Sweetcrude November 2011

FOSTER, Revenue Watch build capacity on revenue analysis

PHCN Eko zone reviews operations ‌ Distributes 85,000 prepaid meters

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A Vanguard Monthly Review Of The Energy Industry VOL 02

N0. 30

UPDATES MONTHLY BASKET PRICE

Oct-11 Sept-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11

106.09 107.61 106.32 111.62 109.04 109.94 111.09 109.84 100.29

Jan-11 Dec-10 Nov-10 Oct-10

92.83 88.56 82.83 79.86

Daily | Weekly | Monthly | Yearly

103.11US

120

110

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90

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70 Oct-10 Nov-10 Dec-10 Jan-10 Feb-11 Mar-10 Aprr-11May-11 Jun-11 Jul-11 Augl-11 Sep-11 Oct-11

Usan floater in place off Nigeria

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evelopment of the deepwater Usan field offshore Nigeria remains on track for first oil during the first half of 2012, according to partner Nexen Petroleum.

The FPSO has arrived at the field location and has been successfully moored.

NOVEMBER, 2011

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Contents 4 7 11 15 16 17 20 21 34 38 42 45 47

COVER

The Realities of facing deregulation headlong

OIL Foster RevenueWatch build capacity on revenue analysis

FOCUS

We’ve been selling below cost with subsidy

GAS

Nigeria Gas reserves stagnate in 6 years

FEEDBACK

Community engagement buoys successful operations

POWER

Canadian companies to bid for hydro station

FINANCE

Fuel subsidy to gulp about $50bn in 5 years

INSURANCE

Oil majors shun local insurance on credit ratings

LABOUR Union lists conditions for downstream deregulation

SOLID MINERALS

Jonathan raises Nigeria’s mining profile

FREIGHT

NNSL: The beginning, the end

TECHNOLOGY

Petroleum refining: Modular versus Conventional Refineries

COMMUNITY DEVELOPMENT

Fuel Subsidy: Ekiyor warns Jonathan against bad advisers

Sweetcrude is a publication of Vanguard Media Limited

THE TEAM EDITOR

Hector IGBIKIOWUBO

DEPUTY EDITOR Clara Nwachukwu CORRESPONDENTS Victor AHIUMA-YOUNG Favour Nnabugwu Godwin ORITSE Yemie ADEOYE Jimitota ONOYUME Samuel OYANDOGHA Oscarline Onwuemenyi Emma Arubi GROUP BUSINESS EDITOR Omoh GABRIEL

PAGE LAYOUT/DESIGN

Francis AYO & Johnbull OMOREGBEE

Printed and Published by Vanguard Media Limited.

Vanguard Avenue, Kirikiri Canal, P.M.B. 1007, Apapa.

Enquiries Call: 08051100256 Internet:

www.vanguardngr.com All correspondence: P.M.B 1007, Apapa, Lagos.

Since the word got out, disc ussions on the full deregulation of the downs tream petroleum sector, and the removal of fuel sub sidy in particular, have occupied our national disc ourse. Discussants have argued based on their interests and how the development would affect their businesses and/or individual lives.

Accordingly, this edition from the cover up to community joins in the disc ourse, dwelling on the preparedness of various stak eholders –government, marketers and a host of othe rs for deregulation in terms of Federal Governm ent’s commitment to the policy, the availability of infra structure to support a free market downstream se ctor, and the state of the Nigerian refineries and the ability to meet national demand for petroleum produ cts.

The Group Executive D irector, Refining and Petr oc he mic al s , N i g er i an N at i on al Pet r o l eum Corporation, NNPC, Mr. Phi l Chukwu, in our Focus interview, admits that the r efineries in their current state are in no position to c ompete effectively under d er e gu l a t i o n , a n d wen t o n to high li g h t the rehabilitation programmes the corporation has embarked on to knock them into shape.

In addition to this, we als o bring to you all the happenings in other sectors of the petroleum industry and economy as a whole, notably, Oil, Gas, Power, I n sur a n c e , La b o u r, So l i d M i n er a ls, Fr eig h t, Technology and Community , so that each segment of the society can have someth ing to identify with.

We remind oil and gas operat ors and other industry and economic players to avail themselves the opportunity offered by S weetcrude international edition, to sell themselves and their products to the world through company pro files and advertisements at the forthcoming World Pe troleum Congress, WPC, coming up in Doha, Qatar, bet ween December 4 and 8, 2011.

Also, we continue our partners hip with CWC for the 2012 Nigeria Oil and Gas I nternational Conference and Exhibition, NOG2012, scheduled to take place next year between February 20 and 23, 2012. This is again an opportunity for op erators to advertise their companies and products in S weetcrude.

Kaztec

Cover Story

4

A Gas station at night CLARA NWACHUKWU

I

t is no longer news that t h e F e d e r a l Government has developed cold feet over going ahead with the planned removal of petroleum subsidy, which will herald the full commencement of deregulation of the downstream petroleum sector.

Government’s indecision follows mounting criticisms against the plan, which many believe would increase the hardship of the common man.

This is because if allowed to run, the price of petrol would be as high as N140/ per litre, while kerosene, the fuel for the common man will be as high as N155/L, according to the latest market data on the Petroleum Products Pricing Regulatory Agency, PPPRA’s website.

Both petrol and kerosene are currently enjoying subsidy, which put their retail prices at N65/L and N50/L respectively.

B y r e m o v i n g s u b s i d y, government said it would be saving about N1.3 trillion per annum, which it plans to use to shore up other sectors of the economy, such as infrastr ucture provisions particularly for effective downstream operations.

Courtsy: PPPRA As shown in the table above, between 2006 and 2011, the Fe d e r a l G o v e r n m e n t o f Nigeria has spent in excess of N3.56 trillion, a huge burden that has weighed heavily on its finances in view of numerous needs.

Apart from being a huge resource drain, the subsidy regime is open to corruption, with the Minister of Petroleum Re s o u r c e s , M r s D i e z a n i Alison-Madueke, admitting

that checking marketers’ sharp practices had become intractable.

According to her, rather than the masses benefiting from the system as originally intended, “the majority of the subsidies were actually going to the middle line operators.”

Against this backdrop she added, “It has become pertinent that we find other ways to utilize vast resources that are being channelled into

s u b s i d y, w h i c h a r e n o t reaching the masses.”

Going forward, she said government would set up an advisory body or a think tank, “ who would monitor and advise,” as government would n o t h a n d l e t h e implementation of these benefits.

How prepared are s t a ke h o l d e r s f o r deregulation?

As the arguments go back and forth on the wisdom of the subsidy removal, many believe that the downstream sector is not fully prepared, infrastructure-wise for deregulation.

For instance, what are the states of the refineries, can the Nigerian National Petroleum Corporation, NNPC, the operators of the four refineries cope with the fuel needs of Nigerians?

If not, can the Federal Government cope with continuous products importation and the attendant capital flight and attendant offshore jobs creation associated with it?

In terms of infrastructures are petroleum marketers – majors or independents or depot operators fully prepared for the challenges of deregulation in terms of depot and storage facilities, jetties and a host of others?

Are the regulatory authorities – the Department of Petroleum Resources, DPR and the PPPRA fully equipped to enforce market discipline, and check sharp practices, so that consumers do not suffer unduly on account of operators’ recklessness?

CONTINUES ON PAGE 5

Cover Story

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CONTINUED FROM PAGE 4

These unanswered questions make market analysts believe that government is putting the cart before the horse, as these issues should have been dispensed with before announcing the intent to deregulate.

Cur rent demand/supply reality Local Refining - the existing four refineries have combined capacity of 445,000 barrels per day, bpd. Over the past five years the refineries only contributed between 4% and 20% to the national PMS/petrol consumption, according to PPPR calculations.

Products Importation - the tempo of importation activities have increased due to lack of local refining capacity and the guaranteed cost recovery for importers through the Subsidy Scheme, PSF. National Consumption there has been a noticeable increase in the national consumption of petroleum products. PMS national daily consumption for example currently stands at 35 million litres from the initially observed 30 million litres, and Kerosene 8million litres up from 6 million litres in previous years respectively.

NNPC embarks on refineries rehabilitation The NNPC enjoys monopoly on refining in Nigeria, as it is the operator of the nation’s existing refineries. However, in view of current realities, the corporation is not deriving maximum benefits from its monopoly status, as it should because of the very poor state of the refineries.

NNPC’s Group Executive D i r e c t o r, R e f i n i n g a n d Petrochemicals, Mr. Phil

Chukwu, in a no-holds-barred interview with Sweetcrude, is the first to admit that NNPC cannot cope and compete effectively under the current state of the refineries.

He said, “The question has been asked that can we survive deregulation. And the answer is that the way we are today, no! For us to survive we must look at how can we make the refineries efficient.”

Chukwu disclosed that the search for efficiency plunged the NNPC into a rehabilitation programme that will revamp, maintain and prepare the refineries for possible future capacity expansion.

The rehabilitation programme is expected to last for a couple of years, because according him, it goes beyond mere turn round maintenance, TAM, a routine structure that the refineries have not enjoyed for decades.

He explained, “Although we have invested, we’ve done some turn around maintenance, but you find that

Oil workers at work trying to do today is to look at the problems from different angles. We look at the plant itself, the different ones I have mentioned, we also look at the

Chukwu disclosed that the search for efficiency plunged the NNPC into a rehabilitation programme that will revamp, maintain and prepare the refineries for possible future capacity expansion these are usually very far in between.

Instead of doing them in three year cycles, we wait till sometimes 10 years and more.

So, many things have happened and what we are

supply chain because crude comes from the fields and tank farms into the refineries. They go through pipelines and all that and when the petroleum products are produced, they also go through pipelines into

depots, tank farms or hauled by road to where they are needed. These are all areas we must look at.

“Then the third bit of the problem is the people. How have we been operating these refineries, do we have the necessary skills to achieve the objectives of these refineries.

So we look at the plants, we look at the supply chain and then we look at the people. So, in our rehabilitation efforts, we are going to address these three key elements.

“For us to survive, we must move away from our current production levels of 60% and the fact that some of the units downstream are not functioning very effectively, so we must fix them. In fixing them, it is not a one-day thing, it is something that must be planned properly – gathering data, doing feasibility studies, scoping, doing the design and all and at the end of the day you are guaranteed the time

when you finish and you are also guaranteed your costs.

But if you don’t do it very well, you are bound to mid-way start to go here and there, trying to solve problems that should have been solved before you started.”

Regulators perspectives Downstream regulators in the DPR were weary to comment on the planned deregulation when contacted severally by Sweetcrude, but its PPPRA counterpart had a whole lot of arguments in favour of deregulation.

According to the PPPRA, “Deregulation and price liberalisation of the downstream oil sector constitutes the basis for medium to long term reforms within the downstream petroleum sector.”

This, it noted, will to introduce competition, enhance efficiency, and CONTINUES ON PAGE 6

Cover Story

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Dispenser

Long queue for fuel

CONTINUED FROM PAGE 5

improve products supply, just as appropriate and liberalised pricing framework will help reduce inefficiencies in sourcing, refining, marketing, supply and distribution of petroleum products.

It further argued that “the elimination or reduction of unsustainable subsidy burden on government and allow deployment of resources to fund critical infrastructure and vital social sector spending is critical to revamping the sector.”

It also said that a deregulated sector will facilitate the operation and management of pipelines and storage facilities under the Open Access, Common Carrier regime.

Notwithstanding its numerous advantages, the PPPRA was quick to note that “Deregulation/liberalisation must be accompanied by infrastructural development, institutional and regulatory reforms,” to encourage

prospective investors.

Some of the areas begging for infrastructure upgrade in the downstream the PPPRA enumerated include, adequate import reception facility, which it said will reduce the demurrage exposure experienced in products handling.

• Investment in storage facility and network of pipelines as we move through the creation of a National Strategic Fuel Reserves, NSFR • The existing pipelines need to be refurbished and adequately maintained.

• There is no pipeline network in the North West region. Could be an opportunity for investment • Also, developing surveillance system of the pipeline network in view of the incessant pipeline vandalism.

Marketers also keep mum None of the representatives of the various marketing groups were willing to speak on their

Government is cash-strapped, and because of increasing pressure from state governments for increase in allocation in the light of the new minimum wage, government is trying to save from every possible way

level of preparedness for deregulation and challenges ahead. The Major Marketers Association of Nigeria, MOMAN; Independent Pe t r o l e u m M a r ke t e r s Association of Nigeria, IPMAN; Depot and Petroleum Products Marketers Association, DPPMA; and the Jetty and Petroleum Tanker

Farm Operators of Nigeria, JEPTFON, all had nothing to say.

But under the condition of a n o n y m i t y, a D A P P M A member insisted that deregulation is the only way forward, adding that the only issue at stake is, “the sincerity of government to pull it through because we have been on the process for over 10 years

now.”

He noted that the only reason why deregulation has suddenly become a big issue is because “government is cashstrapped, and because of increasing pressure from state governments for increase in allocation in the light of the new minimum wage, government is trying to save from every possible way.”

He argued that his members have invested heavily in storage facilities and were waiting to get on with the process and begin to reap the dividends from their investments.

But most marketers of the petroleum products marketers had borrowed from the banks at very high interest rates to finance their projects and may not start making profits anytime soon. With the clamp down on administrative recklessness by the Central Bank of Nigeria, CBN, banks are under pressure to recover their loans.

M o r e o v e r, w i t h t h e acquisition and takeover of some of the distressed banks by new management and some with international affiliations, the fear of these downstream facilities being placed under receivership has heightened.

In the face of these challenges, government may well continue the burden of subsidy longer than expected, except it takes the drastic step of full blown deregulation after certain structures have been put in place.

Oil

7

igerian CONTENT INITIATIVE Dr. Ibilola Amao

… Groups map out action plans

N

Nigerian Oil Firm

CLARA NWACHUKWU

F

acility for Oil S e c t o r Tr a n s p a r e n c y, F O S T E R , recently ended a two-day capacity building workshop on effectively analyzing and utilizing reports from the Nigerian Extractive Industries Transparency Initiative, NEITI. The workshop, which took place in Abuja was facilitated by the Revenue Watch Institute, is part of the institute’s global programme to boost the use of EITI reports, “so that they become effective tools of reform.”

The organisers are concerned that the reports are not being used s expected, especially as, “NEITI spends significant time and resources on the production of the NEITI reports, and these reports constitute the single greatest, publicly-available source of information on Nigeria’s oil sector.”

It, however, noted that the trend is not peculiar to Nigeria alone as the great potential of the reports in ensuring accountability and transparency in the extractive industries are lost in many

countries.

As a result, the workshop aims to give participants new skills and ideas on how to use NEITI reports to understand and analyse Nigeria’s oil economy, and also conduct oversight and advocacy activities.

Specifically, the organisers noted that users of the report focus more on the process of compiling the report rather than using the information and data contained therein as a working tool.

They argued that “accountability only works if people read, understand and use the reports, while knowledge of the extractive sectors only increases if numbers are accurate and complete.”

Participants were encouraged to assess the quality of the reports based on the 2011 edition of the EITI Rules, which among others stipulates that: . Reports must be produced annually . Data contained in them should not be more than two years old . A clear definition of materiality . Audited accounts required from government and companies . Discrepancies between

government and company figures must be identified and reconciled, where possible . Sub-national transfers, barter deals and social payments should be included . Reports must be clear and accessible.

At the end of the workshop, participants, which included civil society organizations (CSOs), professional bodies, the media and NEITI representatives, charted actions plans on how to improve the quality of NEITI. While the CSOs spoke about advocacy activities to the National Assembly; Federal Inland Revenue Services, FIRS; the Department of Petroleum Resources, DPR; and calling for reconciliation meeting by all stakeholders, the professional bodies called for the strengthening of the technical capacity of NEITI, and auditors given clear and defined terms of reference.

Also stressing the need for increased technical competence, NEITI promised of quality assurance and control of its reports, while the media on its part demanded greater access to information and data to enhance public awareness.

igeria needs to establish a Refinery and Petrochemical Plant Development Commission (RPPDC) to increase its GDP, deregulate the downstream sector of its oil and gas industry and remove fuel subsidy to avoid bankruptcy and anarchy. It is no longer news that Nigeria can not afford to sustain its export of crude oil and importation of petroleum products at a subsidised cost which is estimated to be between N1.2 and N1.5 trillion per annum. Fuel subsidy would be better spent on improved infrastructure, health, education and job creation through the promotion of SME’s to jump start a vibrant economy.

Deregulation is a necessary step that must precede investment in refineries. However, Nigeria needs to have in place the necessary framework, resources, fiscal terms, conducive environment and instrument of Government that would act as an enabler for investors who just may be interested in locating a refinery within its shores. Without increased local refining capacity, the removal of subsidies would be tantamount to robbing Peter to pay Paul as the same fat cats who are involved in the export and import business would jeopardise the good intent of deregulation and begin to extort money from the masses through a hiked price of products which has been the case whenever there is fuel scarcity.

There is a need to have a government commission that is specifically assigned with the task of accelerating the establishment of refineries (modular and standard). An investor friendly process which removes repetitive and non-value adding requirements for data, certificates, reports, proposal and financials and has the required synergy to prevent duplicity of effort would go a long way to encouraging investment in the design and construction of new refineries. Struggling through DPR, NNPC, FIRS, Ministry of Environment and Financial Institutions is too cumbersome for investors who are used to non-complex processesA commission would act as a one stop shop and remove encumbrances that pose a deterrent to investment in the downstream sector of the Nigerian economy thus reducing project costs..

Every committed government that intends to achieve a goal, such as increased in-country refining of crude oil and production of a surplus of finished products for export, in an accelerated, transparent and fair manner would be wise to use a commission with key performance indicators (KPI’s) to drive such a target. If the penalty for non-performance should be clearly stated in the appointment letter issued to the Director General, a clear and ethical road map for investors would be adhered to and implemented.

Specific objectives for a refining and petrochemical development commission would include: 1.

Examining the existing policy, legal, regulatory and institutional framework on refinery development in Nigeria visà-vis approvals being sought and concluded within 3 months.

2.

Providing the framework for registration with CAC, Ministry of Environment etc and issuance of DPR License to operate a refinery whilst ensuring that all bottle necks that had hitherto resulted in non-performance are removed from the implementation process.

3.

Examining the issues which need to be addressed at national and regional levels for the purpose of promoting optimal refinery development in the most viable locations for

Oil

s e l f- s u s t a i n i n g o f l o c a l refining. ?

Efficient allocation of resources and steady revenue generation, and,

Nigeria Oil rig

Products

Current Capacity:

Domestic Demand:

Petrol - PMS:

18 million Litres per day

35 million Litres per day

Diesel - AGO:

8 million Litres per day

12 million Litres per day

Kerosene - HHK:

6 million litres per day

8 million litres per day

CLARA NWACHUKWU

T

h e Pe t r o l e u m Products Pricing Re g u l a t o r y Agency, PPPRA, has proposed a multi-phased programme on deregulation as the best option out of the current predicament.

The Agency said Federal Government could adopt the policy of a once off deregulation, in which it would have to make provisions for the “building of adequate fuel reserve, securing and making the pipeline network function optimally, providing various cushioning measures as may be necessary and agreed to by

all stakeholders,” or a phased.

In a presentation on: Deregulation of Petroleum Products in Nigeria: Real Sector Perspective, the PPPRA argued that under the latter programme, “Stakeholders in conjunction with the PPPRA will progressively determine in line with the trends in market fundamentals the quantum of subsidy the government will contribute for the predetermined periods.”

In yet another proposal, the agency suggested that deregulation could be done by appropriation. “In this case, the projected amount of annual subsidy required is determined by the PPPRA. The empirically determined amount is then appropriated by the National

A s s e m b l y .

