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DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION
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February 22, 2011
AROUND EXHIBITION STANDS
P E O P L E | T E C H N O L O G Y | P R O D U C T | S E R V I C E | P E O P L E | T E C H N O L O G Y. . .
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Govt to open up Inland basins Jonathan President Goodluck Jonathan said the federal government is working on opening the inland basins for oil exploration. He said this at the opening ceremony of the 11th edition of Nigeria Oil and Gas Conference NOG 2011. The President through his representative, Dr. Emmanuel Egbogah, Presidential adviser on Petroleum said out of all the oil basins in the country, it is only in the Niger Delta that exploration is being carried out. He said that his administration is determined to open up other inland basins for oil exploration. The President said the Local Content Bill passed by the National Assembly is a demonstration of the resolve of the Nigeria government to enhance
Officer of Mulo Pulo, Mr. Abiona Asikalu said the major challenge confronting the indigenous exploration and production oil companies is sourcing
“Energy Day”;
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unveils new energy solutions SCHNEIDER Electric,
against most indigenous companies from getting loans from international market is that they are not recognized on the global arena. Speaking further, Mr. Asikalu, said the low capital base of Nigerian
the global specialist in energy management, will organize a special “Energy Day” event on Thursday, February 24, 2011 at the Transcorp Hilton Hotel, Abuja. The event which will feature the Minister of State for Power, Mr. Nuhu Wya, as a keynote speaker, is aimed at unveiling Schneider Electric's latest world class innovative energy solutions to a target audience of investors, technical experts, industry regulators both in the power and oil and gas sectors among others. Speaking ahead of the event, Mr. Marcel Hochet, Country President, Schneider Electric Nigeria said “Schneider Electric is proud to organise the Energy Day 2011 in Abuja. It is an
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“Funds Our Major Problem”- Usikalu CHIEF operating
Schneider Electric organizes
NOG Brings Together All The Stakeholders In The Oil & Gas Industry - The CWC Group
POWER
Presidential Adviser on Petroleum, Dr. Emmanuel Egbogah cutting the tape to declare NOG2011 open economy is paramount at this formulated one of which is time as dependence only on greater local participation in the Power Sector Road Map oil and gas for revenue will o i l a n d g a s b u s i n e s s. bill to enable the country not allow the country meet its According to him, “Nigeria realize its vision 2020 goal”. dream of becoming one of need to get it right this time He said the need to develop the leading economies by and that is the reason why all other sectors of the 2020. many policies are being
for funds to operate. He said this at the ongoing Nigeria Oil and Gas Conference while presenting a paper titled “Evolution, Challenges and Prospects of Nigeria Indigenous Exploration and
Production Oil Companies”. According to him, “it has been difficult for the indigenous companies to get loans from the international finance market”. He said that one of the issues militating
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It Has Always Been Our Long-term Objective To Expand Beyond Nigeria's Shores - Capital Oil PAGE 6
The Crisis In Egypt & The Oil Market
ISSUE 1 | February 22, 2011 | Page 2
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION AROUND EXHIBITION STANDS
Editorial Co-ordinator: Frank Uzuegbunam Reporter/Researcher: Stephen Ishola Design/Graphics Felix Omorogbe Operations/Administration: Ikenna Nwamaife Editorial Advisers/Contributors Prof. Wumi Iledare Abubakar Atiku Nuhu-Koko Alexandra Gillies Val Ezeokeke
P E O P L E | T E C H N O L O G Y | P R O D U C T | S E R V I C E | P E O P L E | T E C H N O L O G Y. . .
