilitant acti"ities is coursing to federation and Crude Oil Account of the +ederal Go"ern!ent. Go"ern!ents@ insincerity is also seen in their policy on deri"ation. -nstead of bringing a succor to the polity; it has actually beco!e a subAect of discord. -t brought into fore the inAustice and artificial nature of our federal syste! of Go"ern!ent in Nigeria for a fair and Aust for!ula allocation syste!. Go"ern!ents@ insincerity is also seen in the i!portation and distribution of Petroleu! products for do!estic use. 5he past three decades% fuel price has been a recurring subAect of national discourse. -t has been at the root of social agitations and industrial unrest. Past ad!inistrations ha"e used fuel price increase either as the !eans by &hich their econo!ic progra!s can be realiBed or the panacea for the country@s econo!ic proble!s. 5he price of Cerosene and 7iesel has gone up by a !uch &ider !argin. 5he constant reason for the endless increases is ubsidy re!o"al they said. <ut to our a!aBe!ent the subsidy has re!ained and has been gro&ing by leaps and bounds. Al!ost e"ery price hi,e has preceded and follo&ed by a hue and Cry. -t has al&ays fuelled inflation &ith the corollary of tellingly ad"erse effect on the people@s :uality of life. 5he constant plea that Go"ern!ent should shift its focus fro! fuel increase to efficient 9anage!ent of the country@s petroleu! resources has been falling on deaf ears. Nigeria has the uni:ueness of being a 9aAor Oil producer that lac,s the refining capacity to !eet its do!estic re:uire!ents. <illions of dollars ha"e been spent on 5urn8around !aintenance of our refineries but this has brought little or no result. ad to say% nobody has been brought to Austice for fraudulent acts of &illful !is!anage!ent. Go"ern!ent@s insincerity is also seen in their shifting the goal post for the Gas +laring ban; the extre!ely unrealistic 3ocal content target; the cabottage regi!e and its enforce!ent; regulations for establish!ent of refineries et cetera and !ost i!portantly the Petroleu! -ndustry <ill > P-<% &hich all in the industry ha"e been cla!oring for. #$years of Oil and Gas Exploration and Production in Nigeria% the re"enue &as consu!ed% stolen% !is!anaged and re!ains largely unaccounted for in deliberate efforts to conceal the rot. 5he !onies that should ha"e been in"ested in other re"enue generated "entures &ent &ith the blurred "ision of our leaders. 7espite the shortco!ings the ad"ent of Oil and Gas in Nigeria% it cannot in totality be regarded as an albatross to its gro&th.

OIL AND GAS -: The Nigerian Experience How to Improve On It.


How to improve on it Nigerian Go"ern!ent thin,s and feels that the solution to its econo!ic proble!s can be sol"ed on the printed pages of ne&spaper. 5hey for!ulate good policies but lac, the &ill po&er to i!ple!ent these policies. Nigeria has been under the dictates of a D)years old constitution &hich does not gi"e roo! for clear defined leadership and econo!ic de"elop!ent. 5here is a !axis! that says 3oo, &here you slipped and not &here you fall 1here did Nigeria slip in this &hole issue4 +ro! the "ery beginning of Oil and Gas exploration dating bac, to ./#* and ./#( > the first successful drilling of Oil &ell in Oloibri and first ship!ent of Oil fro! Nigeria. Mi#ta$e%&ro'(em# Prior to ./E$% the Go"ern!ent a&arded concessions in the for! of Oil !ining leases FO93G to operators > -nternational Oil Co!panies F-OCG. 5he -OC@s had full !anagerial and exclusi"e decision !a,ing rights to the entire co!!ercial disco"ery. 5his !eant that the -OC@s has a free hand to for!ulate and execute policies relating to de"elop!ent% operations% production and !ar,eting of the resources. -nfluenced by the global upsurge of nationalis! and the desire to execute greater so"ereignty and ste&ardship o"er its natural resources% the Nigerian Go"ern!ent ac:uired participating interest in the operations of the -OC@s in ./E$ through it u!brella body Nigeria National Oil co!pany FNNOCG. An -nitial $#H &as ac:uired and progressi"ely increased to *)H by ./(' &hen the first for!al participating Agree!ent &as executed. A critical loo, at the Agree!ent re"eals that the contractual docu!ents of the Ioint Ventures are not clearly defined and the issues has ne"er been clearly resol"ed to date &hether the title to the O93 re!ained .))H to the -OC@s% or &hether it &as "ested in both Go"ern!ent and the -OC@s in the proportion of their respecti"e participating interest shares4 5his apparently !eans that the go"ern!ent Aust bought into *)H of business as usual &hile on the &hole% there is no real control of the operator co!panies the!sel"es. 5his ha"e being on for a "ery long ti!e and the Nigerian go"ern!ent is not prepared to correct these abnor!alities. 