T h e implementation during the year is reviewed and advised by the PPPRA.” It enumerated the benefits of this multi-phased approach to include; ?

Adequate and efficient supply and distribution of products nationwide. ?

Elimination of inefficiencies in the management of the Downstream oil sector. ?

Adjustment in the template (if necessary). ?

Additional refining capacity would made possible ?

Healthy competition within the sector. ?

Self-financing and

Given the above supply gaps, the PPPRA argued that this could be eliminated through investment in additional refining capacity, which, in turn, will create opportunities for export particularly abound for AGO and HHK. Furthermore, it said this will attract additional investment in import reception facilities such as Jetties, Ports, Vessels and a host of others, which are currently inadequate.

But before these investments can come, the PPPRA stressed the need to “decongest the Lagos area, as viable alternatives are presented by the two active free trade zones in Lekki & Olokola for the citing of jetties and depots.”

It added that the draughts advantage of these locations would improve on the economy of scale on bulk discharge of products.

In the recent time, the deregulation of the downstream petroleum sector, particularly with regard to the removal petroleum subsidy on petrol and kerosene has occupied the national discuss.

Stakeholders have expressed varied opinions and interests depending on what side of the divide they are on.

While on one hand, some argue that subsidy removal will increase the hardship of the common man, others believe that subjecting the downstream sector to market forces of demand and supply is the only way to free up the sector in order to attract the much need foreign direct investment.

The PPPRA, the organisation currently in charge of administering the contentious subsidy, criticized the policy saying that it has “constrained government spending on the development of adequate infrastructural facilities and depletion of national revenue profile.

Besides, it added, “It encourages inefficient utilization of resources and product smuggling across the

8

borders. The consumers of HHK do not buy the product at a regulated/subsidized price set by the government due to distribution bottlenecks, multiple handling and malpractices by Marketers.

“It does not encourage healthy competitions among operators as the regulatory environment is controlled by the government.

“Similarly, subsidy regime is inimical to building an investor friendly environment for improving the national Foreign Direct Investment (FDI) profile.”

Even as the arguments rage, there are concerns about the place of determines the pricing policy of petroleum products through monitoring of relevant pricing indices.

Accordingly, the agency has tried to put its role into perspective, noting that even with full deregulation and the passage of the Petroleum Industry Bill, PIB, its current roles will be strengthened and expanded. These will include: Regulation of the Market and Marketer’s Activities Determination of Appropriate Operational Tariff/Margins Administration of OpenAc c e s s , C o m m o n - C a r r i e r Regime Implementation & Management of Strategic Fuel Reserve Monitoring and Enforcement of Industry Standards Development of Gas Utilization Initiatives Setting rules for the administration of the open access regime, regulate and administer the open access to transportation and bulk storage facilities Determine the tariffs for the open access Establish methodology for bulk transportation and storage tariffs Administer and monitor the National Operating and Strategic stocks Arbitration, mediation and conflict resolution Supervision of the transport logistics company which will take over the products pipelines and depots Division, segmentation and licensing of pipelines and depots to facility management companies.

Oil

9 Africa to prosper despite global turmoil: Jonathan

A

frica's and fast-growing population will help ensure the continent prospers even if the developed world suffers another economic meltdown, Nigeria's president said. told a business forum in the Australian city of Perth he was confident that strong economic growth seen since 2000 in would be maintained thanks to increasingly strong financial and political fundamentals.

"Africa has come a long way from the 1990s, which was characterised as a lost decade for development," Jonathan told the gathering of mining chiefs and other powerful businessmen from mostly Commonwealth nations.

"All across Africa there is optimism that this positive trend will continue."

Jonathan cited the continent's ability to feed the China-driven global commodities boom as one of the major reasons for believing in Africa's new-found economic resilience.

He pointed out that Africa had 10 percent of the world's reserves of oil and gas, 40 percent of its gold and about 80 percent of its bauxite, as well as significant quantities of chromium, uranium and iron ore.

CLARA NWACHUKWU

O

ne of the ways the Nigerian Extractive Industry Transparency Initiative, NEITI plans to some of the challenges facing it in terms of oil and gas audit processes and data gathering, to boost public confidence is in automation of processes.

Criticisms against recent oil and gas audits conducted by the agency, particularly in terms of uses and relevance to the public made NEITI to have a rethink to re-jig its processes.

The Executive Secretary, NEITI, Mrs Zainab Ahmed, speaking on: The Journey So Far, in the agency’s new publication, NEITI Open Audit, said the agency was faced with a lot of challenges, a d d i n g t h a t h e r administration was doing all it can to overcome them.

She said that part of the immediate plans include the development of strategic plan to guide NEITI’s future plans.

Listing other major priorities areas under the cur rent operating year, Ahmed, who came on board NEITI in November 2010, said she intends to “ensure the commencement of 20072010 Solid Minerals Audit,” haven dispensed with the 2006-2008 oil and gas audit.

To reach a wider audience, she also said that her administration will intensify public enlightenment prograammes and civil society engagements particularly at the grassroots.

She noted that NEITI has recorded modest achievements within the past one year despite the plethora of challenges it faced, especially inadequate funding to execute its projects.

The NEITI scribe recalled some of the successes, especially the fact that

Artistic impression of an automated machine between November 2010 and May 2011, the Secretariat was “able to meet all the six EITI conditions, which made it possible for Nigeria to attain Compliant Status.”

She further revealed that “the procurement processes for NEITI to embark on new industry audits have reached advanced stages” for the 2009/2010 Oil and Gas Audit, and the 2007-2010 Solid Minerals Audit. For the latter audit, she said a consultant for the Mining Scoping Study has already been appointed.”

Furthermore, she revealed that the implementation of the Multi Donor Trust Fund, MDTF, under the World Bank has commenced, “following the setting up of a steering committee and appointment of a Project Coordinator, Procurement processes of all activities under the fund.”

However, she noted that NEITI is still bugged down by ineffective governmentNEITI relations/sectoral linkages; comatose Inter Ministerial Task Team and static remediation plans, dwindling donor confidence, and poor NEITI/CSO relations and a host of others.

FG Urges Investment In Gas Sector

V

ice-President, Namadi Sambo at the weekend urged the European Investment Bank (EIB) to partner with the Federal Government in the development of the country’s gas sector to boost energy supply for speedy industrial growth.

Sambo made the call when he received the Management team of EIB, led by its Vice President, Mr Walsh Patrick, at the Presidential Villa, Abuja.

He said the call had become necessary in view of the fact that all the 10 on-going power projects across the country would be completed by 2012 and would become functional only when there was adequate gas supply.

“One major area, which even yesterday we had an extensive meeting with the Ministries of Power, Petroleum and the major

oil companies, the IOCs, is the issue to address the local gas supply. ‘’I will like to inform that at the present moment, we are constructing 10 new thermal power plants and these plants are at about 80 to 90 per cent completion.

“Three of the plants are ready and are injecting power to the system, but gas is the big challenge.”

Sambo observed that the

provision of gas for local use was a priority to government, as it was a major requirement for adequate power supply and production of fertilisers.

He said that the country had a robust Gas Master Plan meant to speedily develop the sector.

According to him, there are programmes in the Gas Master Plan to develop major gas processing centres, develop fields for additional gas and arrest gas flaring.

Oil

Natural Gas pipeline

CLARA NWACHUKWU

R

ecently, about 60 participants from nine African countries took part in a twoweek Regional Extractive Industries Knowledge Hub (REIK Hub) Summer School, which held at the Ghana Institute of Management, Policy and Administration, Accra.

Participants were drawn from oil and gas operators, ministries, members of p a r l i a m e n t , l a b o u r, international organisations, civil society groups, religious institutions, traditional rulers, the academia and the media, who were put through intensive coaching on avenues for leakages and revenue loss in the extractive industries and how to checkmate capital flight from their respective countries.

Participants were drawn from

Tanzania, Nigeria, Sierra Leone, Uganda, Liberia, Zambia, Mozambique, Zimbabwe and Ghana The Nigerian contingent comprised 10 representatives that included two media representatives, one of whom was Sweetcrude’s Deputy Editor, who were sponsored by the Facility for Oil Sector Transparency, FOSTER, a British change programme funded by the Department of Foreign Inter national Development, DFID. According to the sponsors and organizers of the programme, GIMPA, Revenue Watch Institute and Deutsche Gesellschaft fur Internationale Zusammenarbeit (GiZ), the summer Hub also “seeks to deepen knowledge and equip participants with skills for them to undertake independent analysis of fiscal and revenue management policies, EITI reports analysis,

contracts analysis and finally understand key legislation in their countries.”

The two-week residential course covered fundamental and intermediate governance issues in the Extractive industry, EI value chain.

The Summer Hub, which theme was, “Governance of Oil, Gas and Mining Revenues,” was to acquaint participants on critical issues that will help their respective countries maximize benefits derived from the exploitation of their natural resources.

Each course is made up of modules that cover the EI value chain and structured along general concepts (theory and practice); comparative analysis of current situations of current situations from the region and beyond; case studies; policy labs to analyse regional cases studies; and plenary

10 discussions.

The participator y and output oriented course also drew from participants experience, their professional skills and individual initiatives. In addition to the lectures and case studies, was a field trip to AngloGold Ashanti Iduapriem Mine, Takwa, to give participants firsthand experience at the mines.

They added that the variety of approaches adopted for the programme is meant to encourage participants to share their ideas and experiences through small group discussions and workshops.

These approaches are geared toward a deeper understanding of the issues and challenges in the EI within Africa, which is an emerging hub for providing g l o b a l e n e r g y s e c u r i t y.

Participants are equally expected to use the insights to improve on the existing frameworks in the sub-region, while also developing regional capacity to provide effective training and mentoring to grow the number of knowledgeable, skilled human resources who are duly equipped to affect strong oversight and governance of natural resources.

“The purpose of the Summer School is to strengthen, equip and empower participants to exercise their oversight roles effectively in the prudent management of extractive industry revenues by their host governments,” said the organisers.

Over 30 courses were delivered cutting across policy, contractual processes, fiscal regime, exploration, exploitation and production, refining, marketing and transportation, and environmental issues and rounding off with group projects on specific subject matter along the EI value chain.

With regard to sponsoring the Nigerian contingent to the Summer School Hub, FOSTER, said that this is geared toward strengthening transparency and accountability in Nigeria’s oil and gas industry, especially as the sector is the livewire of the economy, from which it derives the bulk of its revenues.

F

Can you give us an update on the state of the four refineries – the two in Port Harcourt, and the ones in Warri and Kaduna?

Let me first of all say that we see the refineries as three refineries because Port Harcourt has two refineries in one – so we talk about the 210,000 barrel refineries in Port Harcourt.

In Kaduna, we have a refinery and a petrochemical plant attached to it. Actually, in Kaduna there are two plants – the fuels plant which uses Escravos Crude, and there is the Lu b e s p l a n t , w h i c h u s e s imported heavier crude. Also, there is the LAB, which uses some of the products from these refineries to produce linear alkaline benzene, which is a raw material for detergents. From this also, we produce base oil from the Lubes plant for lubes, wax for candles etc. So in Kaduna, you may be talking about three separate plants – the fuels, the lubes and the LAB. Then the tin and drum is for packaging.

In Warri, you have the refinery, and then the petrochemicals – the PP or clean plant as it is called and the carbon black plant as well, so you also have about three of them.

You can now see how complex these refineries are and for us to have the full benefits of these investments, we must have all of these units work. Unfortunately, over time, the refineries have not been operating optimally, they are not doing well, and we are doing very poorly.

I believe, if I may say that even though we can do about 60 percent, that is the inlets or DCUs- Crude Dispensing Units, if they can take about 60 percent of the name plate capacity, even though we can do that, the other units also have issues because they are not producing optimally. Therefore, you find that the yield slate we have is not being achieved in the refineries.

This is because of many years of not investing in these refineries.

Focus

Phil Chukwu

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r. Phil Chukwu, the group executive director in charge of refining and petrochemicals at the Nigerian National Petroleum Corporation, NNPC, is a focused and driven man. Before his current posting at the corporation, he had occupied other portfolios including that of group general manager, NAPIMS, group executive director, exploration and production, among others. In this interview with Hector Igbikiowubo and Clara Nwachukwu of Sweetcrude, he speaks passionately about how the refineries fell into disrepair, plans to rehabilitate them and restore production to 90 per cent installed capacity. He talks about the need to position the refineries to operate in a deregulated environment, among other issues.

Excerpts:

Although we have invested, we’ve done some turn around maintenance, but you find that these are usually very far in between. Instead of doing

them in three year cycles, we wait till sometimes 10 years and more. So, many things have happened and what we are trying to do today is to look at the

problems from different angles.

We look at the plant itself, the different ones I have mentioned, we also look at the supply chain because crude comes from the

11 fields and tank farms into the refineries. They go through pipelines and all that and when the petroleum products are produced, they also go through pipelines into depots, tank farms or hauled by road to where they are needed. These are all areas we must look at.

Then the third bit of the problem is the people. How have we been operating these refineries, do we have the necessary skills to achieve the objectives of these refineries. So we look at the plants, we look at the supply chain and then we look at the people. So, in our rehabilitation efforts, we are going to address these three key elements.

And how far have you gone with tackling any of these problems?

The programmes have started, we call it refineries rehabilitation programme. For instance, the Port Harcourt initially started with a turnaround programme, and they’ve gone as far as placing orders for long lead items, and we have also visited some of the contractors because what we are doing is that those who built the refineries will be the ones to do the jobs for us. We have understanding with Technimont that was proposed by JGC. JGC is unable to come for several reasons – there is a Japanese Government’s advisory that Japanese companies should not come to the Niger Delta. So that is an issue, and we’ve visited them in Japan trying to make them understand, and the Ministry of External affairs is assisting us in this respect. So we are trying to convince them so that the Japanese Government can change their advisory from a high alert level, to maybe a moderate one so that these people can come. But the situation today is that they are unable to come. But they said they will work with Technimont, who has been partnering with them all around the world. So Technimont will be there to work, with JGC in the background.

For Kaduna, Kaduna was built

by Chyoda, and Chyoda is going to come and they have agreed to come, even though they are Japanese as well, but they are not going to the Niger Delta, which is where they have an advisory. Chyoda have agreed to come, we were in Japan and we met with them and we are working at how we can come to an agreement for them to come.

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CONTINUED FROM PAGE 11 For Warri, we have Saipem, which is the successor of Snamprogetti, who built the refinery. Snamprogetti has been acquired by Saipem, so it’s a unit of Saipem; they are ready because they are on ground in Nigeria so we don’t have a problem with them.

So all three contractors have been identified, we are also engaging NETCO, working with Technip, an internationally renowned company with a lot of experience in refinery work and they will act as consultants to NNPC. NETCO and Technip have formed a consortium, but NETCO is leading and they will now act as consultants to us. We have started going round the refineries to gather data, do the inspection and auditing, gather all the data, scope the work, schedule it and do the cost estimates, prepare all the documentations for negotiations with the afore mentioned contractors.

So we’ve gone along this route and we are currently engaging with NETCO and their partners to ensure that we wrap up agreements with them. But before then, they have already started work and their proposal is with us and we are in the process of negotiating with them.

Going back to Port Harcourt and JGC, in the event the advisory is not vacated, what happens, or do you have an alternative arrangement in place?

Let me assure you that Technimont is a very competent company, they’ve worked for us in that refinery and they partner with JGC all across the world, so they don’t have an issue.

Actually, it was JGC that suggested we work with them and we believe that they have all the competences required. They even worked on the Eleme Petrochemical Company.

We also know that the Port Harcourt Refinery over the years has been bedeviled by electricity supply issues, is there any plan to tackle that problem head on?

Yes, we have two initiatives – one is to refurbish the existing electricity supply system, which is the steam turbine. The problem we have there is because of the water quality producing steam to drive the turbines. So we are fixing that.

But the main plant, which removes all the minerals from the water, we have a contract in the process and once that is concluded, they will award contract for the placement of a mini plant, which produces the water, which goes to the boiler and from the boiler, you have steam that drives the turbine. So,

problems in implementation and that is what you must avoid.

If you want it to happen today, it’s not going to happen. When our consultants finish their work, then you’ll know the proper time schedule.

We are looking at three elements in the implementation.

The first one is to revamp the refineries the way they are today in the immediate short term. We look at the refineries, there are things that need to be replaced, some cleaning up and all that and we’ll do that. The next stage is the upgrade; you’ll agree with me that in the time we are talking about 25-30 years that these refineries have been there, technology has changed, and if technology has moved on, you need to also adapt to new technologies. So we the upgrade segment, after the initial revamping, you have the upgrade and if subsequently you want to expand these refineries, you can go ahead and refine them. These are some of the things that we hope to do.

The first bit is to revamp the refineries, clean them up,

Phil Chukwu

this system is being worked on.

The second system is where you have a reliable power generation system just like you have in Warri, to have a gas fired generator. In that case what we are doing is, we are talking to two companies and as soon as we conclude, in fact, the papers are going to be considered in GEC, if the GEC meeting holds today, we will look at what has been proposed, select the best one and begin to work with them to install a turbo generator inside the compound in Port Harcourt. That will be an alternative to the existing system.

This doesn’t sound too salutary an alternative considering the issues we have with gas, so how will it play out?

We don’t have that many issues with gas because there is already a gas pipeline that comes into the Port Harcourt refinery. The volume of gas required is something like for 30 Megawatts power generation, so it won’t

require that large volume of gas.

Already there is a pipeline taking gas across that area and all we need is to key into the refinery.

The interventions or programmes you have mentioned so far appear to be moving at snail speed, which is usually the case with executing policies in Nigeria?

The snail speed you’re talking about, let me tell you that in engineering projects you don’t just jump into it, you must plan properly else, you’ll have

change the parts that are rusty to make it more efficient, but it remains the way it is. Then you go to the upgrade side, this will increase the efficiency because we are introducing the latest technology in refining, then the final stage is if we want to expand the refineries. But we are not talking about that now.

These are the things we plan to do and our schedule will address the first part – revamping, and then address the second one, and we take them in stages like that.

In order to address this concern, can we look at the time line, how soon do you expect a feedback from your consultants?

Let’s not look at my consultants because what we have or the directive we have from thee management – the minister and government is that we will do the Port Harcourt 1 for one year, the other one we will do

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CONTINUED FROM PAGE 12 for two years. The Port Harcourt 1 like I told you, we’ve already ordered for the long lead items. I personally went to Japan to speak to some of those who manufacture these components, so went to their offices one by one. We spoke with them and got agreement with them on when they can bring them in. the actual bit of during the time when they will actually do the work on ground will be say during a two month or three month period. What you have is from now to probably AugustSeptember will be for the manufacture of spares and equipment that we need and once they arrive, the actual work of installation and integration will commence immediately.

We have been given one year and we are trying to work within one year, but the revamping bit, if we now need to move ahead, then that is another segment of the work. Our objective at the end of the day is to achieve about 90 percent of the name plate capacity for Port Harcourt and all other ones. Today, Warri is the best that we have.

But you see, one of the problems we have in Port Harcourt is that it is the new Port Harcourt that we will address during this phase. The old Port Harcourt is really in totally bad shape and that one will be included in a longer term work and this will come in with the upgrade because you have to really go into it and do detail work in order to upgrade it to a standard where it can produce on the basis of the name plate capacity.

For the purposes of clarity, the 90% you’re looking at is for Port Harcourt 2, the 150,000 barrels?

Yes, the 150,000 of the new Port Harcourt. The old one has not been functioning for a very long time, therefore a lot more work needs to be done there. Port Harcourt is doing 66% as at yesterday. But you have to understand also that the FCC – Fluid Catalytic Cracking unit has not been working because of power issue. So once the power issue is solved, in fact, they are trying to bring back the FCC today.