- Nigeria’s Mainstream Energy Resource
Meet us at the press room of NOG10 International Conference Centre, Abuja Call: 08033071135 or 08051340651
www.nigeriaenergyintelligence.com
ISSUE 1 | February 22, 2011 | Page 3
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION ENERGY FINANCE SEMINAR
CONTINUED FROM FRONT PAGE
“Funds is Our Major Problem” banks has not also encouraged the growth of the indigenous companies. Usikalu said that “although there has been an improvement after the banking consolidation of 2008, some banks are now strong enough to give the desired loan, but a lot still needs to be done in this direction”. He also said, in sourcing support services the indigenous companies have not been doing well. He said, providers prefer international oil companies to their indigenous counterparts, and even in some cases services are rendered at higher rate not at optimum time. “Indigenous companies are subjected to terms like producing five banks statement of account, paying contractors upfront and other such terms”. The speaker also talked about community and security problems facing the indigenous companies. He said that the problem in the Niger Delta is also critical though there has been tremendous improvement in that aspect and more funds are being spent on security. Some companies have even resulted to making huge expenditures on security such as buying gun boats. In proffering solutions, he said there is a
The capital base of Nigerian banks has not also encouraged the growth of the indigenous companies.
need for some concessionary polices for indigenous companies to thrive in the oil and gas sector. Other recommendations include; fiscal policy considerations to reduce tax, grant tax holidays (deep water concessions), conversion of expenses on community & security to offset taxes, etc; Nipec to identify and present for government's consideration areas for preferential statutory regulations concession; Preferential considerations on OSP to increase profit, opportunity/incentives to indigenous companies to bid for bigger acreages & deep water blocks. He said if these policies are implemented “surely indigenous exploration and producing companies will climb steadily to the top”.
Schneider Electric organizes “Energy Day” Opportunity for us to once again demonstrate our leadership position in providing global energy solutions through innovation”. Schneider Electric has continued to drive efficiency in energy management across the globe through innovation and expansion of market. It will be recalled that Schneider Electric recently acquired Areva D, a global energy solutions provider, to strengthen its capacity to meet rising energy needs. Together Schneider Electric's medium voltage and Areva T&D Distribution activities form a dedicated business for MV: Energy. Schneider Electric is accelerating its path to become the global specialist in energy management and a world leader in the field of power distribution, as well as in Smart Grid. Energy will be Schneider Electric's centre of excellence, for every product, every system and all services towards utilities and electro intensive customers. The Areva T&D Distribution activity perfectly complements the existing Medium Voltage business. It has the complementary assets for Schneider Electric to succeed together as a leader in medium voltage and network automation. The new five lines of business which span
Marcel Hochet, Country President, Schneider Electric, Nigeria Primary Distribution, Secondary Distribution, Transformers, Automation and Services come in handy in the areas of energy management, efficient electricity distribution, protection of existing networks and ensuring continuity of quality power supply in Nigeria.
ISSUE 1 | February 22, 2011 | Page 4
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION
BRIEFS Reform In Oil & Gas Industry Not To Scare Investors NNPC GMD GROUP M a n a g i n g Director of the Nigeria National Petroleum Corporation, NNPC, Engr. Au s t e n O n i wo n , h a s assured multinational oil companies and other stakeholders in the oil and gas industry that the ong oing refor m in the industry is not targeted at their businesses but it is aimed at improving the business of oil and gas exploration in the country. Oniwon was speaking at the Public Launch of the book, entitled, “T he Political Economy of Oil and Gas in Africa: The Case of Nigeria”, written by Dr. Soala Ariweriokuma, a staff of the NNPC, in Abuja. According to him,“I will like to reassure our joint venture partners and other players that the intention of government in the ongoing industry reforms is not to discourage investment but rather to strengthen the industry within a clearly defined framework which will ensure the sustainability of existing businesses and i nve s t m e n t s a n d t h e attraction of new investments in the entire hydrocarbon value chain given the various targets that have been set.”
Te c h n o O i l Charts Path To Oil & Gas Sector Issues ISSUES such as the Petroleum Industry Bill (PIB), deregulation policy, the local content initiative among others called for a good understanding by operators in the energy sector, the Managing Director of Techno Oil, Nkechi Obi has said. In a two-day Strategic Business Review in Lagos recently, Obi said that based on this, inter nal and exter nal experts were invited to chat a way forward for the company so that maximum oppor tunities can be derived. She listed the objectives of the retreat as appraising capabilities and areas for appropriate intervention, identifying contemporary issues in the downstream sector and the opportunities, devising appropriate strategies that would enable the company break into new grounds.