5he -OC@s are our contractors and &e should gi"e the! instructions on &hat to do. 6ather% they tell us ho& to do it and the go"ern!ent la!ely accepts their ter!s. 5oday they lea"e a large nu!ber of fields unde"eloped% choosing and pic,ing the ones they &ant to de"elop. Exploration progra!!e are not diligently pursued; P C@s in Nigeria are non progressi"e agree!ents a situation for instance that allo&s cost of o"er burden of as !uch as J K.billion for the <onga proAect% !a,ing go"ern!ent pay for &hat !ay ha"e been the error or poor esti!ation by the contractor. Strategie#% So()tion# o% the go"ern!ent should loo, at &here it slipped by refor!ing? restructuring the Oil and Gas sector. 5his includes restructuring its agencies > NNPC and Others. +or one thing NNPC has continued to deal &ith an o"er arching conflict of identity and purpose. +ro! its acts% policies and pronounce!ents it@s see!ed NNPC is ne"er sure &hether it is a go"ern!ent agency or a corporation &ith a profit > !a,ing obAecti"es. o &hile &e agreed to change and &elco!e the Petroleu! -ndustry <ill FP-<G% it is good to state that !uch &ill still depend ulti!ately on the &ill and attitude of go"ern!ent &ith respect to po&er and control. A lot of effort has to be directed to repositioning and re8ordering of the Go"ern!ents attitude and culture in this regard. Experience in the past has sho&n that the authorities continuous !eddling of the day > to > day affairs of these organiBations ha"e constantly pull their purse strings% and this !ust be curtailed.

4 As part of refor!ing ade:uate arrange!ents !ust be !ade for training and re8orientation of go"ern!ent personnel &ho &ill ad!inister and operate the ne& organs. 5hey !ust be ready to sub!it to and be bound by the chec,s and balances in the refor!s. 5oo !any experiences abound that sho&s that politicians ha"e inculcated the disregard for due process. Go"ern!ent should see the refor!s as an opportunity to correct once and for all so!e of the aberrations inherent in the sectors contractual agree!ents. Improvement# an* +a,# -orwar* 5he Go"ern!ent of Nigeria should in their refor!s and restructuring cha!pion 3ocal Content participation in the Oil and Gas sector. 5he go"ern!ent of Nor&ay did it $)years ago% sa!e &ith 6ussia% 9alaysia% China% <raBil and outh Africa etc.% and no& the NOC@s of this countries are gi"ing the -OC@s a run for their !oney in !any operating areas of the &orld. 5he go"ern!ent !ust acti"ely engage indigenous co!panies% in"estors% and the li,e to participate and create a safe platfor! for the! not to be played out or played upon by the -OC@s as in past and e"en presently as so!e cases ha"e sho&n. 5he past ad!inistration of -brahi! <abangida did tried in that direction &hen in .//.% selected so!e frontline Nigeria entrepreneurs and offered the! discretionary a&ards of Oil bloc,s. Jnfortunately% !ost of these !en did not understand the intention of go"ern!ent at that ti!e% &hich &as to internaliBe the Oil business by e!po&ering Nigeria business!en to play ,ey roles. o sa!e "ision should be pursued by the present go"ern!ent &ith a "ie& to e!po&ering Nigerian business!en to play acti"e roles in the Oil and Gas industry. 5he go"ern!ent should stop shifting the goal post for stopping Gas flaring in the Niger 7elta. Nigeria has earned an unen"iable position as the highest gas flaring nation in the &orld and currently flares an a"erage of ..'tcf of gas annually. 5hat figure of flared gas is capable of generating the o"er .'%)))91 of electricity that is badly needed to catalyBe the gro&th of Nigeria econo!y and end the econo!ic% social and en"iron!ental &oes of the Niger 7elta region and the generality of Nigeria. tatistic sho&s that Nigeria has lost K.#) billion J 7 to gas flaring bet&een ./E) > '))*% and on daily based K.(.'9 J 7. 5here are so !any benefits that these flared gases can bring to Nigeria being the E th &orld gas reser"e holder &ith potential to beco!e a !aAor player in 3NG export. 5here are t&o possible solutions to gas flaring > -nstead of flaring% the gas could be re8inAected at the production platfor! or it is gathered and or !anifold% then piped to storage location pending &hen it is processed as by8 product such as do!estic gas F3PGG% industrial gas Fbutane% !ethane% propaneG% 3i:uefied natural gas F3NGG% sulphur li:uid fro! sour gas% fertiliBers for industrial and agricultural uses and so on. 5his &ill add "alue and positi"ely i!pact the econo!y Fyouth e!po&er!ent% e!ploy!ent and industrialiBationG. Also% it facilitates reduction of da!age to the ecosyste!% the en"iron!ent and li!its the e!issions of har!ful greenhouse gasses > FC)'G% &hich cause cli!ate change. Co!panies li,e Carnaud 9etal <ox Nigeria Plc% Cadbury Nigeria Plc and other co!panies are already benefiting fro! F3PGG supplied to the! by Nigeria Gas Co!pany through partnership &ith Gaslin, Nigeria 3td.