A little more clarity, if you say

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the refinery is doing about 66%, yet the FCC is not working, how is that?

The explanation is that the CDU that is the unit that brings in crude and when refineries report their performance that is what they report. The other units will take input from the CDUs and other units to function; the FCC gets it raw materials from the VDU and then processes it.

So what the FCC does is to increase the volume of PMS that you are producing. But in reporting the 90% I am talking about, is from the CDU, what the refinery can take in at any particular time. So now it is now our responsibility to ensure that these other units function optimally so that whatever is passed into them is also processed.

In real terms, the refineries supposedly get 450 000, barrels per day, what volume of this are you able to process?

I’ve given you an average for all the refineries, if you talk about an average of 60%, it will be 60% of 450,000. But this fluctuates because it is not that at any particular point in time you have just that same volume, it could be higher, it depends on how the refineries are functioning. But the issue with

the refineries in terms of the restrictions of the crude you pass into it, is not because the refineries are not functioning all the time. There are other issues.

There are the issues of bringing in the crude, sometimes, you are processing and the crude line is broken. You process what you have and if you finish processing that, you have to wait.

In sum, when you are looking at the average, you are doing lower than what you expected to

Phil Chukwu

do, and that is what the issue is. A lot of problems associated with the refineries come with the availability of crude.

Let us look at another level of the problem, the limited authority in terms of approval limits the managements of the refineries enjoy are rather small, has this been addressed?

That has been addressed. The federal Government has changed the level of financial authority for most of the

ministries, departments and agencies and we have adopted that. Today, the approval limit at the refinery is substantially more than what it used to be in the past. So I don’t see that as a problem.

Given your explanations, it a p p e a r s t h e t u r n - a ro u n d maintenance will take longer than anticipated?

What we are doing is rehabilitation not turn around.

Rehabilitation is more of TAM + because you have to do a lot more. TAM is a routine thing, but this time around, we are not talking about the routine because when we should have done Port Harcourt, we are talking about several years back.

Now we are trying to do it and in addition to that, we are talking about all the others like power system, the de-bottlenecking of the FCC. When the Port Harcourt

refinery was built, it was originally designed at 100,000 p/d, then I think there was a plan to build another refinery in Calabar, but that one failed, so gover nment decided they should increase the Port Harcourt to 150,000 barrels. But in increasing it to 150, 000, the FCC unit was not increased.

Recall also that the old Port Harcourt refinery was just a topping refinery but it didn’t have FCC, it had to also use the existing one. So you have to debottleneck it this time around.

You have to increase its capacity or you add another unit that will handle it to increase the volume that it has to take. So the work on ground is beyond turn around maintenance.

Given these scenarios, from a layman’s point of view is it not just better to build new modular refineries?

No, I don’t agree. Having a modular refinery will be very small and I don’t see a company like NNPC going to have smaller refineries. But if we refurbish this one, we will do that at a cost that what you will spend here cannot even build one refinery. Do you know how much it will cost you today to build a refinery of this capacity?

You’re talking about a combined 445,000 bpd refinery; it’s going to be a huge cost if you decide to build new ones. Why don’t you spend a fraction of the money you would have used to build this one up, do the technology upgrade. We have experts who have looked at them and can do it.

We are also looking at the market, the market in Nigeria today is different from the market in Nigeria when some of these refineries were built.

Therefore, the question is, when experts look at it, am not saying that is what will be done, but we can reconfigure the refineries to produce more of the products desired in this market than products that probably we can’t handle.

Let’s take Kaduna for example, when it was designed, it was designed to produce asphalt, but how do we evacuate it, have we been able to successfully evacuate it. Yes, asphalt is needed in the country but since we have not been producing, have we not been using asphalt in the country?

These are some of the things we have to look at, we have to look at the market, what does the market want? And we must be able to address the issue. These are some of the issues we are carrying out studies on and we hope at the right time we should be able to say we can do this to

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CONTINUED FROM PAGE 13

the refineries or leave them the way they are. But some of the will need twitching here and there, and I gave the example of the Port Harcourt Refinery.

I also want note the situation in Warri, where there is a PCPetrochemical plant, it has not worked for over 12 years and we hope that during this exercise we will be able to bring it back to life because it is also going to be a money earner for us.

This brings us to a grave concern out there, which is part of what has brought the refineries to where they are today with regard to the frequent policy shifts in government and management.

Won’t you say the NNPC will be better off partnering with the private sector for greater efficiency and less interference from government?

Let me first of all say that the policies regarding refineries in Nigeria have been very consistent in the sense that there is hardly any government in Nigeria that does not desire optimum utilization of the capacity of the refineries, it has always been the same. They want the refineries to run well, they want them produce at optimum levels.

Once this is done you may say that in implementation, there is scarcity of funds because there are competing needs in this country so if the funds are not there and the money is not invested at that time, we have this kind of problems occurring.

So talking about policies, the policies have been very consistent.

Secondly, am here today, am pursuing a policy of rehabilitating the refineries to make sure that the refineries are working at least 90% of their capacities, it is not just me but something being driven by the management of the NNPC and the government – the minister up to the president. They desire it and want this to happen. Why? From a selfish point of view, if we don’t do it, then we will b out of business tomorrow. If there is deregulation tomorrow and we are not able to do it we will be out of business, if we continue to produce at a higher cost, as an efficient organization, we should be able to sell below my costs; if I do that there will be no market for me. In the long run, I won’t even be able to refurbish my refineries, so these are some of the things that happened because the business structure was really such that we’ve been selling below costs with subsidies and all that, it distorts the market and we are unable to run a refinery in a business

the refineries, the refineries process it for the PPMC, which takes its products and sends it to the market. For the refineries, what they earn is the processing fees from PPMC. That is the structure on ground today.

But we are looking at a structure where the refineries can buy their own crude, process and sell. This is happening in other places. I went to France to see how they are organized.

They have what they call refining and marketing. They process their crude and sell the products. We are not running that today and we are looking at it. This is what was proposed in the PIB, where the refineries will buy their own crude, process it and sell to off-takers and that is an option we are looking at.

So you find that PPMC also has a lot of issues, lines are vandalized, they lose a lot of the crude before it gets to the refineries and same thing when the products are produced before it gets to the end users.

They carry the burden of these losses. If they eliminate these vandalism and all, the costs will be lower.

I don’t know if this is still part

Phil Chukwu

manner. And that is what deregulation will probably introduce and if we don’t do well, we’ll just phase out. So it is very important that we fix these refineries, from the NNPC’s point of view and bring it to the level where we are ver y competitive.

Then when you are talking about joint ventures, I believe it is beyond me, it is government’s decision on what they want to do because they own the assets. If they decide tomorrow that they want to do it then they will.

Would you then say the NNPC and the refineries are prepared for deregulation?

That is what this programme is all about, it is geared towards making the refineries efficient and if the refineries are efficient they will be able to compete effectively in a deregulated environment. For us to be competitive and bring our refining costs to a level comparable to refineries across the world, then we should be able fix tem, once this is done,

the products prices will be competitive as well.

You raised a critical point about costs of your output; it’s contentious out there, because there are arguments that since the crude oil is here, the refineries here, the cost of producing a litre of petrol is relatively cheaper?

Let me explain that the way it is today, PPMC buys the crude from government at the international market price. It is PPMC that sends this crude to

of the PIB, it was proposed that the refineries will have a structure where they will become refining and marketing companies and take over most of the functions of the PPMC and a new company will be established to manage the pipelines such that when you use the pipeline, you pay a fee for it and it will be open for all users.

So why were all these not done before full deregulation?

The question has been asked

that can we survive deregulation. And the answer is that the way we are today, no. For us to survive we must look at how can we make the refineries efficient. If you look at manufacturing in Nigeria, it is done at a very high cost, no matter which sector you are looking at –m with having to provide their own power and other facilities and the refineries are not an exception.

Earlier on we were talking about how to give power the Port Harcourt refinery, you can’t rely on PHCN for power you have to build your own power plant and when you do this and buy gas and other inputs your costs will be higher than the ordinary power supplied by PHCN. So for us to survive, we must move away from our current production levels of 60% and the fact that some of the units downstream are not functioning very effectively, so we must fix them. In fixing them, it is not a one-day thing, it is something that must be planned properly – gathering data, doing feasibility studies, scoping, doing the design and all and at the end of the day you are guaranteed the time when you finish and you are also guaranteed your costs.

But if you don’t do it very well, you are bound to mid-way start to go here and there, trying to solve problems that should have been solved before you started.

This is what we are doing today, engaging those who must work with us and ensure that this thing works, those who have done it before. By the initial studies carried out, by March next year, we must begin to see changes for Port Harcourt. For the other refineries for the ones the items that we need to order, we have placed the orders so that by the time the ground work begins we have prepared everybody. We need also to address the skills of the workers, such that in upgrading the plants we are also upgrading the skills of the people.

To this end we are planning to establish a refining school where people both old and new will be trained and gradually over the years they will be going back for retraining. It’s going to be hands on, to sharpen their skills, and improve health safety and environment knowledge so that they won’t burn down the refineries accidentally. Those already there today, we need to give them top up training, because when people have been in a place for too long there are certain behaviors they acquire which are not right. You need to correct that and you can only do that through training and retraining. These are what we are doing.

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BY KUNLE KALEJAYE

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he Nigerian Association of P e t r o l e u m Explorationists, NAPE, has said that Nigeria’s gas reserves have remained stagnant in the last six years.

Speaking at the preconference workshop of the association in Lagos recently, the Managing Director, Niger Delta Petroleum Resources, Mr. Layi Fatona, said Nigeria is not discovering new gas due to lack of exploration activities.

He said, “Nigeria is not discovering new gas and the only way to discover new gas is to do exploration work, and to do more exploration work is to have more investments and what that tells you is that nobody is investing in oil exploration and gas operation. All the gas we have found is through exploration for oil and if we have not found new gas it means we have not been exploring for oil.”

He attributed the development to the worsening weather condition and the non-passage of the Petroleum Industrial Bill (PIB). “When we have favorable weather condition and the quick passage of the PIB, Nigeria’s gas reserves will improve,” he argued.

In his welcome address NAPE President Mr. Jide Ojo, said one of the potential drivers for the growth of the Nigeria oil and gas industry is renewed search for alternative energy.

“This search is driven mostly by increasing but fluctuating oil prices as well as an alternative source of energy due to its natural occurrence as fossil fuel and its abundance which is recognized globally as a cleaner source of energy with mostly carbon dioxide (CO2) and water vapor as by product.”

Ojo believes that Nigeria will come out from dormancy and an apparent state of flux regarding gas development and moving

Gas Reserves

the gas commercialization train forward to the next level with significant potential for gas revolution through the unveiling of the President Gas Revolution Agenda on 25th of March 2011.

In his presentation, the Managing Director/Chairman, Chevron Nigeria Limited, CNL, Mr. Andrew Fawthrop, noted that there was the need for a transition from just oil to oil and gas based economy. This, he pointed out was the enabler for e x p l o r a t i o n a n d commercialisation.

Fawthrop, who was represented by the Director, Gas, CNL, Mr. Steve Freeman, said there was the need to determine the price of the commodity. He also stressed the need for effective guarantee for payments for the supply of the commodity.

According to him, to encourage operators to invest in the business and undertake effective exploration of gas, issues like policy, infrastructure, m a r ke t , p a r t n e r s h i p s a n d security must be addressed in the industry.

He maintained that when there are clear and consistent policies, players would be encouraged to make investments that would in the medium and long-run, transform the petroleum sector.

Fawthrop said the industry would further emerge as a key p l a y e r, a n d t h a t w o u l d encourage downstream investments. He said that companies would, therefore, be encouraged to consider exploration portfolio.

Imo to host gas expo

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The Group Executive Director, Exploration and Production,, Nigerian National Petroleum Corporation, Dr. Andy Yakubu, said steady growth in the demand for gas remained a good reason for stakeholders to invest in its exploration. He said that this was good for the country’s growth, especially in terms of national output.

Yakubu, who was represented by the Group General Manager, National Petroleum Investments Management S e r v i c e s , N A P I M S , M r.

Morrison Fiddi, placed the country’s gas reserves at 184 trillion cubic feet.

Also placing the demand of the commodity at 225 trillion cubic feet, he stressed that the country needed to increase exploration activities (not only for oil, but for gas) to address the deficit of 41 trillion cubic feet, which is a huge shortfall.

He stressed the need for effective management of future

demand and supply of gas in the country, noting that funding had remained a major issue for companies that undertook gas exploration.

According to him, notwithstanding the challenges, there were huge prospects in the gas sector, which strategic companies could tap into by boosting their exploration activities.

Stakeholders in the sector are, however, argued that for the domestic gas market to thrive, issues like securitisation, stability, development and coordination, simplicity, and commitment (from all stakeholders), must be holistically addressed.

Nigeria’s 2010 natural gas production at 3.3 billion cubic feet per day 2010 clinched the third largest producer in Africa, contributing 16 percent of Africa’s production and the 25th in the world accounting for only one percent of the production.

h e I m o S t a t e Government has concluded plans to host an International Gas Roundtable & Expo, tagged IGR 2011, scheduled to hold between November 29 and 30 in Owerri, the state capital.

The Gas Expo, which theme is: Gas-to-Wealth is being organized by the state Ministry of Petroleum and Environment, and meant to serve as the “Energy corridor, linking the huge gas market potentials to gas Producers and Suppliers in Nigeria.”

The organisers also noted that Nigeria is increasingly turning into a significant gas market in her own right with over 187 trillion standard cubic feet, scf of proven natural gas reserve.

In a statement to Sweetcrude, the organisers said, “IGR shall showcase various investment opportunities in the gas sector of Nigerian economy, play host to teaming delegates, oil industr y players, resource dignitaries, exhibitors, gas consultants, L N G c o m p a n i e s , international and local gas traders and buyers, engineers and the gas industry regulators.”

Participants are promised the opportunity to enhance their brand reach, as the ex p o w i l l p r o v i d e t h e platform to meet the huge gas potential and opportunities in Nigeria.

Fee dback

BOLAJI AJALA

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ndigenous joint venture partners, Energia Limited and the Oando Group, have said that the only way to run a smooth operation in the communities is through partnership with the host communities.

Highlighting their development efforts in their host communities, which made their operations successful, the JV partners said their host communities are carried along in all of their projects execution.

The host communities include, Emu Ebendo (major host), Obodougwa-Ogume, Umusam–Ogbe, Ogbeani, Isumpe–Ogbe, UmusadegeOgbe.

Taking journalists on a tour of community projects executed in their areas of operations, after an engagement programme with the communities last week, the Managing Director, Energia Limited, Mr. Felix A.V., said, whatever

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h e C h i e f Executive Officer of Techno Oil Limited, Mrs. Nkechi Obi, has been conferred with the Member of the Order of the N i g e r, M O N , f o r h e r meritorious and selfless services to the nation. Other notable industrialists, politicians, educationists, administrators and eminent people were also honored in several categories as announced yesterday by the Federal Government.

In response to the award, Nkechi Obi stated, “I thank Mr. President and the people of Nigeria for considering me worthy of a national honour.

To me, it is a clarion call to

the company gets as gross revenue, at least three percent of it goes back into the communities as a means to help in the development of the communities.

He also said that the company ’s community engagement approach has resulted into the signing of several Memoranda of Understanding, MoUs with host and other impacted communities.

He said, “1.25 percent of our gross production is ceded to Emu-Ebendo community as host community, and 0.75 percent to each of the impacted communities. We also incorporated a Trust Deed and established a separate Trust boards to manage the revenues accruing to the host community, and a separate Trust board to manage the impacted communities for sustainable community development programs. We also pursued the incorporation of a youth’s company, IFOGAT Limited, for the empowerment of the

make even greater contributions to the growth and development of my fatherland.”

“I am delighted indeed, that my country has made me proud and fulfilled. I continue to advise our teeming youths to have abiding faith in Nigeria because God truly has good plans for everyone,” With this award, Obi joins the ranks of other distinguished women and men all over the world, who have been recognized for their selfless service in various walks of life.

Obi driven by a relentless passion was raised by a

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youths through employment creation and contract award, “Also, we initiated an interface for monthly meetings with Ebendo at Kwale Base office, where we made series of cash/material donations to Emu-Ebendo Community during festivals, and other cultural occasions, Energia has remitted large sums of money to the trust fund accounts, held Trust Boards Meetings various ECDA meetings. Energia JV is also involved in other community development efforts outside of the trust fund, awarded series of contracts to IFOGAT, and

other Community registered contractors.”

Some of the community projects include the Construction of 12m x 18km earth road from Obodugwa to Ogume; the construction of a mini housing estate with standard borehole and electricity; and the rehabilitation of Obodugwa water borehole system.

Others are the institution of a n E l d e r s We l f a r e Programme, Educational Remedial Programme, construction and commissioning of ultramodern market at Ebendo During this period, the

modest working class family.

She resolved at an early age to commit a significant percentage of her resources to help the poor. Over the years, she has remained committed to this cause.

of repute; she is also a positive role model and mentor. Obi has shaped the lives of many people including the less-privileged and rural women.

From its humble beginnings, Obi built an impressive track record having nurtured Techno Oil to be a leading indigenous oil and gas company in less than a decade. Her immense contribution to the oil and gas sector in Nigeria has earned Techno Oil a dominant role in the distribution of petroleum products across the country.

She is not only an accomplished philanthropist

Among her impressive charity initiatives that have impacted positively on the society is the scholarship scheme to undergraduates in Nigerian universities who may have never had the opportunity to be educated.

Techno Oil’s ethos of social responsibility is founded on Obi’s passion to ‘give a heart.’ She has single handedly undertaken the rehabilitation of five secondary schools, as well as constructed two ICT centres in Lagos and Anambra state

16

Energia boss disclosed that the company also executed some projects with the site locations, such as the clearing and disposal of grasses and debris at the flow station; construction of 2 x 50HP export pumps skids and roof; and the construction of 10 doghouses for our fire extinguishers storage “ We a l s o e n g a g e i n monthly evacuation of non toxic waste at the flow station, supply of electrical repair items for the construction of pump panel at the station, drilling of water borehole for the drilling location, procurement of two Hilux trucks for transportation purposes, production tanks interconnection and commissioning, security caravan upgrading and fur nishing, condensate return line construction and commissioning,” he added.

Currently, he said the company and its joint venture partners are developing an Ebendo

in a bid to bring succor and hope to the less-privileged.

Disturbed by the predicament and challenges faced by physically challenged people in Lagos, she staged a musical concert attracting top personalities in the society including Gov. Babatunde Fashola to give their hearts to the lessprivileged. Proceeds from the event were donated to charity.

Nkechi holds a BSc in Economics and is a core professional in strategy and business development. She is an alumnus of the Lagos Business School and Harvard Business School in the United States.

Power

17

OSCARLINE ONWUEMENYI

C

anada has revealed that some of its major e n e r g y companies have expressed an interest to invest in Nigeria’s power sector.

The Canadian High Commissioner to Nigeria, Mr. Chris Cooter, and his Deputy, Mr. Jean Gauthier, dropped the hint recently when they paid a scheduled visit to the Minister of Power, Professor Bart Nnaji, in his office in Abuja.

According to the High Commissioner, “There is a global awareness that something massive is unfolding in the power industry in Nigeria,” even as he sought from the Minister specific areas of challenge the Canadian firms could participate in.

“The air indicates that something is enveloping Nigeria’s capacity to lead the w o r l d . We a r e h e r e t o complement these efforts to resolve your electricity challenges and galvanize your industrial leadership of Africa,” he added.

The envoys predicted an explosion of employment in the sector as soon as the reforms are through and allayed fears being entertained by workers on lay-offs.

Cooter disclosed that major Canadian energy companies will be visiting Nigeria soon to join other multinational corporations to bid for participation in certain areas, especially hydro electricity where he believed Canada has the highest comparative advantage in the world.

He noted that institutional structures like bulk trading and privatisation are already exciting global investors, boosted by the country ’s bidding process and urged that the “foot remains on throttle” to stamp out institutional corruption. “Canada will go the whole hog with you,” the envoy pledged.

In response, Nnaji expressed

Shiroro Hydro-Power Plant

Nigeria’s readiness to partner with Canadian construction giants in the Mambilla and Gurara hydro electric power projects expected to jointly produce 3,300 Megawatts, MW. He told his guests that reforms in the power sector have institutional and legislative backing, and as a result, their implementations have been procedurally systematic to avoid loopholes that ruined past efforts in the sector.

On the need to involve the state governments in the sector, Nnaji noted that the lawmakers put electricity in the Federal Exclusive L e g i s la t i ve li s t , t h e re by imposing the authority to construct, produce, regulate and supervise the sector on the central government.

He quickly promised that the Federal Government will continue to encourage the states, adding that in view of the sensitive nature of the

sector, government would discourage the mutation of state run power stations that could possibly be mismanaged in future and take Nigeria back to the abyss again.

Nnaji said Nigeria is carefully monitoring the distribution efficiency of the

existing stations as well as the tariff to incentivise the value chain. ”We are guarding against the mistakes of the past while addressing other institutional lapses through the strengthening of the National Power Training Institute, NAPTIN, and ensuring that World Bank commitment to the issue of bulk trading is not lost.”

Wi t h r e g a r d t o l a b o u r agitations against reforms, the minister said that labour leaders justifiably fight for their members and that “they are elected to do that.”But he noted that some of their agitations were motivated by the self-centeredness of their leaders and gave the assurance that all of their grievances would be addressed.

The minister further argued that corruption in the power sector has been a serious impediment to its efficiency and effectiveness, adding that government was not taking the matter lightly.

Shell fined for Brazil noncompliance

S

hell has joined Petrobras with the dubious honour of facing fines for failing to comply fully with Brazilian local content requirements.

According to Energia Hoje, an electronic news bulletin Brazil’s national petroleum agency (ANP) held that the company had not met its commitments during the exploration phase of a block awarded eight years ago and subsequently relinquished.

The non-compliance attracted a penalty of 1 million Brazilian reais, equivalent to less than $600,000 Andre Araujo, Shell’s president for its Brazilian unit, said the company was considering whether to appeal against the ruling.

The company is one of several targeted for alleged non-compliance of local content requirements.

Power

An Electric meter

OSCARLINE ONWUEMENYI

J

ust a few months after the Nigerian Electricity Regulatory Commission, NERC, announced a new Multi-Year Tariff Order, MYTO, the Commission is now seeking the removal of the Meter Maintenance Fund, MMF, which could reduce the monthly tariff paid by consumers across the country.

The introduction of the new MYTO led to a “slight” increase in electricity tariff charged by the Power Holding Company of Nigeria, PHCN, According to officials of the Commission, the Distribution

Companies (DISCOs) no longer have justification for charging the maintenance fee since such a charge is adequately covered by the MYTO review. The removal is meant to be reflected in the October 2011 bill, which is usually presented to customers in November.

The MYTO review in July was met with protests in some quarters due to the poor state of electricity supply in the country.

Many claimed that the resultant hike would further worsen the economic gloom of Nigerians.

NERC officials, however, argued that the review was long overdue since it had been proposed by the previous administration.

Before the review, DISCOs were permitted to charge

certain fees including the Meter Maintenance Fund, which were aimed to help them shore up their limited funding. However, the latest MYTO review appears to have taken care of such

funding, making any additional charge a burden on the consumers.

In an interview with Sweetcrude, the Chairman of N E R C , D r. S a m A m a d i , sympathised with electricity consumers while noting that there has been little or no difference in the state of power supply in the country since the power reform was initiated by the Chief Olusegun Obasanjo government in 2005.

Amadi explained that the Commission was in the process of consulting with stakeholders over the need or otherwise to increase electricity tariff in the country. He urged stakeholders to be objective over the review process, noting that, “Public power supply in the country is still a standby in most homes and offices, as it was in 2005 when the reform in the sector began.”

He added that, “The state of electricity generation in this country is so terrible that one patriotic duty of every Nigerian is to speak strongly and critically about what needs to be done to review the situation. To us at the Commission, there cannot be a better time than now to put issues plaguing the sector back on the front burner.

It comes as the Federal government is on the verge of divesting sole ownership and control of successor PHCN companies to allow private equity and management in line with the spirit of the Electric Power Sector reform Act, 2005.”

According to Amadi, the general belief in the electricity sector is that current MYTO prices cannot support investments therein as they are much lower than in most developing countries. He added that market imperfections as low generation capacity, low private sector participation, high and unprecedented operating costs and overheads still abound in the industry.

But he further noted that, “As

18 daunting as these challenges seem, we cannot give in to these frustrations if we must succeed.

We must confront the pricing challenge while taking into consideration the prevailing economic situation of our country folk.

“For the avoidance of doubt, there is no guarantee whether the tariff will go up or down. It is the outcome of this consultation that will determine where the electricity tariff goes.”

Amadi insisted that all over the world, prices have played a dual role in achieving efficiencies in the distribution of goods and services to consumers and in driving private investment into the economy. “Therefore, if we must achieve the goal of giving every citizen access to stable, reliable and fairly-priced electric power, a reliable and sustainable framework must be put in place to ensure the robust interaction of market forces with social policy to attain equilibrium.

“This we can do by establishing a pricing regime that will sustain massive private sector investment and guarantee a positive return on investment, while also being fair to underprivileged consumers.”

The NERC boss observed that prior to the introduction of MYTO, the industr y was characterised by lack of a transparent price determination process and abysmally low tariffs, adding that the PHCN-fixed government-determined tariffs mostly based on the political whims and considerations as opposed to the economic principle of full cost recovery.

“This promoted inefficient pricing of electricity and constrained the ability of government itself to recoup costs of investment. This ultimately undermined the growth potentials of the sector because it totally distorted the economics of the electricity and deferred private sector participation until now,” he stated.

He explained that “MYTO provides for periodic review of the cost parameters through the minor (annual) and major (fiveyearly) review windows. The annual review of the framework takes into cognizance changes in gas price, inflation and exchange rates while the major review considers holistic changes in major parameters.”

However, he pointed out that despite the attributes of MYTO, “the market is yet to become robust. The market has failed to achieve optimum efficiency and milestones as envisaged by the Commission. The much needed private sector investment especially in the distribution sector has not materialized.”

Power

19 Ivory Coast urges end to 'illegal' drilling

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… Distributes 85,000 prepaid meters

A pre-paid meter

YEMIE ADEOYE & KUNLE KALEJAYE

I

N a move aimed at implementing the F e d e r a l Government’s p r o p o s e d transformation agenda in the power sector the management of Eko Distribution Company, one of the eleven distribution companies under the Power Holding Company of Nigeria, PHCN has begun the review of its operations.

This is meant to improve efficiency and turnaround time, in order to serve its customers better and shore up its revenue base.

The newly appointed Chief Executive Officer of the c o m p a n y M r. O l a d e l e Amoda, an engineer, dropped the hint during a media interactive session which held at the company’s headoffice in Marina, Lagos recently.

According to him the era of a public service mentality for workers of the company is over, as it has become

imperative for them to treat customers’ complaints with paramount importance.

To d e m o n s t r a t e i t s willingness to serve customers better and eradicate the issue of crazy billings, which is rampant in the country, Amoda said that the company is set to roll out the distribution of 85,000 prepaid meters to customers on its network, to be followed by the deployment 350 distribution transformers even as 120 has been set aside as relief transformers for customers in overloaded areas.

The CEO explained that aside from the transformers, the Zone’s intention to roll out 85,000 prepaid meters in phases is actually to replace the existing old meters which have become obsolete.

According to him, the zone has commenced the replacement of the old meters to eradicate the problems associated with inappropriate billing of customers.

He gave the assurance that customers would be given

the new meters within one week of payment, adding that the zone was also replacing all obsolete equipments that had limited its capacity to evacuate power.

He also added that there was an on-going construction of new 33kv and 11 kv lines, as part of the plans to rehabilitate dilapidated lines.

“We have embarked on the construction of new 33kv and 11kv lines. In Eko, the NIPP is also executing 27 projects, including the construction of 33kv and 11kv lines. All the projects under construction,

including those of the NIPP run into billions of naira,” he said.

As part of the measures to ensure that the activities of workers remained in line with the new customer friendly stance of management, the CEO said that a new re-orientation of the workers had begun.

The new CEO said apart from organising customers’ forum, he would also revive customer consultative meetings, and also introduce town hall meetings all over the company’s network and areas of operation.

il and gas authorities in the Ivory Coast have appealed for petroleum companies to stop drilling into its waters from neighbouring Ghana in a war of words over offshore territory between the two states.

“The state of Ivory Coast, which has continually denounced these operations, again appeals for this [drilling] to end, because the resources being exploited are our exclusive property”, the country’s directorategeneral of hydrocarbons said in a statement.

The Abidjan-based authority has released a new map delineating three offshore blocks to the far east of its sedimentary basin, declaring that “every company who wishes to operate any kind of petroleum-related activity in this zone must apply for permission”.

It says the indicated blocks CI540 to CI544 (see map, above), totalling 5526 square kilometres, are within its territory.

Companies already operating in the indicated area without authorisation should halt operations immediately, the directorate

said, “because their actions consist of assault amounting to theft and looting of raw materials”.

The dispute has already been raised with the UN Continental Shelf Commission without a conclusive result, and it is thought a negotiated resolution is the only way to end the dispute without costly arbitration.

The Ivorian government has recently instituted plans to expand oil and gas exploration after President Alassane Ouattara replaced Laurent Gbagbo earlier this year following a bloody standoff in the wake of October 2010 elections.

Financing

NNPC building, Abuja

YEMIE ADEOYE

N

OT less than $50billion would have been spent in the next five years if the federal government yields to the ongoing pressure to allow the continuation of fuel subsidy according to Sweetcrude investigation.

Oil subsidy in a single year gulps anything between $8billion and $9billion, and in the next five years with increase in fuel demand and domestic consumption, the country would have spent about $50billion subsidising fuel.

Oil industry operators, who spoke with Sweetcrude exclusively, opined that if the entire budget for Year 2011 is N4.972trillion, which is about $31billion, then it would be destructive to continue with the subsidy scheme, especially as it has been established that most parts of the country don’t enjoy subsidy.

Those opposed to the subsidy removal argued that the federal government would impose untold hardship on the people if the oil

subsidy is removed outright, hence, government should consider a phased removal of subsidy to ameliorate the hardship on the people.

They said, “The Labour Union and other stakeholders at this point need to engage the government from a position of knowledge. They should make government commit itself to laudable and economicdriven infrastructural projects, as there is currently lack of trust for the government due to past experiences over the years.”

Meanwhile, the former Deputy National Chairman of the ruling People’s Democratic Party Chief Olabode George, has also joined other professionals to throw his weight behind the federal government’s proposed subsidy removal by 2012.

George spoke on the sidelines of the Practical Nigerian Content forum, which held last week in Port Harcourt, South-south Nigeria.

According to him the subsidy is only beneficial to the fat cows who unfortunately are also saying they are against it, now we should note that subsidy gulps a lot of money, where is the direct benefit to the people? He queried.

“In all, our neighboring countries petrol sell far higher than we sell here. What the government should do in this instance is to have the Central bank Governor, the ministers of petroleum, finance and information, to come out and sensitise the people on this issue.

“They can go to as many state capitals as possible to speak to the people in the language they understand through a kind of public hearing. They can also bring the opposition people to the debate, so they can discuss the matter and clear all grey areas.

“It is my view that when the people see the loophole in the treasury as a result of deregulation, they’ll be alarmed. Hence, to change that policy government needs to effectively engage and educate Nigerians.”

Meanwhile, a highly placed industry professional who pleaded for anonymity, argued that the only way the subsidy removal as laudable as it is, would make sense to the average Nigerian, is if the removal is structured in phases.

According to him, the effect on the people would be too severe and government would be unpopular for it. He, however, urged

20 government to make public what it would be doing with the over $8billion of annual saves if it must remove subsidy.

He further noted, “Part of the problem with government is improper analyses. They need to work with verifiable statistics on this issue of subsidy removal. They need to know how many Nigerians go by diesel powered public transport to work every day and how many go on petrol powered vehicles. In Paris, for example, about 3 million people go about in public buses daily, and with such a figure government can plan.

“They need to be able to tell us for instance, that in the first phase of the subsidy removal refineries would work at optimal level; in the second phase, the power generation would rise to a particular level; and in the third phase major road contracts in the country would be awarded and completed in a particular period of time. This is the only way government can show that it is responsive to people oriented issues and would not end up doing the right thing in the wrong way,” he said.

But George differed and opted for an outright removal of subsidy, as according to him, it is benefitting but only a few. “I believe outright subsidy removal is necessary. It takes a lot of courage, but it should be properly explained to the people. The ministers should leave their seats and go out there to enlighten the people that is why they are there.

“The fat cows benefiting from subsidy have a lot of money at their disposal to fight through the press so as to misinform the people so that it can continue. It is a large chunk of our treasury and if it goes on and the people meant to be impacted are not impacted, then what are we doing? It simply means government has failed.

“There cannot be sanity in this system when even beneficiaries of the fuel subsidy are also calling for its removal, probably to shield themselves from the fact that the system has benefited them.

Government should also ensure that the refineries are optimal and create a level playing ground for investors who may be interested in the business of refining. People should be able to go to the bank get money if need be and invest in the business of refining as this is the only solution.

Government cannot run refineries and cannot be in business. All they need to do is create the enabling environment to allow for more investor to flood the system. All over the world if government goes into business it loses money. About 18 companies have been given licenses to build refineries and they have not proceeded, it simply means there is a problem and any responsible government would want to know what went wrong with such a process” he enthused.

Insurance

21 Shell Plans to Boost Nigeria Gas Production Next Year

ROSEMARY ONUOHA

I

nternational oil companies in Nigeria, IOCs, have been accused of refusing local insurance companies the opportunity to cover their risks under the guise that the local underwriters don’t have international credit ratings.

C o n s e q u e n t l y, t h e s e companies still take their oil and gas risks abroad even when the Local Content Act stipulates otherwise.

Mrs. Justina Omekere, an insurance practitioner who made the allegation in Lagos, lamented that with such actions the oil majors have continued to disregard the laws of Nigeria, thereby depriving local insurers’ the opportunity to expand their human and financial capacity.

In order to guard against the spread of this ugly trend, Omekere charged underwriters to subject themselves to international credit ratings to stop the oil majors from using such cheap blackmail to deprive them of what is rightfully theirs as well as saving the country from the incidence of capital flight.

In her words, “The oil majors always demand for credit rating from us before they can insure their risks. In essence, underwriters should avail themselves to be rated by credible rating agencies so that they will not continue to lose business.”

Meanwhile, the former Director General of the Nigeria Insurers Association, NIA, Mr. Ezekiel Chiejina, added that in line with being rated, underwriters should also do a lot of reinsurance in special risk business if they wish to play big in the oil and gas sector.

According to him, underwriters should enter into reinsurance treaties with ‘A’ r a t e d i n t e r n a t i o n a l companies to further increase their ability to underwrite special risks.

An Oil Rig

Chiejina noted that special risk business is highly capital intensive, as such, insurers should ensure that adequate reinsurance is in place because adequate reinsurance is imperative for underwriting companies to pay claims promptly when and where the need arises.

The former NIA DG advised insurance operators to effectively use coinsurance to pull capital and develop relevant skills such that pricing of risks could be done in Nigeria. He added that they should avoid unhealthy competition that erodes the potential

profitability of the companies to participate in the sector.

Chiejina stressed that every oil and gas risk underwriting business must be insured to a Nigerian company for them to take what they can cover, then cede the rest to a captive company, adding that insurers are over exposing their account if they take too much of these special risks and exposing clients unnecessarily.

Royal Dutch Shell Plc, operator of Nigeria’s largest oil fields, plans to boost its natural-gas production in the country as it starts a new facility and cuts flaring, or the burning of the fuel at fields.

Shell’s vice president for gas in sub-Saharan Africa, Osten Olorunsola said in Abuja that the Hague-based company plans to increase daily output to one billion cubic feet within a year from about 700 million.

Nigeria, holder of Africa’s largest gas reserves of more than 187 trillion cubic feet, flares most of the fuel it produces along with oil because it lacks the infrastructure to process it.

Shell plans to collect gas at its Utorogu and Ughelli fields and start the Agbada non-associated gas facilities from the first quarter of 2012, Olorunsola said.

“We mop up the gas which otherwise would have been flared and we also make the gas available for power,” he said. “We’re basically using one stone to kill two birds.”

About 70 percent of Nigeria’s domestic gas demand is provided by Shell, most of which is used to generate electricity in Africa’s most populous nation. Chevron Corp., Exxon Mobil Corp., Total SA and Eni SpA are the other major suppliers of domestic gas.

Shell cut gas flaring 50 percent in the African country to about 300 million feet a day in the eight years to 2010 after installing gathering infrastructure, according to the company’s website. The gas gathering project will cost about $6 billion when completed, it said.

Shell has about 14 ongoing gas projects including the integration of the Forcados oil and gas development that will come on stream between the first quarter of next year and 2015, Olorunsola said.

Gas facility

Insurance ROSEMARY ONUOHA

T

he National I n s u r a n c e Commission, NAICOM, has charged insurance brokers in the country to avail themselves of the opportunities in the Local Content Act and carve a niche for themselves.

Commissioner for Insurance, Mr. Fola Daniel, who gave the charge, stated that the Local Content Act has given brokers a huge leverage as well as a rare opportunity to participate in the oil and gas sector.

Daniel, who made the appeal at the 2011 National Insurance Conference, organised by the Nigerian Council of Registered Insurance Brokers, NCRIB, reiterated that the Nigerian Oil and Gas Industry Content Development Act 2010, has given insurance brokers in Nigeria a leverage, adding, “It is significant that by section 49 of the Act, all oil and gas insurance businesses in Nigeria must be transacted through a Nigerian registered insurance broker.

This is indeed a rare opportunity.

However, brokers require technical, as well as Information Technology (IT) capacities to take effective advantage of the provision.”

To w a r d s d e v e l o p i n g t h e needed capacities, Daniel advised that building strategic alliance with some established foreign insurance brokers may be helpful in addition to deliberate efforts to develop human and technical capacities.

The Insurance Commissioner, however, regretted that brokers have not brought sufficient energy into the Market Development and Restructuring Initiative, MDRI of NAICOM. Daniel stressed the need for a more energetic and proactive collaboration from brokers than is being seen at the moment, adding that there is the need for the brokers, and indeed the insurance industry to reflect on how to tap into the vast insurance opportunities that currently abound in the country, as these were yet to be fully exploited.

Daniel noted that in the past

For emphasis, one of the key objectives of the MDRI is continuous availability of genuine insurance products at the grassroots two years, the Commission has been under the burden of developing and expanding the insurance market and by ex t e ns i on, i nc re a s i ng t h e insurance sector’s contribution to the nation’s Gross Domestic Product, GDP, and part of the efforts is the introduction of the MDRI in 2009.

He said, “For emphasis, one of the key objectives of the MDRI is continuous availability of genuine insurance products at the grassroots. Naturally, fake insurance products will thrive in the absence of genuine.

“We therefore need more brokers and agents at the grassroots. Towards achieving this objective, the Commission has tended to be more liberal with licensing of brokers and

F

ormer Managing Director of Financial Institutions Training Centre, FITC, Mr. Oladimeji Alo, has advised insurance operators to create a strategy that suits their own business pattern and not involve themselves in every business in the insurance sector.