5 1e !ay not need ne& la&s to end flaring of gas as all la&s to encourage genuine actions are already encapsulated in the status boo,s. 5he i!ple!entations of penalties ha"e been largely ineffectual in discouraging flaring in Nigeria. 1hat &e need are bold steps in ti!ely capital proAects i!ple!entation to&ards gas flare do&n as de!onstrated by our 3NG% Condensate reco"ery% gas gathering and gas re8 inAection proAects etc. 5he operators !ust ta,e decisi"e corporate steps in consonance &ith their &orld8&ide practices and operational standards% to end gas flare in Nigeria. =o&e"er% the -OC@s attitude to&ards their i!ple!entation :uestions the sincerity and co!!it!ent of the -OC@s to the progra!!e and proAects and ho& they are tied &ith the aspiration of Nigeria to end gas flares and abate its en"iron!ental% social and econo!ic conse:uences. o the go"ern!ents ha"e the responsibility to conser"e its resources for the future generation and not allo& a &aste that cannot be Austified against econo!ic data as sho&n abo"e. 5he go"ern!ent has to ensure that all parties in the industry concertedly de!onstrate that confidence to their progra!s and proAects. 5he Petroleu! -ndustry <ill FP-<G% this is a bill that is long o"erdue because the Nigerian upstrea! co!panies are not go"erned by la&. o the bill is a &elco!e initiati"e and e"eryone is eager to see this bill passed into la& for the benefit of the Oil and Gas -ndustry. till there are issues raised in the P-< that once again bring to :uestions go"ern!ents insincerity to put an end to the resti"eness in the Niger 7elta. +or instance% in the P-< the go"ern!ent is as,ing the states and local go"ern!ents in the Niger 7elta &ho! they ha"e refused to deal &ith in really i!portant issues% to be the &atch dogs to Oil and Gas pipelines and facilities. And should there be any attac, on these facilities the tate and 3ocal go"ern!ent &ill be held accountable% and go"ern!ent says it !ust ta,e 'H fro! their allocation gi"en the!. Not only that% the go"ern!ent in this bill has co!pletely re!o"e fro! the picture the -OC@s reli"ing the! of any responsibilities as regards their operation in the Niger 7elta region. o% it !eans that the -OC@s are not liable to any action of theirs in that region. Critically% ho& can you say you are gi"ing A!nesty to the !ilitants in the Niger 7elta that you &ant to end the resti"eness in that area and yet you ha"e co!pletely disregarded the co!!unities and "illages &here these exploration and production acti"ities are ta,ing place% the "ery reason &hy there is 9ilitancy in the area. 5his is absurd and unfair% that go"ern!ent ha"e not engage the! as sta,eholders and it goes to sho& that the A!nesty deal is Aust a !a,e belie"e. =appily% Niger 7elta go"ernors are saying that they &ill not be party to that ,ind of clause in P-< and also experts and sta,eholders in the industry are all crying foul to so!e of this clause &hich are not practicable any&here in the &orld &here there is Oil and Gas exploration for de"elop!ent of the sector and the =ouse is actually &or,ing to rectify these clauses. o &hen this bill is e"entually passed into la& despite go"ern!ents delaying of it passage% &e hope to see a brighter picture that all &ill benefit fro! and e"entually ha"e the re:uisite effect on the Nigerian econo!y as &ith other Oil producing countries.