According to Alo, because of the varying capital base levels of insurance operators, not every insurer can go into oil and gas business.

Alo who gave the advise in Lagos, stressed that underwriters should consider their strengths and capacities before they decide to do oil and gas business.

Meanwhile, Managing Director of the Law Union & Rock Insurance Plc, Mr. Yinka Bolarinwa, said that underwriters and Nigerians in general have not

positioned themselves strategically in reaping from the benefits which the Local Content Law provides.

According to Bolarinwa, one key element that the country needed to play actively in the oil and gas sector is infrastructure, and the government has provided the infrastructure on a platter of gold, which is in the form of the Local Content Act. In his words, “Now there is a guideline on this Local Content Act which stipulates that 70 per cent of non-life

risks in the oil and gas sector must be domiciled in Nigeria, while 100 per cent of life business must be done in Nigeria. To me, that is the infrastructure that we need and nothing more.”

On what operators need to do to tap into the benefits of the Local Content Act , Bolarinwa stated that underwriters should collaborate and work together as one team to develop capacity, human capital as well as skills that will be able to match the

agents. Notwithstanding, it appears that brokers have continued to be concentrated only in our major commercial cities. This trend must change if we are to truly develop the insurance industry in Nigeria.

Beyond MDRI, brokers now have the opportunity even to explore Micro and Takaful insurances.

This is important especially in the face of the renewed efforts by world governments towards financial inclusiveness.”

The insurance commissioner stated that the government has demonstrated renewed commitment for developing the agricultural sector through the launching of the Nigerian Incentive Based Risk Sharing for Agricultural Lending, NIRSAL

demand from local insurers.

He stated, “Nobody can love this country more than you and I. it is you and I that must do it and build this country. So insurers must collaborate, work together and ensure that the Nigerian model work for us. I must tell you the truth; we have not started penetrating the oil and gas market. So we need to collaborate and work h a r d e r. T h e N i g e r i a n Government has said ‘this is what I want in my country,’ so if the oil majors don’t corporate with Government they should be shown the way out.”

He, therefore, tasked insurers to ensure that the Local Content Law worked, adding, “This is our country, the oil majors should not dictate what happens in our country for us. If they don’t

22

project currently coordinated by the CBN. “The insurance element in the project is indeed a big plus for the insurance industry. A necessary fallout of this development has been the proposal for deregulating agricultural insurance in Nigeria. At the moment it seems that the Nigerian Agricultural Insurance Corporation, NAIC Act, has conferred on NAIC the exclusive right to insure all subsidised agricultural risks.

However, opportunities still abound in the areas of commercial unsubsidised agricultural risks.”

Daniel noted that going forward, the Commission shall give appropriate consideration to underwriters desiring to underwrite’ agricultural insurance under the relevant provisions of the law, noting that existing underwriters are well advised to take advantage of the capacity already accumulated

by NAIC. As a means of attaining sufficient capacity for large risks, the Commission shall actively support pool arrangements, co-insurance

comply with the law of the land they should leave. So you and I must not also be saboteurs, we must ensure that we collaborate with government so that it works.

No outsider will come in here and do anything that is not in line with the law except you and I connive with them.”

Commenting on the directive handed down to insurers by NAICOM to transit to Inter national Financial Reporting Standard, IFRS, Bolarinwa stated that collaboration amongst industry practitioners will be beneficial to all. “Naturally, when we are starting a new thing like this it is better to collaborate if others are available to collaborate with you. But if they say, ‘no’, there is no way you can force them.

Insurance

23 Oil rises on EU rescue plan

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Naicom corporate building

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he National I n s u r a n c e Commission, NAICOM, has been accused of not doing enough to engage other law enforcement agencies and security outfits in its drive to increase insurance p e ne t ra t i on t hroug h t h e Market Development and Re s t r u c t u r i n g I n i t i a t i v e , MDRI. The Regional Manager, Law Union & Rock Insurance Plc, Mr. A. Falade, who made the assertion, stated that the regulatory body should do more to engage such outfits like the Nigerian fire brigade, Nigerian police, and the Federal Road Safety Corps, to increase insurance penetration in the country.

Falade stated that for the MDRI to work, NAICOM should regularly engage these law enforcement agents and security outfits in various awareness campaigns and stop relying on its own agents

alone.

He said, “NAICOM wants to stamp out fake insurers in the country and have not engaged the law enforcement agents to enlighten them on what constitute fake or real insurance certificates. The policeman on the street does not know fake or real insurance paper, so how does he apprehend people with fake certificates?”

He argued that NAICOM needs to regularly train these people to get the best because if they continued doing the same thing, they will keep getting the same old result.

The concept of MDRI is based on the development of the market through enforcement of compulsory insurances; restructuring of the system through a review of the channels of distribution as well as the elimination of fake insurances. The policy is also meant to build consumers confidence in the Nigerian insurance market; promote

public understanding of the insurance mechanism; increase the penetration from six per cent to 30 per cent by the year 2012, as well as grow the nations insurance density.

Others include enhancing the citizens’ access to relevant and affordable insurance products; as well as reducing the potentials for insurance firms to be used for financial crimes.

Aside from engaging these other agencies, some experts are of the view that the government has a big role to play if the insurance sector must grow.

The Group Managing Director of Royal Exchange Insurance Plc, Mr. Chike Mokwunye, said that the government needs to lend its support towards the growth of insurance in the country and assist it in deepening the retail end of the market because it is important to the nation.

According to him, “The government should assist the insurance industry to develop the retail market because developing retail end takes time but with government’s support, it will be achieved.”

Mr. Wole Oshin, Managing Director of Custodian & Allied Insurance Plc, stated that the government needs to recognise insurance as is obtainable in other economies where governments pick on insurance for progress.

il prices rose by more than a dollar after European leaders agreed to boost the region's rescue fund, raising hopes that the euro zone debt crisis will be contained.

The new version of the euro zone's rescue fund will be leveraged four or five times, giving it firepower equivalent to about €1 trillion ($1.4 trillion) a c c o r d i n g t o Fr e n c h President Nicolas Sarkozy Brent crude was up $1.00 at $109.91 a barrel last week, after touching a high of $110.12 earlier. US crude gained $1.51 to $91.71 a barrel after hitting an intraday day high of $92.04.

"I attribute the edging up of oil futures to some apparent progress in the discussions in Europe regarding the European debt crisis," said Victor Shum of Purvin & Gertz.

"The stock markets, if you look at the Japan Nikkei index, are also reacting positively to this development. The macro event and the financial markets are leading and oil futures are reacting even though the crude inventories in the US have increased substantially."

Crude stockpiles rose 4.74 million barrels to 337.63 million barrels in the week to 21 Octoctober, EIA said. This was sharply higher compared to analysts' projection of a 1.3 million build.

Expectations that the Chinese government would begin loosening tight liquidity policy in the fourth quarter as China's economic growth slows also supported oil prices. .

Barrels of Oil

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Labour Union states conditions for downstream deregulation 34

VICTOR AHIUMA-YOUNG

T

he National U n i o n o f Petroleum and Natural Gas W o r k e r s , NUPENG, has warned the Federal Government to be ready for war if it goes ahead with the deregulation of the downstream sector without meeting the agreements reached with organised labour over two years ago.

The union, at its National Executive Council, NEC, meeting in Owerri, Imo State, also decried the non-passage of the Petroleum Industry Bill, PIB that has been before the National Assembly since 2008 and the increasing insecurity in the country.

In a communiqué signed by comrades Igwe Aches, and Elijah Okougbo, NUPENG’s Pr e s i d e n t a n d G e n e r a l S e c r e t a r y r e s p e c t i v e l y, members said they deliberated on issues that were key and germane to socio-economic and political transformation of the country.

These issues included the PIB, deregulation of the downstream sector and the insecurity in the Niger Delta region and a host of others.

The communiqué read in part, “The NEC in session ex p r e s s e d d i s m a y o v e r procrastination in the general reform of the oil and gas industry to ensure transparency and accountability increased investment and return through the timely passage of the petroleum industry bill which has been at the national assembly since 2008. It is even more worrisome and disturbing that there are various versions of the bill in circulation giving room to wild speculation and apprehension in the industry and the nation at large.”

“The NEC in session therefore calls on the National Assembly to make

Refinery

These issues included the PIB, deregulation of the downstream sector and the insecurity in the Niger Delta region and a host of others available the authentic version of the bill to the public to enable concerned stakeholders to make meaningful contributions to the content of the bill. The NEC in session further calls on the National Assembly to immediately put in motion all processes for the speedy passage of the bill for the actualisation of the much anticipated reform in the oil and gas industry.”

On deregulation of the downstream sector, the NEC e x p r e s s e d t o t a l disappointment at Federal Government’s attempts to

deregulate the sector under the current import driven petroleum product supply status. Furthermore, they noted that the refineries are not functional, compounded by obsolete products pipelines network and depots, low local refining and inadequate energy generation capacity and dilapidated road network in the country.

The union reiterated that it is not opposed to deregulation, but that it must be undertaken under the following conditions: ?

There must be

immediate practical and pragmatic steps to rehabilitate the existing four refineries in the country to ensure optimal capacity utilisation. ?

Government must create an enabling environment to engender private investors’ interest in building refineries in the country for the purpose of improving the local refining capacity to meet the ever increasing local demand of petroleum products and i n d e e d f o r ex p o r t a t i o n purposes ?

Engage in massive infrastructural development vide, repairs and construction of road network, modern railway system, expansion of energy generating capacity, repairs and reconstruction of petroleum products pipelines network and depots to improve and ensure

effective distribution of petroleum products. ?

E n s u r e t h a t appropriate palliative measures are instituted to cushion the immediate impact of the deregulation on the citizenry, and ?

Ensure adequate protection of all oil and gas workers in the country as the UNION will not hesitate to take appropriate actions should these attacks and abduction continue unabated.

The union equally expressed alarm over the increasing rate of insecurity in the country as reflected by reports of violence across the country and the high rate of criminal activities vide, kidnapping, communal strife, resulting in wanton destruction of lives and properties, bombing, arson ,armed robbery, rape .

Labour

Informal of sector of the economy

Informal workers reject planned subsidy removal …Say safety nets will be meaningless VICTOR AHIUMA-YOUNG & NOAMI MGBAKOR

W

ORKERS in the informal sector have rejected the F e d e r a l Government’s plan to remove subsidy on petrol, saying it would worsen the sufferings of Nigerians and that the socalled safety nets by government would be meaningless.

Under the umbrella of the Federation of Informal Workers’ Organisations of Nigeria, FIWON, the workers said that

government’s reasons for the removal of subsidy were not tenable because the welfare of the majority of the masses was the reason for government’s existence.

The General Secretary of FIWON, Comrade Gbenga Komolafe, also faulted the plan to hike electricity tariffs and wondered why government did not discuss the so-called safety nets with stakeholders and unions.

He contended that “If some monies embezzled during programmes and those cut from salaries of political appointees can be saved, it will be enough to

fund social protection net.”

According to him, “The federal government has announced its intention to increase the prices of petroleum products and electricity tariffs. They have gone on to link this plan to an intention to implement a programme of ‘social safety nets’ to cushion the effects of the increases. These so -called ‘safety nets’ have been arrogantly announced without consultations with relevant stakeholders especially organisations of the working poor and the trade union movement. It is no surprise that the content of the so-called

We also demand that the federal government should massively invest in the construction of refineries not only for domestic consumption but also for export

35 ‘safety nets’ have little bearing to the central concerns of the working poor. More importantly, we deplore a situation whereby the announcement of social protection measures by the federal government is made conditional on policies that will completely obliterate whatever good the so-called safety nets will achieve. Increases in the prices of petroleum products and electricity tariffs will make aggregate costs of production, transportation of food and raw materials even more prohibitive with attendant consequence of more small businesses closing down. Kerosene will become more costly forcing even more people to use firewood with dire consequences on the environment.”

“On the other hand, a reasonable reduction in the colossal cost of governance with government bureaucracy and political appointees gulping close to 70% of national resources will immediately free trillions of naira to fund social protection measures as well as massive social and physical infrastructural projects all over the country. After all, previous increases in petroleum products’ prices and concomitant promises of investing in the social sectors have never been implemented. We therefore r e j e c t u n e q u i v o c a l l y, t h e planned increase in the prices of petroleum products as well as the hikes in electricity tariffs. We demand that our right to social protection be respected without conditions while calling on the National Assembly to enact a comprehensive social protection law to cover unprotected Nigerians. We also demand that the federal government should massively invest in the construction of refineries not only for domestic consumption but also for export as several other developing countries including non-oil producers have done rather than wait forever for so the called private sector to do so.”

On social protection the FIWON scribe said, “Most poor people in Nigeria are in the informal economy where there is no protection against their multiple vulnerabilities making the lofty objectives of the Millennium Development Goals (MDGs), a pipe dream in Nigeria.

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Labour

36

Victor AHIUMA-YOUNG

W

ORKERS i n t h e P o w e r Holding Company of Nigeria, PHCN, have insisted on the October 31 deadline to the Federal Government and their management to pay the 50 percent agreed salary increment or risk industrial unrest.

The threats came against speculations that instead of the 50 percent pay rise agreed to and signed between government and the workers, government is preparing to pay them only 37 percent.

It will be recalled that the workers and PHCN management agreed on 150 percent pay rise, of which only 15 percent had since been paid. The 50 percent was the final agreement after the government-appointed conciliator, pioneer President of Nigeria Labour Congress, NLC, and Secretary General, Organisation of African Trade U n i o n s U n i t y, OAT U U , Comrade Hassan Sumonu, prevailed on labour to accept at a conciliatory meeting.

Sweetcrude gathered that both organised labour and Comrade Sumonu have kicked against the government’s latest antics and have totally rejected it.

A labour leader in the sector who spoke on condition of anonymity, said government was playing with fire as the workers would not accept anything less than 50 percent, as this was a compromise by the workers.

The two in-house unions in the power sector, the National Union of Electricity Employees, NUEE, and its Senior Staff Association of Electricity and Allied Companies, SSAEAC, counterparts had on October 14, issued the October 30 deadline to pay the 50 percent salary increases or face industrial unrest.

General Secretary of NUEE, Comrade Joe Ajaero, told SweetCrude that the ultimatum remained and that the choice was government’s, to either trigger off or avoid industrial unrest in the sector at this critical point in time.

In a separate letters to the PHCN management, NUEE and SSAEAC noted that the new pay package ought to have begun since June, but has been delayed, adding they were no longer in a position to restrain the workers after the expiration of the ultimatum.

Demonstrators on the street

The NUEE letter signed by Ajaero, read in part; “Workers in the industry have flooded our Secretariat with complaints of non-reflection of the 50% salary increase in their September 2011 salary as previously promised by Government. We are amazed at this unwarranted development because Government made it very clear in our maiden negotiation meeting in Abuja on May 19, 2011 that enough fund had been set aside to take care of all financial implications emanating from the negotiations.

“The non-implementation of this salary increase clearly suggests to us that Management and Government are only paying lip service to the spirit of tripatism and social dialogue. In view of this mistrust deliberately created by Government, we cannot but

carry our destiny in our hands to salvage our situation. We therefore demand that the salary increase including the arrears from 1st June, 2011, be paid to workers in the industry not later than October 31, 2011. We have waited enough.

At the expiration of this two weeks’ notice, the Union would not guarantee industrial peace in the sector.”

Similarly, the SSAEAC letter by its Secretary General, Comrade Abiodun Ogunsegan, to the Minister of Power warned that workers should not be held responsible for any action to be taken by them if the agreement reached on the 50% salary increase is not implemented by the end of this month The letter, also copied to the Managing Director/ Chief Executive Officer of PHCN, read: “We need to inform you

that in breach of our line of communication, the Honourable Minister dispatched letters to the market Operators, the CEOs, and station heads on the payment of the negotiated 50% salary increase, thereby creating serious distortions in the information flow and consequently affecting the payment of the salary increase agreed.

“The 50% salary increase negotiated in May 2011, was to take effects from June 2011, and be effected in staff salaries from September 2011 as Government had stated and pleaded in the negotiations with the unions in July 2011.

However, the report we received from our members is that the new pay is yet to be computed for payment due also to the lackadaisical attitude and lack of

commitment of the management and the Government to pay.

“We wish to draw you attention to the increasing uneasiness among our members due to the refusal to pay as agreed and wish to inform you that we will not be held responsible for any action taken by the workers, if by October 31, 2011, payment of the arrears of 50% salary increase from June to September 2011, and salary of October incorporating the 50% is not effected.”

Theworkers, however “called on the Government to intervene on the implementation of the 50% salary increase, stressing that when the announcement was made in May 2011, it was not clear to Nigerians that by September 2011, the implementation is yet to takeoff.”

Ferry

Solid Mineral

38

Miners at work

Oscarline Onwuemenyi

P

r e s i d e n t G o o d l u c k Jonathan has continued to demonstrate his administration’s commitment towards developing the mining and minerals sector as a counterforce to oil and gas exploitation.

Speaking last week at an interactive dinner with leading Australian mining and solid minerals investors, the President said his administration will vigorously implement policies, programmes and projects that will ensure the rapid development of Nigeria’s solid minerals sector in the next four years.

He invited the Australian miners to also invest their resources, skills, expertise and technology in the development of Nigeria’s solid minerals sector. “You are well known for solid

Jonathan raises Nigeria’s mining profile minerals and you will find a lot to do in Nigeria,” he told his audience at the dinner.

The president, who spoke at the foreground of the meeting of Commonwealth Heads of Gover nment, CHOGM, in Perth, Western Australia, said this is in furtherance of efforts to c r e a t e m o r e j o b opportunities for the country’s youth. Western Australia with its huge solid minerals resources is the richest mineral region in Australia.

President Jonathan had earlier in the day met with the Premier of Western

Australia, Mr. Colin Barnett, and declared his commitment to the full development of Nigeria’s solid minerals sector because of its huge potential for boosting the national economy.

He told Mr. Barnett that his administration was working towards the full development of Nigeria’s solid minerals sector to expand and diversify the countr y ’s economic base. “We have a lot to learn from you in solid minerals development and we look forward to e s t a b l i s h i n g m u t u a l l ybeneficial partnerships with

Australian investors and industrialists,” he said.

The President also reassured the gathering that his administration had the political will and commitment to fully implement all the regulatory reforms required to facilitate the entrance of more investors to Nigeria’s mining sector. According to him, Australian investors were also welcome to invest in o t h e r u n d e r- d e v e l o p e d sectors of the Nigerian economy such as agriculture, noting that the country was blessed with vast arable land on which almost anything

can be grown.

The Minister of Trade and Investment, Mr. Olusegun Aganga, who also spoke at the occasion, told the Australian investors that Nigeria had over 33 solid minerals in sufficient quantities for commercial exploitation. He also promised of government’s commitment to creating the enabling environment for the development of Nigeria’s solid minerals sector.

One major immediate outcome of the session was the proposal by Mr. Hugh Morgan, a leading Australian solid minerals developer who cochaired the interactive dinner, for the establishment of a Joint Nigeria-Australia Trade and Investment Commission, to promote economic cooperation between countries.

Solid Mineral

39

Oscarline Onwuemenyi

T

he Minister of Mines and S t e e l Development, M r. M u s a Mohammed Sada, has stressed that the Federal Government would not entertain an out of court settlement nor would it enter into further negotiations with Global Infrastructure Holdings Limited, GIHL, over the cancellation of the concession of Ajaokuta Steel Company Limited, ASCON. Sada, who said this at a policy dialogue and briefing with the media in Abuja, said government would see the case through, adding that it would not withdraw from a case with an investor whom he alleged cannibalised the assets of the steel company and breached the terms of the concession agreement.

He noted that the present administration was determined to wrest the management of the billiondollar steel complex from the Indian managers, whom he accused of “assetstripping and roundtripping.”

According to him, “There will be no negotiation; we cannot enter into any negotiation with a company that has repeatedly breached the terms of agreement. What we must do is to demand for our rights and ensure that things are done properly. We have already articulated our position on the issues and hope the matter will be amicably resolved soon.”

He, however, said that government and are in arbitration, adding that both parties met last month and would meet again in January next year, when Nigeria will present its counter claim.”

Meanwhile, he said, government has concluded plans to re-stream some of the completed units of the Steel company such as the Engineering Workshop, the Thermal Power plant, and the Rolling Mill, which workers retained on the job are being paid regularly.

“The arbitration does not say we cannot operate on our asset, and we are ready to go ahead and do what we must do to keep the place afloat even as we try to find a way to resolve what has turned out to be a sham of a concession and a ridicule to our national pride and

Carbon Steels

resource,” Sada stated.

He noted that the concession to GHIL, which was based on a principle of capital importation, could have seen the Indian steel manufacturer investing billions into the company.

However, “ what we have seen over the years is a continuous stripping of the assets of the company by people who are supposed to be investing money into it.”

He added that, “What they met on the ground in terms of raw materials, they did not try to improve upon that, rather they just sat on the raw materials and consumed and drained the natural resources.”

The minister further hinted that more than N37

billion borrowed by GHIL from local banks was partly to blame for the crises that set in some of the banks.

On government’s plan for the firm and the Nigeria Iron Ore Mining Company, NIOMCO, Sada said that to avoid the repeat of past mistakes, government has raised an economic team to carry out a study on what to do with the two entities.

The team, headed by the Coordinator of the Economy, and Minister of Finance, Dr. Ngozi Okonjo- Iweala, is to study the possible rate of return for the plants.

He said, “Government wants to transform the place.

As I am talking to you, there is a study of economic rate of return on the two facilities. I

think it will be concluded very soon. It is being coordinated by the Coordinator of the Economy because it is not a technical thing; it is strictly business.

“All the factors will be put into consideration, as we don’t want a situation whereby a private investor will come and look at it and say I can operate it. No. We want professional managers to contact professional engineers, get the input from them and get their report so we know this is their direction. So, we will be able to advise the government on the various available options, between concession, outright sale or joint venture. This is where we are now.”

On the control of explosives, Sada said the ministry and stakeholders have agreed that explosive dealers and directors of user companies will be thoroughly screened before licences are issued.

He said stakeholders unanimously agreed at a conference in August for the review of the Explosive Act of 1964 and the Explosive Regulations of 1967, to address emerging needs, trends and challenges associated with explosives handling. The review is also expected to address issues that border on security, manufacture and export.

Solid Mineral

Underground tunnel miners

Oscarline Onwuemenyi

T

he Federal Government has urged operators in the n a t i o n ’ s extractive industries to operate in a professional manner that will ensure the sustainability of the environment and help create opportunities for wealth creation for millions of Nigerians.

The Minister of Mines and Steel Development, Mr. Musa Mohammed Sada, stated this during a Stakeholders’ Forum on C o m p l i a n c e a n d Enforcement, organised by the Council of Nigerian Mining Engineers and Geoscientists, COMEG, in Abuja.

He charged professional bodies to uphold standards

and best practices in their areas of operation, saying, “There is no gainsaying that an established and wellmanaged extractive industry will accelerate economic, social and political growth of the country through the provision of gainful employment and a rise in national economic earnings.

In addition, solid and liquid minerals development will provide local raw materials for industries and bring vital infrastructure and wealth to rural areas.”

Sada stressed that the mining industry is a global industry with many countries competing for exploration funds, adding that the government is generally creating an environment that will enable businesses to flourish.

“There is therefore a need to develop the mineral resources of the country

along policies, actions and strategies that are conducive to investment. The policy thrust would respond to the n e w a n d g l o b a l developments in the sector, and furthermore, develop human capital development in the extractive industry.

Most importantly, this will develop the legal and regulatory framework consistent with international best practices,” he said.

He argued that the global increase in demand for extractive industry commodities has enhanced the need for quality and adequate manpower for the s e c t o r. “ G o v e r n m e n t recognizes the need to continuously develop skills in order to meet the demand for professionals in the extractive sector.

He added that “the registration of a professional is a testimony that the

individual has achieved a standard of proficiency sufficient to guarantee the possession of the knowledge and skills required for the efficient practice of his area of discipline.”

Sada, however, charged members to upgrade their skills as best as possible in the light of advancing knowledge. “A member is therefore expected to, at all times, possess and exercise the skills and judgment of an average member of the profession practicing his or her discipline.”

Also speaking, the Registrar of COMEG, Engr.

Jonathan Ikeako, dislosed that the council has developed a Code of Conduct and Ethics for members, to ensure the proper exercise of skills within the prevailing knowledge and disciplines.

According to him, “The member shall at all time act

40

in a judicious manner and with full regard to the code of practice of the profession in accordance with the rules laid down in the Code of Conduct and Ethics.”

The forum was meant to sensitize practitioners especially those in the Mining and Quarrying industries, oil and gas as well as water and welldrilling, and construction on the need to regulate their activities through formal registration with COMEG in accordance with the Decree (now Act) No 40 of 1990.

“The main thrust is to regulate and control the training, deployment, discipline and practices of professionals, who work in the extractive industries. These professionals include geologists, mining engineers, metallurgists, mineral processors, hydro-geologists, hydrologists and in other related fields,” he stated.

COMEG registers all persons who are authorized to practice specialized professions in Nigeria; approves any course for the training of prospective members of these professions as stipulated in the Decree; approves any institution either in Nigeria or elsewhere, which it considers to be properly organised and equipped for conducting the training of relevant professions to be registered.

The Council also sets standards for candidates who wish to be registered to show that such candidates have sufficient knowledge and skill to practice the relevant professions, besides maintaining discipline in the professions.

Solid Mineral

41

Oscarline Onwuemenyi

T

he Nigerian government constantly speaks of the desire to “diversify the source of revenue generation for the economy away from oil,” and regularly projects the mining industry as the next best thing outside crude oil.

Accordingly, government has identified dimension stone production as the gem of the solid minerals industry, and a sure route to the creation of millions of jobs and wealth for Nigerians.

This belief appears to be catching up even internationally since the country’s participation in one of the biggest and most colourful Dimension Stones Fairs in Italy, last year.

Locally too, there has been a lot of movements into the dimension stone sector, showing that perhaps local operators may have finally woken up to the potential of the sector to create wealth. Indeed, the growing interest in Nigeria’s dimension stones by international market operators marked the sector as a valuable tool for the nation’s upward building and construction industry as well as for architectural designs.

Speaking recently in Abuja, the Minister of Mines and Steel D e v e l o p m e n t , M r. M u s a Mohammed Sada, noted that the workshop reflects government’s determination to grow the industry rapidly.

He said this is in line with the policy of utilizing the nation’s natural resources for the overall economic growth and wellbeing of Nigerians.

Sada, who spoke at a workshop on: Fundamentals of Dimension Stone Quarrying Techniques, observed that Nigeria’s basement complex hosts a wide variety of granites and marbles with attractive colours and textures, which have a huge potential for both domestic use and for export.

He stressed that Nigeria is endowed with huge natural resources for the dimension stone industry, but which potential are undermined by the over-dependence on finished imported stones from Europe and Asia.

According to the minister, “The cost of the finished locally processed materials is considered too expensive, hence the high patronage of products from other countries.”

He argued that the development of dimension stones is one of federal government’s strategic interventions towards the rapid transformation of the minerals

Dimension stones

industry as a catalyst for economic growth.

He said that over the past few years, the ministry has worked assiduously to implement a wide range of reforms to create an environment conducive for both government and investors.

He said, “Government has provided the necessary transformation for an accelerated development of the sector. The private sector is hereby challenged to invest in mining. The dimension stone industr y with its diverse downstream opportunities, including a large Nigerian and international market is no doubt a good business.”

He hoped that the workshop would ignite interest of architects, builders and other stakeholders to “the large and

beautiful deposits of Nigerian stones, the technical criteria for architectural stones and modern usage of stones in architecture.”

He said that his ministry through the World BankAssisted Sustainable Management of Mineral Resources Project, SMMRP, has commissioned a baseline study to prepare a typical business plan for the development of the stone industry. This is meant to promote Nigeria’s dimension stone industry, including the sourcing of plants and machinery (mine to market).

Sada explained that the study was carried out by “reputable international consultants from Italy,” adding that tremendous interest had since been shown in the development of the industry.

The minister stated that the

countr y is targeting self sufficiency in dimension stones production.

He noted, however that one major issue that came up during the fair was the European Union policy on the certification of all stone blocks imported into EU countries, generally referred to as CE Marking.

“This involves the technical evaluation of the quality of the stones for use in architectural and decorative designs. Some laboratories have been approved all over the world for the pre-evaluation of stones entering the EU countries.”

Other challenges are the need for the training of Nigerians on the stone quarrying and processing and the need to establish a World

class DS testing laboratory in the country.

To this end, the minister disclosed that President Goodluck Jonathan has approved a programme to facilitate the development of the sector to include organizing a construction industry workshop on dimension stones in the country; the engagement of international and local consultants to professionally classify Nigerian stones; and the training of operators on dimension stone quarrying and processing techniques.

Furthermore, he said that Nigeria has now established a world-class dimension stone testing laboratory, located at the National Geosciences Research Laboratories Centres, NGRL, in Kaduna, Kaduna State.

Freight

42

Gerald CHIDI

T

H E establishment of the Nigerian N a t i o n a l Shipping lines Ltd was borne out of government deliberate policy not only to participate in the invisible earning sector of the economy but also as part of its economic independence from the colonial masters and the creation ofthe country ’s distinct image.

The Company therefore came into being through a Private members Motion in the Federal House of Representative in 1958 and 1959 calling for the establishment of a Government Shipping line that would carry the “country’s flag to all the seas of the world.” After the motion was passed into an Act of Parliament in 1959, the Federal Government then incorporated the NNSL with the following Object Clauses: 1. To project the good image of Nigeria abroad by flying the Nation’s flag on the High seas and world seaports.

2. To promote the acquisition of shipping technology by creating and diversifying employment opportunities in the shipping industry.

3. To improve the country’s balance of payments position by enhancing the earnings and conservation of foreign exchange.

4. To assist in the economic integration of the West and Central African sub-region.

5. To support the Nigerian Navy in the event of conflict.

From the foregoing object Clauses, it could be said that profit motive, though implied, was not the motivating factor for the company ’s establishment.. One has to understand the mood of the major political players at the time to appreciate why “showing the nation’s flag to the world’ was a major focus.

The ships were indeed expected to play the role of ” Ambassadors” for the emerging independent country. Arguably, NNSL achieved most of its major objectives as envisaged by the founding fathers before its liquidation which I personally consider ill advised and very unfortunate.

The Company was incorporated with an Authorised and Fully paid-up Share Capital of N4 million (four million pounds sterling) held jointly by the Federal Government and two nonNigerian shipping lines, namely Elder Dempster lines Ltd and Palm line Ltd both

Ship in the sea

British which were technical partners. The Federal Government held a Controlling Share of 51% while the two technical partners had 49% between them. In 1961, either in the euphoria of political independence or selfish interest of the Nigerian Management of the Company, the non-Nigerian equity holdings were bought out rather prematurely and the Company became wholly o w n e d b y t h e Fe d e r a l Government with Nigerian Management in total control.

The company, however, had a small office in liverpool in the United Kingdom wholly manned by British personnel for fleet management which included technical ship maintenance and commercial programming. Elder Dempster lines were also General agents in the UK which provided the major

ports of call. The Company started operations with four second hand vessels in 1959 and this increased to 15 vessels by 1971 but at that time the ships were already becoming old and unable to meet the challenges of modern s hi p p i ng . The Fe d e ral Government then decided to retonnage the fleet with 19 combo vessels but by the time the first of the new ships was delivered in 1976/77 changes in ship technology and containerisation concept had taken place and unfortunately all the 19 ships were the same type - combo vessels.

Diversification in ship type, size and the evolving technology could not be reflected in the “new” ships due to inflexibility in Government policies as it was the Government that provided the fund. This situation ultimately played a part in the failure of the Company.

When the 19 new vessels were introduced into service, there was no working capital.

Even the initial bunkering of the vessels at the builders’ ship yard was done on credit. But the situation was managed because in 1973 NNSL incorporated a subsidiary company known as NIGERLINE (UK) Ltd based in Liverpool, England. The subsidiary company acted as General Agents in Europe to NNSL. The subsidiary company employed e x p e r i e n c e d a n d knowledgeable British shipping technocrats in the field of marine engineering for fleet technical maintenance as w e l l a s commercial/operations, etc. even though a Nigerian was the Head of the subsidiary company. That subsidiary Company was trusted in Europe by creditors and shippers alike. The Company

was a training ground for training Nigerian officers and in particular for the co-ordination of sea officers training. One notable advantage of this arrangement was that apart from performing agency services for the parent companyNNSL - and earning agency commission which was hitherto paid to Elder Dempster Lines, the outfit was supervising ship repairs and making sure that the right work ethics were maintained resulting in reasonable ship maintenance costs and seaworthiness of vessels. However, when civilian government returned to the country, in 1979 interest groups within the Lagos-based management began to criticize a situation where decisions on ship repairs/maintenance was not totally controlled by Lagos Head Office even though all major repairs for strategic and economic reasons were carried out in Europe.

Freight

43

T

Nigerian Port main gate

Godwin ORITSE

N

AT I O N A L President of t h e Association of Nigerian Licensed Customs Agents (ANLCA) Alhaji Shittu Olayiwola has said that the eviction of the Standard Organisation of Nigeria and other security agencies from the nation’s seaports will reduce the cost of clearance of cargo by as much as 40 percent.

In an exclusive chat with Vanguard Shittu stated the affected agencies before their eviction had constituted check points in the ports.

He accused SON and other agencies of being more interested in the so called levies, fees and penalties which they tagged administrative charges because these monies are auditable.

He said “SON claims to know the importers of fake and substandard products let them go after these unscrupulous importers.

“We are talking about trade facilitation must Nigeria continue to remain like this that is my worry,, we want the wrought to stop so as to help this country

“You have what is called single window project being practiced by the Customs NICIS. By the time you go to the Trader Data Input (TDI), the information you get from your importer v ia the internet if the importer is compliant, automatically your cargo can go to green.

“Now the number of times your importer brings in cargoes and has been declaring genuinely determines the level of confidence the system has in the importer but majority of Nigerian importers are not complaint and I can tell you that the importers I work for are compliant some of them have been with us for 15 years and once their cargoes come, they go through green.

“Green means that you b do not have to do any examination but you are given immediate release .

“But Customs will not sign your exit until you have gone to

all these agencies to sign that they are satisfied with your examination “Meanwhile, there is this one stop shop that was brought by Customs that any container that is meant for examination must have all the agencies in attendance.

“And when they come, they send the lowly junior staff to go and give them report in their offices.

The importer will now in turn go to their office to negotiate the release of their cargoes before they sign his exit “Now the representatives of the affected agencies ensure that as long as your cargo remains in inside the port, you are under pressure to negotiate the release of your cargo.

And as long as your cargo remain in the port, you will e intimidated to part with money so that you can go.

“Otherwise, while you are waiting demur rage is running on the trailer, demurrage is running on the container demurrage is running on the terminal rent so they know you cannot afford to waste time so you must ‘settle’ “Let SON and others do their work outside the port, the port is suppose to be a transit area,it is not suppose to be storage area, it is not suppose to be a check point but what we are seeing are check points in the ports

HE management of Transport and P o r t Management System (TPMSL promoters of the Cargo Tracking Note in Nigeria, has said that the scheme is a veritable tool to facilitate international T P M S L ‘ s spokesperson Mrs Tola Aiyewumi explained that these notes provide additional security by collating and storing all data or information on all cargo either coming or leaving the country.

Some of the provided by the scheme on every cargo includes the identity of the importer, country of origin, the f o r w a r d e r, t h e consignee; notified party, c a r r i e r, v e s s e l a n d voyage number, port of loading and discharge, description of the quantity/quality of the content and value of goods, etc.

Aiyewumi further stated that, among others, the notes help in the generation of data for economic planning and development; provide a single windowv system of operation in the clearing process, I e. a database; and improve the integrity of the information in the bill of . lading and manifest, thereby eliminating false/ under-declaration! concealment of cargo.

“Since the operation is web - based, we operate round - the - clock, thereby having information before the arrival of other documents.

“This is an important aid towards Nigeria’s projected 48 -hour cargo clearance time frame”, she said.

Freight

44

Godwin ORITSE

T

HE Lagos Deep Offshore Logistics (LADOL) base, an indigenous organization has commenced talks with foreign investors for the take off of its proposed $300million dollars multipurpose facility otherwise called the Floating, Production, Storage and Offloading (FPSO) platform.

The platform when completed is expected to advance the country towards the realization of her potentials and desire as a major Oil &Gas hub station for the West African sub-region.

Managing Director of LADOL, Dr. Amy Jadesimi, who dropped this hint Tuesday in Lagos at a Business DayConference, t a g g e d ‘A n n u a l Infrastructure Roundtable’, described the FPSO as a massive investment that would create 5000 direct jobs for and an additional 50,000 indirect jobs for Nigerians.

According to her, the facility which will be completed in the next 36 months as the LADOL phase II is in fulfillment of government’s desire to attract the volume of Oil & Gas projects that were only hitherto carried out outside Africa, to now take place in Nigeria.

She pointed out that Nigeria currently expend over $100 billion USD on deep offshore oil and gas venture in Africa as indicated in a World Oil Report without having much to show for it since most of the jobs go to foreign companies.

Dr. Jadesimi noted that the development at LADOL will further encourage fabrication in the country taking advantage of the ensuing technology transfer and skill acquisition since most of the massive fabrications that would be needed at the

Foreign Partners

FPSO platform would be carried out within the Niger Delta region of Warri, PortHacourt and Yenagoa, where they will be shipped to the base in Lagos.

The LADOL boss, who attributed the investors’ courage in embarking on the project to government’s

institution of the Local Content Act, maintained that the industry and the nation’s economy would be the better for it.

“We are now talking to a lot of foreign partners and because the Local Content Act mandates that the foreign company has to work here in the country, we anticipate that more than one of them may actually end up working here with us on the development.

“The beauty of having this development in Lagos by an

indigenous Nigerian facility built on NPA land is that it will now be available for many foreign companies to use in the future. So, we are not tying ourselves to a situation where we can be held to ransom by one foreign company…hence we are opening the doors for a number of foreign companies for wider technological transfer and wider investments” she added.

She described the

investment as a necessary development adding that, the only reason why it was delayed was as a result of lack of infrastructure to support the initiative.

She lauded the efforts of Government, which she noted, has already provided the enabling environment by setting up the Local Content Development and Monitoring Board (LCDMB) which she said has added to the boosting of opportunities in the oil and gas industry.

Technology

45 Greater process flexibility (Refining units may operate independently o r l i k e w i s e b e interconnected in combinationas determined by the processing needs).

Limited refinery project land space Low or minimal nstallation cost (using skidmounted during construction) Quicker investment recovery Two operators can restart the plant from a cold start and have the plant in full operation in a matter of hours.

Completely automated and once an operator sets all the controlling points, all product temperatures and flows can be controlled automatically.

Only a flat support area or concrete slab without anchor bolts is required to support the plant.

Fuel supply can be natural gas, naphtha, diesel, fuel oil or a combination of these fuels.

CONVENTIONAL versus MODULAR REFINERIES

Picture of a typical large scale petroleum refinery at night

PETROLEUM REFINING:

Jim-Rex Lawson MOSES

O

il refining i s t h e process that takes us from crude oil to refined or finished products through an oil refinery such as highoctane motor fuel (gasoline/petrol), diesel oil, liquefied petroleum gases (LPG), jet aircraft fuel, kerosene, heating fuel oils, lubricating oils, asphalt and petroleum coke.

A petroleum refinery is therefore a factory where crude oil is transformed into

petrol and hundreds of other useful products or a factory where crude oil is broken down into its various components, which then are selectively changed into new products like the ones mentioned above.

An oil refinery is considered an essential part of the downstream side of the petroleum industry.

Refineries come in various sizes. The range from small topping and reforming refineries to sophisticated complex refineries, but perform three basic steps which are Separation (fractional distillation), Conversion

(cracking and rearranging the molecules), and Treatment.

A typical large [conventional] refinery costs billions of pounds to build and millions more to run and upgrade. It runs around the clock 365 days a year, employs hundreds of people and occupies as much land as several hundred football pitches.

A modular refinery as the name implies, is a refinery whose parts or equipment are constructed in modules designed to be transported quickly and easily anywhere in the world and comes in a variety of sizes with capacities that range from 500 to 20,000 barrels per day.

PREFERENCE FOR MINI REFINERIES Mini Refineries are ideally suited for: Remote locations Rapid production of primary fuels (for consumption)and raw materials or feed (for the petrochemical industries)

CONVENTIONAL Constructed in place (on site) Configuration could be any of topping, coking, cracking, hydroskimming etc Caters for all range of products Could Process all crude types depending on processing severity MODULAR Skid-mounted on modules Mostly installed as topping or hydroskimming plant Product mostly restricted to production of middle distillates, naphtha, and lights.

Utilization of heavy crudes’ yield higher proportion of low value residual fuel oils

A typical modular petroleum refinery

Technology

46

Pictures showing the DALIC technology in process

Jim-Rex Lawson MOSES

I

n the oil and gas Industry, invested capital declines in value unless machineries are properly maintained.

Experts say that corrosion and wear of machinery parts are a major problem in the offshore drilling business.

Offsh ore oil a nd ga s platforms are subjected to hostile corrosive marine environments, which require continuous preventive and corrective maintenance to ensure prolonged and safe operations.

Millions of premium pipes and couplings are used in oil fields every year. Many of these connectors suffer galling due to a combination of extreme tensional and compressional forces. The galling of the threads of the connectors is at best a nuisance resulting in a leak, but at worst a disaster as the pipe and connector weld together causing expensive time wasting and the loss of pipe lengths and connectors.

In realization of the foregoing, Tricontinental Technologies Limited, a d i v i s i o n o f t h e Tricontinental Group has developed a new technology called the DALIC Selective Process for rebuilding worn components and for filling in damage such as corrosion or erosion of expensive or badly needed parts – through electroplating, on site, on oil and gas platforms.

W H AT I S DA L I C TECHNOLOGY? DALIC Technology is a mobile system for adding metal to metal. The process is, in fact, a special type of metalizing but with far better adhesion, less porosity and more precise thickness control than spray, flame, or plasma types of metalizing or welding techniques, no heat is generated.

Therefore, no internal stresses are imparted to the part. The end result is the user is concerned with neither thermal distortion nor cracking.

DALIC Technology works like an arc welder. A DC power pack has two flexible leads, one going to the work and the other connecting to one of a number of working tools “styli”. Anodes of different sizes and shapes (round, flat, concave, and convex) are connected to the end of the styli. The anodes are wrapped with an absorbent material. The covered anodes are dipped into the DALIC solutions or the solutions are flow-fed to the area when mechanized operations are used. A positive (+) connection from the DC power pack is connected to the work tool and the negative (-) is connected to the work piece. An electrical circuit is completed either when the wrapped tool is moved over the metal work piece or by moving the work piece under the wrapped tool.

With the completion of this electrical circuit, metal deposits from the liquid

solutions onto the base metal. The deposition rate is very rapid, often times at the rate of 0.05mm per minute.

WHERE IS THE DALIC TECHNOLOGY USED? Anywhere industry needs metal build-up for repair, resizing, metal restoration, or replacement coatings for mechanical, electrical, or corrosion resistant properties. DALIC installations are now used in service world-wide in Aircraft overhaul; Marine maintenance; Offshore oil drilling; Plastic, Rubber, or Glass moulding; calendaring; Offset & Gravure printing; Power generation and Turbine r e p a i r ; Ra i l w a y maintenance.

HOW MANY COATINGS MAY BE APPLIED? Over 100 primary metals or binary or territory alloys can be deposited with the DALIC Technology. Examples are: Babbitt, Cadmium LHE, Copper, Cobalt, Gold, Lead, Lead-Tin, Nickel, Nickel-

Tungsten, Rhodium, Silver, Tin, Tin-Indium, and Zinc.

The end-user’s application governs which coating is selected.

W H AT I S T H E C O S T JUSTIFICATION FOR THE DALIC TECHNOLOGY? Most DALIC customers save the cost of their DALIC installation within the first six months of application. A D A L I C Te c h n o l o g y installation is possibly the most cost effective capital equipment any company will ever purchase.

W H AT A R E T H E CHARACTERISTICS OF DALIC’S DEPOSITS? First and foremost, an excellent bond. In contrast to spray type metalizing where a mechanical bond is achieved, the DALIC Technology results in a molecular bond. This bond is achieved on any base metal such as aluminum, cast iron, cast steel, stainless steel, tool steels, chrome, beryllium copper, brass, or bronze.

47 ‘Jonathan’s image diminishing over subsidy’ Emma AMAIZE and Akpokona OMAFUAIRE

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President Goodluck Jonathan

Emma AMAIZE

subsidy, the President should concentrate on the many (Just back from The Netherlands) challenges facing the country, including issues on state ORMER national creation, which should president of the benefit all Nigerians; the fight I j a w Yo u t h against corruption , which Council, IYC, Dr. should ordinarily tackle the Chris Ekiyor, has cabals’ benefitting from the called on President Goodluck subsidy scam. Others include Jonathan to follow his infrastructure development conscience in taking decisions especially in the Niger Delta, that affect the country, and not to address the very cause of allow “stupid policy the agitation; slow formulators” to make his performing Millennium government unpopular.

Development Goals, MDAs; Speaking to Sweetcrude in the Ministry of Niger Delta; Rotterdam, The Netherlands, Niger Delta Development on the plan by the Federal Commission, NDDC; Government to remove education, aviation and petroleum subsidy, Ekiyor health sector,” he asserted. wondered why President He added, “Nigeria, with its Jonathan, who won the support current financial muscle and of the masses in the way he fuel subsidy in place can managed the fuel crisis in his tackle all these frontally if early days in power, would now only President Jonathan will want to do exactly the opposite follow his mind rather than by removing fuel subsidy at listen to stupid policy such a critical point in time. formulators, who in between “Instead of removing fuel the line of such policy have

F

hidden agenda to either steal further from the system or plunge the Goodluck administration further down the ladder.

“Why should it be President Jonathan that should be removing fuel subsidy knowing that it will adversely affect the ordinary man and why at this crucial time of our national life?

As far as I am concerned, those who advised him on this policy, indeed, are not in tune with the reality on the happenings in the country.

“Even military junta as much as possible used the subsidy to attain cheap popularity, what is it the Jonathan administration intend to achieve by this issue?

There are already too many challenges confronting the nation and President Jonathan is the centre of them all.”

Ekiyor further argued the president “should focus on the small possibilities and deliver on them, rather pursue big impossibilities. Nigeria is not

there yet to implement certain American models in isolation, we must consider at all times the reality on ground, even though we seek the ideal.”

The youth leader also pointed out, “The three new refineries are still on paper, while the old three are barely struggling. The coastal road project is perhaps in the pipeline and cr ying for attention now, as not much has been heard after the fight between the ministry and NDDC on who awards consultancy for its design. The price of cement is still yet to drop to the prescribed N1000 per bag, even though the big importers promised to respond to Mr. President’s orders, so what are we talking about?

“How can you increase fuel price while trying to drop cement price. Certainly, we are double speaking. More so, if we build refineries, there will be nothing to subsidize on imported petroleum products since we can meet our domestic consumption and would have also created jobs for our team unemployed young graduate.”

ARRI- NIGER Delta activist, C o m r a d e Pa u l Bebenimibo, weekend, said the support for President Goodluck Jonathan by the masses was waning across the country because of his planned removal of petroleum subsidy and non-fulfillment of his electoral promises.

Bebenimibo, who described the planned removal of the fuel subsidy as a betrayal of the confidence of the masses and an indication of gross failure by the government, urged President Jonathan not to succumb to the anti-masses agenda.

His words, “The masses’ support for Jonathan is dwindling because the electoral promises are not forthcoming, but are veering to a harsh economic hardship.

Jonathan should listen only to the masses to avoid chaos and total collapse of support for his government. He should not listen to crooks and the business people who are only after profit to the detriment of the masses.”

“The issue of fuel subsidy was at its peak before President Yar’Adua died, Jonathan came and stabilised the price of petroleum products, and that was why the masses loved him and voted for him. To remove the subsidy now will be a total disservice to the masses and making money available for the governors and the private businessmen who do not have the interest of the masses at heart. It is taking Nigeria back and it will make nonsense of the minimum wage which they just implemented, as cost of living will skyrocket,” he added.

Bebenimibo argued that the problem with Nigeria is not really a lack of funds, but improper utilisation of available funds, pointing out that huge sums of money have been appropriated for various projects with nothing tangible to show. The activist cited the Benin-Ore and the East-West roads, which have gulped several billions of naira but remained impassable.

He, therefore, urged the National Assembly not to yield to the temptation of removing the fuel subsidy if the members were really representing the peoples’ interest.

48

Clara NWACHUKWU

T

he Sir Emeka O f f o r Foundation, S E O F, h a s commenced the second phase of the donation of study materials to schools in Nigeria, cutting across p r i m a r y, s e c o n d a r y, polytechnic and universities.

The education materials are courtesy of the United States non-governmental organisation, NGO, Books for Africa, BfA, and are being shipped into the country and distributed to beneficiary schools by SEOF. Receiving a delegation of Books for Africa, BFA, at the Chrome Group Headquarters in Abuja for the signing of M e m o r a n d u m o f Understanding, MoU recently, the Chairman of thee oil and gas group, Sir Emeka Offor, said SEOF and BFA will collaborate with the NGO to distribute the education materials within the next 24 months.

According to him, “This second phase of the distribution of the education materials, which include books, computers and a host of other equipment, is mainly for the South-South region. In the third phase we will go to another region and even beyond Nigeria to other neighbouring countries because education is key to national development.”

He recalled that the first donations were made in June, and promised that the books will not be sold and will get to the target beneficiaries.

The Project Manager, SEOF, Mr. Inno Anoliefo, who introduced the guests, said that SEOF will be the major partner of BFA in Nigeria and the West African region, as the foundation will be responsible for the distribution of the study materials and other facilities in the sub-region.

He said the intension of the partners is to enhance the quality of education in its entirety in Nigeria as well as the sub-region, adding that if a long term improvement is to be achieved in the education sector, then there has to be access to study materials.

As he put it, “If we make books and other study materials available to pupils across all education cadre, then the quality and standard of education will rise. All schools will be equipped with enough study materials to relieve government of some of the burden of education

Study room

development.”

He also explained that the BFA team is on a fact finding and consolidation mission with a view to identifying other areas of need in the education sector and easing supply issues.”

He said that education is at the heart of the foundation’s

corporate social responsibility, adding that SEOF has made educational donations to many tertiary institutions worth hundreds of millions of naira.

Also speaking, the C o o r d i n a t o r , S E O F, Honorable Tony Obi, who revealed that the value of the expected materials to be distributed in this phase is about $7million, also said that by the end of next year, the partners would have distributed materials worth $21million.

The Executive Director, BFA, Mr. Pat Plonski, who led a fivem a n t e a m , w i t h representatives from the International Foundation for Education and Self-Help, IFESH, said, said the goal of the American NGO is to

provide Africa with as many book as possible to help the education system in the continent.

He noted that given Nigeria’s huge population, BFA expected the country to get more books, but pointed out that this can only be facilitated with the support of local partners like SEOF. Plonski said, “Nigeria is getting the single largest donation this time around, as SEOF has agreed to pay for the shipment and freight of the educational materials.

Hitherto, Ghana and Ethiopia used to get the largest donations. We have already sent one consignment of eight containers and we are planning to send a second consignment of 16 containers.”

He revealed that the BFA

team will also meet with the US ambassador to Nigeria, Mr. Terence McCulley, to intimate him the NGO’s activities in Nigeria, adding that the organization is a grassroots one and that book and materials donated are from individuals, schools, libraries, corporations and publishers.

He said that BFA partnership with SEOF will last for as long as there was an education need and partners continue to cooperate, adding that the mission of the latter “is to end the books famine in Africa and we will continue until this is achieved.”

Commenting, Dr. Mike Essien, also from BFA, commended the Sir Emeka Offor Foundation for accepting the responsibility of shipping the books to Nigeria, noting that the country has produced excellent students who have been able to hold their forte in various fields of endeavour.

49

Bitumen spilage

Emma ARUBI

S

APELE-L ARGE quantity of bitumen allegedly from pipelines belonging to Asca Bitumen Company located in Ogorode, Sapele, Okpe

Council Area of Delta State was late Tuesday night spilled into the sprawling residence of Nigeria’s first Finance Minister, Late Chief Festus Okotie-Eboh.

The spill, which was

discovered in the night by the wife of a tenant in the compound, has allegedly devastated living things such as fowls, frogs, rats and lizards and non living things around and within the

premises.

The bitumen company runs some of its pipelines and loading bay right behind the building of late OkotieEboh’s home, even as some of his children have dragged the company to court over the location of their bitumen plant.

The spill was allegedly caused by a leakage from one of the pipeline joints, which the General Manager of Asca, Mr. Karten Asher, described as “unfortunate” in view of the loss of bitumen worth millions of naira to “acts of vandalism”.

He alleged that the pipeline was deliberately vandalised to sabotage and discredit the company’s reputation.

Asher, who spoke with newsmen, revealed that the incident is the second time Asca’s installation was being vandalized in recent times, thereby, causing the bitumen spill.

Although he could not confirm the quantity of bitumen lost so far, he, however, denied knowledge of the death of animals or fowls belonging to the late Okotie- Eboh’s family as a result of the spill, and sued for the protection of the company’s installations.

On his part, Mr. Godfrey Okotie- Eboh told journalists that his attention was drawn to the spill by a tenant at about 7pm on Monday, and immediately called on the company’s accountant who later came with some engineers to clamp the pipeline.

He claimed that animals like goats, fowls, lizards and rats had died as a result of the spill, adding that movements in and out of the premises have also become restricted due to the spread of the product and called on the Federal Ministry of the Environment, and the Department of Petroleum Resources, DPR, to come to their aid.

KEFFES Communities demand transparency in EIA Samuel OYADONGHA

T

he KEFFES communities in Bayelsa State may be heading on collision course with the Nigerian affiliate of American oil c o m p a n y, C h e v r o n , following alleged disagreement with the managements on social issues.

KEFFES an acronym for Koluama I & II, Ekeni, Fish Town, Foropa, Ezetu I &II and Sangana rural communities.

The communities, which are situated on the Atlantic fringe of the state, have threatened to disrupt exploration and gas drilling activities at Oil Mining Lease, OML 86 located in their area.

Representatives of the communities also want Chevron Nigeria Limited, CNL, to make public the Environmental Impact Assessment, EIA Report, it conducted before work commenced on the drilling project.

The representatives of communities who met in Yenagoa, the state capital, expressed disappointment at CNL’s management over the exploration and gas drilling of OML 86, North-Apoi, Funiwa in their territory without recourse to making public the EIA report.

The communities in a letter addressed to the management of the company signed by Bravery Salgbe, Oweizidei Abaka, Uriah Idon, Job Cole among others, demanded for copies of the EIA Report as well as 50 per cent of the vacant positions from the Agbami oil field, which they claimed fell within the KEFFES territory.

The letter was also copied the State Commissioner for Environment, the Commander of the Joint Task Force, Director of the State Security Service, SSS and the State Commissioner of Police

50

Tax regime in Delta is within law —Eghagha Emma ARUBI

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Samuel OYADONGHA

T

he Bayelsa S t a t e Government has called on the Ijaws in Diaspora to return home and invest in the cause of transforming the state from a resource based economy into a knowledge-driven one, so as to catch up with the rest of the world.

Such investments, it said is aimed at revitalising the ailing educational sector and prevent the state from relapsing into youth militancy.

Governor Timipre Sylva, made the plea in a paper entitled, “Ijaw Nation: A Time to Reflect,” delivered in London on the occasion of the 2011 Isaac Boro Day Celebration, organised by the Ijaw People’s Association, IPA of Great Britain and Ireland.

The governor said the desired transformation of the Ijaw nation would be a mirage without the development of its educational sector and collaboration of its sons and daughters in foreign lands.

Sylva also said, “The principal challenge of our

time is how to get our people to acquire the right knowledge and ideas to make them productive and competitive in the global economy. We must get education, the right kind of education, backed up with technological skills to transform Ijaw land into an industrial hub renowned for quality products and service.”

According to him, “Ijaws in Diaspora have a significant role to play in the effort to protect and improve our collective legacy. Our people all over the world must be on the same page with the government and people of our native land in the work of educating the current and next generation of Ijaw citizens and preparing them to contribute to the productivity that we need to sustain our civilisation.”

Continuing he said, “As a government, we have made the education of our people a priority. We have launched a campaign to educate our people to know the things we need to do now and those we must avoid in this generation in order not to endanger the next generation. We have tried to position our people to appreciate the changing times, understand the

science of change and how to har ness change for societal benefit.

“Our people in foreign lands must endeavour to be committed partners in the collective effort to build a more informed and responsible society. I am confident that if we roll up our sleeves and get to work right away, we can achieve the Ijaw land of our dream by individually contributing our quota in the propagation of this gospel.”

H e c o m m e n d e d M r.

President for thinking along this line by approving the establishment of six federal

universities, one in each of the six geo-political zones with the one for the South South zone already cited in the heart of Ijawland in Otuoke, Bayelsa State.

As part of the amnesty programme, the governor added that a number of the youths who were fighting from the creeks were sent abroad for training to enable them acquire skills so that they can stand on their own and be useful to the society.

He, therefore, called the Ijaws in Diaspora to support in whatever way they could to make this dream a reality.

He pleaded, “I urge you to come home and invest in this cause of transforming our community from a resourcebased economy into a knowledge-based economy so that the Ijaw man can sit among those who own the future and not be among those left behind to regret lost opportunities.”

I n h i s r e m a r k s , I PA President of Great Britain and Ireland, Mr. Isaac Namabiri, reiterated the willingness of the Ijaws in Diaspora to assist the government in its effort to revitalise the state’s educational sector.

He said plans were afoot to dispatch some of the best brains in the United Kingdom to help in drawing up a sound curriculum for the planned model schools in the state.

ARRI-THE Tax regime currently in operation in Delta State is within the ambit of the tax law in the country, just as those grumbling over same have been advised to take their case to the National Assembly.

The State Commissioner for Higher Education, Prof. Hope Eghagha, stated this recently during an official visit to the Delta State Polytechnic, Otefe-Oghara, adding that the Delta State Board of Internal Revenue, DBIR, is working in tandem with the tax law in the country.

He, however, advised aggrieved parties to pursue their grievances at the National Assembly, with a view to reviewing the tax law.

He insisted that the state has looked critically at the deductions being made by DBIR and came to a conclusion that the Board is operating within the confines of the Personal Income Tax Act, PITA. Eghagha, who commended the Revenue Board on its effort towards raising the Internal Generated Revenue, IGR of the state, observed that the increase in the wage bill of the state government required corresponding increase in revenue generation and that strict adherence to tax laws is not an exception.

According to him, “People need to know this in the state.

The wage bills of Institutions in the state are quite enormous. Delta State University alone every month gets about N368million. I know that in Ogun State all the tertiary institutions take home about N300million monthly and that is what comes to Delta State University alone here, not to talk of the Polytechnics, the Colleges of Education and the different parastatals. The civil service takes N2.1billion every month. So that is the reason why the state is looking at Internal Generated Revenue and that takes us to the current tax regime, which some workers have raised a loud cry.”

51

People in Hospital

Emma ARUBI

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ARRI-THE W a r r i Refining a n d Petrochemi cal Company, WRPC, in Delta State has been commended by the traditional ruler of Uvwie kingdom, HRM Emmanuel Sideso, Abe 1 for donating a 100kva Mikano sound proof generating set to the Ekpan General Hospital in Uvwie Council area of the state.

The traditional ruler said that the gesture would certainly uplift the standard of medical care delivery in the council area, even as he noted that it is the function of the state government to provide such facilities for the smooth operations of the hospital.

He, therefore, appealed to the relevant authorities of the state to rise up to the challenges of lack of infrastructure and equipment in the hospital.

Speaking during the installation and commissioning of the power generating set, the

Managing Director of WRPC, Mr. Simon Itua Ehiemua , charged the management of the hospital to embrace the maintenance culture. He said this would ensure a longer service life from the generator, saying that the donation is in fulfillment of his promise to give electricity to the hospital light as requested by the royal father when he visited him on assumption of office early this year.

The hospital has been without a power generating set for long, making medical operations extremely difficult to both doctors and patients who have to

put up with the epileptic public power supply from the Power Holding Company of Nigeria, PHCN. The President-General, Uvwie Improvement Development Union, Chief Tuesday Onoge, noted that doling out cash for developmental projects to community leaders is the primary source of crisis and violence in most Niger Delta communities.

He also commended the WRPC for the provision of the generating set, adding that “this one will not bring any infighting.”

The management of the

hospital thanked the company for the gesture, but reminded them that unless they go the extra mile of providing at least 5,000 litres of diesel monthly to power the set, it would make no meaning to them as their monthly allowance cannot sustain a regular supply of diesel

Emma ARUBI

W

ARRI- FOUR suspected ar med robbers were allegedly set ablaze at different spots in the oil city by angry mob along the ever busy Airport Road and Ajamimogha Road in Warri, Delta State,.

The suspects, who had allegedly been terrorising Warri and

to power the plant.

The hospital is also said to be in need of some medical and office equipment, building of more structures, paintings of the existing buildings and landscaping/interlocking the water logged hospital premises.

Effurun residents, met their waterloo during their nefarious activities on Sunday and Monday respectively.

Two of the thieves were caught on Sunday when they snatched a lady’s handbag and attempted to escape on motorbike, while the other thieves were caught on Monday along Ajamimogha Road and roasted alive.

52 Samuel OYADONGHA

T

he Joint Task Force, JTF in the Niger Delta coden a m e d , Operation Restore Hope, has arrested over 100 suspects in the last three months for crude oil theft and operation of illegal refineries.

The suspects were nabbed in separate operations launched in the creek of Bayelsa, Delta and Rivers States. Interestingly, the largest haul was made in the creek of Bayelsa around the Akassa enclave on the Atlantic fringe of Brass.

Information at SweetCrude disposal showed that the men of the Joint Task in a single operat ion swooped last Thursday on 46 suspected illegal bunkerers including three women operating in several Cotonu boats along the Akassa River in the mangrove swamp of Bayelsa State.

This is aside, the fifteen that were arrested penultimate week also along the Akassa flank of the state.

Also reportedly nabbed in the latest haul alongside the suspects along the Akassa river according to security sources was a giant cargo vessel, MV O m i e s a m w i t h International Maritime Organisation registration no 7048611 which was about to receive illegally refined petroleum products from the Cotonu boats before a patrol team of Joint Task Force swooped on them.

The Cotonu boats it was learnt destroyed by the security operatives as would be difficult towing them to Yenagoa while the vessel MV Omiesam and its eight man crew was escorted to Government Jetty Yenagoa by JTF gunboats.

Sometime in March, 2011, the Joint Task Force it was learnt intercepted two Cotonu boats along the Nun River carrying about 700 drums of illegally refined petroleum products which translate to about 187,500 litres of adulterated fuel.

Pa r a d i n g t h e l a t e s t suspects in Yenagoa, the Media Coordinator of the Joint Task Force, Lt. Col

Illegal crude oil

Timothy Antigha said they were nabbed by a patrol team of the Joint Task Force along the Akassa river in Brass local government.

According to him, they were attempting to

d i s c h a r g e t h e i r consignment of illegally refined petroleum products into a ship, MV Omiesam, an International Maritime Organisation IMO vessel with registration no 7048611 when security operatives swooped on them.

But the captain of the impounded vessel MV Omiesam, who gave his name as Fidelis Roland in an interview said, “Our company identified as Geo Fluids Marine Ltd sent us to Brass to load AGO and on getting there, we have not started loading before we were arrested by the soldiers.”

Lt Col Antigha who spoke to newsmen said the security the outfit would not relent in its crusade against crude theft and illegal refineries operators until the scourge is stamped out.

The JTF Spokesman said, “these suspects, who were nabbed by our patrol teams along the Akassa river were in the process of loading this vessel (MV Omiesam)

with illegally refined petroleum products.

Presently, the oil vessel is detained at the G o v e r n m e n t J e t t y, i n Yenagoa.

“The intercepted vessel has a crew of 8 and the other 38 suspects were found with 13 Cotonou boats and 1 speed boats that had assembled beside the vessel, with the plan to load it with the illegally refined products.

“The 13 Cotonou boats contained about 13 GP Tanks of various capacities, ranging from 500 to 1,000 litres, including numerous plastic drums that were already filled with petroleum products.”

He said such products were sourced through stolen crude oil or vandalised pipelines and subsequently process in a crude manner.

“These suspects have contributed in no small measure to the destruction of the nation’s economy and the environment,” he said.

The JTF, he said, would not relent in its efforts to ensure adequate security of the country’s oil facilities and installations.

“The inimical activities of oil thieves and vandals would not only be contained, but also nip in the bud,” he assured.

He explained that with the latest arrest no fewer than 100 suspects had been nabbed in the last 3 months

by JTF in Bayelsa, Rivers and Delta states on criminal activities of illegal bunkering.

Aside, he disclosed that the JTF had destroyed over 2000 illegal refineries in the region in the last couple of months which operators relied on stolen crude from the nation oil facilities.

Some of the equipment allegedly used to pump stolen crude oil and other harbour engines being utilised to carry out their illegal activities of siphoning oil from ruptured pipelines were also recovered by the security operatives.

53

Public Building

Emma ARUBI

W

ARRID E LTA S t a t e Governor , D r .

Emmanuel Uduaghan, has charged community leaders in the state to assist in securing public properties in their areas of authority, even as he maintained that the myriad of problems confronting the education sector in the state cannot i n t i m i d a t e h i s administration.

The Governor made the c h a r g e a t t h e commissioning of a Science Laboratory building donated to Zik Senior Secondary School, Sapele, b y A g b a m i Pa r t n e r s , insisting that there was no going back in his plan to tackle the problems confronting the education sector.

The Governor, who spoke through the State Commissioner for Basic and Secondary Education, Prof.

Patrick Muoboghare, held that his administration was poised to leave a lasting legacy in the education

sector.

In his words; “We shall tackle the problems and we shall not be intimidated by any problem. If schools are dilapidated, we shall rehabilitate them. They are dilapidated we know, but one thing I am certain of is that the brains of our teachers are not dilapidated because in spite of these problems we are having our teachers are still putting in their best.

“Now we appeal to them

to continue to put in their best because no matter what the government says, if the teachers are not there to convert our expenditures to student’s product there is a hitch. I am happy to hear from the principal that with the intervention of Chevron and with the use of the laboratory even before the commissioning that the performance of the science students improved greatly at the current examinations. I congratulate you and Chevron,” he stated.

According to him; “What Chevron has done is a call for partnership. They have partnered with us to build this laboratory and our counterpart contribution is to provide the teachers who will use the laboratory. I promise you, in the next

few weeks, we shall provide science teacher for this school so that the facilities given to us by this intervention will not be put to waste.

“I must appeal to community leaders, if after the laboratory is put to use for the next five to seven months and if we observe that the facilities are stolen, i t c a n b e v e r y, v e r y d e p r e s s i n g a n d demoralising. Just as Chevron is partnering with us by providing this facility, the community must also partner with us by providing security for the things we are able to put in place, and the principal alluded to that when she was speaking. So community leaders and parents/teachers association, I appeal to you

to help and partner with us by providing security for whatever we are able to put in place.”

He further disclosed that this “School was one of the schools that was chosen by the Delta state government for complete overhauling and not just patching of buildings. And all those schools in that set, about eight of the contractors have mobilised to site and I am expecting that any moment from now the contractor handling this one will mobilise to site.

Because if the interest shown by the community, I want a situation whereby when the contractor mobilises to site, I want a small ceremony like this to let the world know that we have started work.”

54

Samuel OYADONGHA

P

e r e m a b i r i community in the Boma clan in the Souther n Ijaw L o c a l Government Area of Bayelsa State, is on the throes of being washed away by erosion, as a large portion of the community has already been eroded.

Last month, two persons, one of them a graduate of the state owned Niger Delta University, identified as Ikioudo Abel, and a secondary school leaver, Stanley Dominic, lost their lives when a landslide hit a section of the community waterfront.

Indiegenes of the community who are host to the Shell Pe t r o l e u m D e v e l o p m e n t Company, SPDC Diebu Creek oil facility and the multi billion naira moribund Peremabiri Rice Farm, have launched a fresh appeal to the federal government to save their community from extinction.

Several homes are already under water in the community with a large portion of the land lost to the rampaging Nun River, as a result of what they blamed on the ongoing dredging work by the oil giant in the area.

The Peremabiri Community Development Committee Chairman, Dickson Peresuote, while lamenting the plight of his people said unless urgent remedial steps were taken the ancient settlement could be wiped out.

According to him, “ where we are standing right now may be inside the river sooner than we can imagine. We have lost so much of our community to the River Nun. Even yesterday, as some youths were playing football in the field when they chased the ball to the water front, the ground on which they stood collapsed into the river.

And, if you watch you can see with me that the river has advanced too close to the concrete road in the

Golly created by erosion community.”

He blamed SPDC for the woes of the community saying, “If we take a tape and measure, I am sure the space between the River and the concrete road is now less than three meters in that section of the town. Everyone in the community is worried about this threatening ecological issue.

When we were young, this community was very far from the football field. That is why community leaders are not happy with the way Shell has continued to carry out dredging activities within our environment. SPDC has continued to dredge at some

sections of the River Nun and along the Diebu Creek every three years or so without recourse to Environmental Impact Assessment.

“We are of the belief that what Shell is doing is having a direct relationship with this loss of land to the river in our community.

And we want solution to this problem. As a peaceful people, we want the authorities to prevail on SPDC and also intervene on this matter. I should use this opportunity to call on the Federal Government intervention agencies like the Niger Delta Development

Commission, NDDC, and the recently created Niger Delta Ministry, to come to our aid.

Unless urgent steps are taken to arrest the rapidly advancing river, this community will disappear soon. Yes, behind our community is a swamp and, we cannot go and build our houses in the swamp. This is our predicament.”

Another indigene of the community, Maurice Jonathan, said, “To tell you the truth no one is comfortable with way the River Nun is expanding while the community land is shrinking by the day. It is like a story now

when we tell strangers that this community has lost over 50meters of land in the last few years. And, if the trend should continue unchecked, we may join the monkeys in the swamps very soon. We are of the view that the dredging activities of Shell around us also have negative effects that is leading to the collapsing river banks and expansion of the River here. We are calling for assistance from government before we are wiped out from this location.

What are we going to tell our children coming behind?”

The Field Coordinator of the Environment Rights Action, ERA, Mr. Alagoa Morris, who was in the community to assess the impact of the erosion menace called on the federal government to, as a matter of urgency, take positive steps to address the ecological threat in Peremabiri and other Niger Delta communities facing similar conditions.

While calling on the people to remain peaceful as they draw attention of the authorities to their plight, he pleaded with the State and National Assembly members representing the area not to rest until something is done to address the ecological threat confronting the people.

55

The Question johniyene@yahoo.com

John OWUBOKIRI

T

he first point to note about t h e downstream sector of the oil and gas industry is that it is heavily deregulated and just lightly regulated. Over the years the NNPC got wise to the fact that it could not refine, warehouse, wholesale and retail petroleum products all by itself. The deregulation by legislation of the downstream sector produced new generation operators such as Addax Oil, Oando Plc, Capital Oil, Masters Energy, Zenon, Sahara Oil, etc, all multimillion dollar concerns. The Nigerian government and her sympathisers would have us believe that the regulation ONLY of the pump prices of Premium Motor Spirit, referred to on the streets as ‘petrol’ and Kerosene is bringing down the Nigerian economy. This argument is as mathematically inaccurate as it is fraudulent. The pump prices of diesel and LPG are deregulated and we have neither seen nor enjoyed the benefits of their deregulation.

What the Nigerian government seeks to achieve is not deregulation but the removal of the ugly tic in the industry that is petroleum price subsidies by the insensate surgical means of immediate legislation instead of a gradual phasing

process that would take into account the all important factor of the purchasing power of the consumer. Petrol and kerosene are currently pegged by government at N65.00 and N50.00 per litre; according to an International Monetary Fund Staff Position Note published on February 25, 2010 that advances the reduction of subsidies, “a price subsidy is the difference between the price facing consumers and a specified “optimal” benchmark price.”

The optimal benchmark price is of course different from the marginal supply cost which is computed from the bare cost of production and handling. The specified optimal benchmark cost is computed from production, handling, plus nice imponderables such as natural disasters, speculative buying, wars, reduced production by a competitor, etc. Don’t be fooled, all the rumpus over deregulation in Nigeria is not about the inability of the operators in the downstream sector to access the specified optimal benchmark prices of petrol and kerosene because they do thanks to the nice facility called subsidy differential which gets paid to them through the facilitation of the Petroleum Products Pricing and Regulation A g e n c y, t h e t r u s t e e a n d administrator of Nigeria’s Petroleum Support [Stabilisation] Fund. Thanks to this price balancing mechanism Nigerian companies make as much profits as their counterparts in other climes. The snag and the reason for all the furore over deregulation is that government

Refinery

feels unduly burdened by the cost of the subsidy, something it claims amounted to about N1.3trillion in the last fiscal year.

The government argues that this sum which accounted for about 30% of its budget could have been put into some other productive ventures like education, road construction, the refurbishment of the refineries, etc. Pray, what did government do with the monies it did not defray as subsidy payment before the coming into being of this regime of subsidy payments? Nigerians stood by and watched members of the National Assembly who constitute less than 0.5% of the country’s population appropriate 25% of our national budget to cater for their welfare and all hell is about being let loose because 80% of the people will continue to enjoy the relatively stable pricing of two very basic and yes, already very expensive products. The IMF, that meddling predator and the motley of confused local economists have argued on the side of government that subsidies have slowed our economic growth, specifically the rapid development of the downstream sector. They argue that though Nigerian authorities have approved about 18 licences to private companies to establish and operate refineries, none has commenced because of the subsidy regime; the idea is that with the removal of subsidies, private investors would have the incentive to commence private refinery operations, employing young school leavers, creating sub-sector investments, promote further diversification of the sector for the overall benefit of the Nigerian economy.

First of all, oil subsidies are not a Nigerian peculiarity; if anything we came late into the game we are trying to exit before getting a proper hang of it. According to the IMF Staff Position Note quoted earlier in this piece, “G-2O countries account for 70% of tax inclusive [oil] subsidies.” In April 2002, India, a country that sources 75% of its crude r e q u i r e m e n t s e x t e r n a l l y, abolished its Administered Price Mechanism and its Oil Pool Fund, the counterparts of our PPPRA and the PSF. India has since reversed the policy and provides heavy oil subsidies for its citizens,

the same as China, Mexico and Indonesia. The United States provides heavy oil subsidies to its citizens by giving tax breaks to every level of oil production. It is elementary economics that a tax that is below its optimal level generates tax subsidies. Russia, Trinidad and Tobago, Venezuela and many other countries subsidise oil. The Canadian government paid between $3b and $8b to the forest industry in 2000, $6b to mining, $700m to fishing and $2b to the nuclear industry, among many other subsidy payments. It was only in 2004 that Libya removed about $5b of subsidies from electricity, fuel and basic food, leaving more than three times that amount on the same items. Qatar subsidises nearly the whole existence of her citizens including local telephone calls made via private GSM carriers like Etisalat!

Nigeria subsidises nothing except the pump prices of kerosene and petrol; having mismanaged this facility through corruption and cronyism, we seek the first point of exit in the face of our first set of challenges and it is on record that the government has extended direct subsidy payments to private operators for only two years through the PPPRA. Instead of investigating the abuse that brought the situation to such a desperate level, we seek to abandon this first attempt at reducing the suffering of our people, forgetting that about 80% of our population live on less than $2 per day.

Let me also opine with the boldness that the statistics accord me that the removal of oil subsidies in Nigeria would not add a single refinery to the Nigerian industry and economy.

Anybody who invests in a refinery, a long term project, in the present energy situation would truly require a psychiatric evaluation because with the current pace of research efforts in the industry, that party may be left with a facility that refines nothing. And it is simply not true that banks will not invest in a business that is dependent on government subsidy payments.

After all, banks are financing the importation of products for the promise of subsidy payments because of short term returns.

Subsidies are paid for products not for the manner in which the products hit the market.

The Nigerian government should be equally hysterical about the beautiful volumes of sales recorded as excess crude sales. Should we not know what tiny percentage of the upstream earnings account for the subsidy payments? If Nigerians enjoyed a government shelter of N1.3trillion over petrol and kerosene usage what did the

country make in the sale of crude in the last fiscal year or in the taxation of LPG, diesel, bitumen, high and low pour fuels, lubricants, etc? Instead of undermining our economy, subsidies have defined the potential of the d o w n s t r e a m s e c t o r, stabilised supply and promoted credit security in the sector. And government acts as though the money paid to marketing companies and importers as subsidy differential is lost to the economy. Were the monies dumped in the Atlantic or in a real serviceable sector of the economy? Wouldn’t some of that money go back to government as tax?

Haven’t the banks been boosted with deposits, commissions, interest payments, foreign exchange earnings and new jobs by virtue of the injection of these funds into the economy? What is the level of the sale of the subsidised products compared to the former situation? We forget too quickly that government, the economy, political activities and power is about the welfare and security of the people.

One is very mindful that in canvassing the opinions articulated in this piece, one may have unwittingly given support to the rabble in PENGASSAN, NUPENG and the other trade unions that enter into any and every fray for vocational reasons. I would like to dissociate myself from that crowd; I have found over the years that within these unions are the most unpatriotic set of Nigerians who care nothing about driving us off a cliff in so far as their allowances and salaries are in issue. They would not accept pay cuts or sacrifice their luxuries for corporate survival. They are like the unions that gave corporate America the need for and lexicon of outsourcing, turning round to envy the Asians their good fortune in inheriting American manufacturing lines. They use the masses both as weapon and as shield, as it suits their needs. Our views may have found a point of convergence on this issue but they are no friends of mine or of the Nigerians whose interest they pretend to serve.

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