INTERVIEW
NOG Brings Together All The Stakeholders In The Oil & Gas Industry - The CWC Group NOG 10 was a celebration of a decade of excellence. What lessons were learnt by CWC over the past decade and how will those lessons impact on the next decade of NOG beginning with NOG11? NOG has grown and transformed alongside Nigeria's oil and gas industry. We have learnt how important it is to maintain a continued presence in the market and to establish and nurture our relationships with Nigerian clients and partners. It is our priority to ensure that we always meet the needs of the industry and that NOG serves as an instrument to support its development. Looking at the future, we will continue to increase our involvement in Nigeria, and become not just supporters but also an integral part of the industry and its progress. CWC recently established a Nigerian arm. Was it in line with the Nigerian Local Content Act? Setting up our Nigerian company was a natural step in the expansion of our business activities in the country. We are part of the Nigerian market and can see great potential for growth. We feel very optimistic about Nigeria's future; a future that we want to be fully involved in. In assessing CWC events across the world, how would you rate Nigeria amongst other countries that host CWC events? CWC has a very strong connection to Nigeria and we enjoy our work in country. We have had a great experience doing business in Abuja, Lagos and Port Harcourt. The great thing about Nigeria is that there is a real entrepreneurial spirit and this makes it a very exciting and fast moving business destination. Do you think deliberations at NOG have helped on policy formulation in the Nigeria oil and gas sector? Indeed. NOG brings together all the stakeholders in the oil and gas industry and provides a unique platform for discussion and exchange of ideas and opinions. Actually NNPC was quoted as saying that CWC has been a major contributor to the development of Nigeria Content over the last 10 years. We are delighted to receive those sorts or testimonials, as CWC is always looking at ways to be more involved in the industry. Should Nigerians look forward to another new event before the year runs out? We specialise in Energy and Infrastructure. We are looking for new products to set up if they fit with our portfolio and if they offer real value to our clients and partners. Any new innovations for NOG11? We have included a second seminar, the Energy Finance Seminar which is proving popular with delegates and already booking on very well. Networking opportunities have been enhanced with additional functions and we are also increasing the promotion of NIBUCCA's activities; as you may know we are very active members of the coalition. Following the monumental success of NOG, we have seen the introduction of Nigeria Infrastructure (NIF) in 2008 and NOGTECH in 2010. How will you access the reception of these two events? They have been very well received. NOG Tech was a great success on its first year and being technology and industry driven, Lagos was the perfect location for it. We have already built on that first success for 2011 in terms of booked attendance at the exhibition and the programme, not mentioned the huge support from industry institutions. We moved NIF to Lagos with the backing of the Lagos State government; it has been great to get this support and we are planning for NIF2011 as we speak.
Scott Shelton
NNPC was quoted as saying that CWC has been a major contributor to the development of Nigeria Content over the last 10 years. We are delighted to receive those sorts or testimonials, as CWC is always looking at ways to be more involved in the industry.
NOG Exhibition Statistics (Square Metres)
ISSUE 1 | February 22, 2011 | Page 5
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION
INTERVIEW
BRIEFS
It Has Always Been Our Long-term Objective To Expand Beyond Nigeria's Shores - Capital Oil Tell us about Capital Oil and its operations Capital Oil and Gas Industries Ltd. is a wholly Nigerian-owned, private, limited liability company. We are a major player in the importation, storage, distribution, trading and retailing of oil products. The Company was incorporated in 2001 by Mr. Ifeanyi Patrick Ubah, who is our Managing Director and Chief Executive Officer. The Lagos depot opened for business in March 2007. We now have a staff strength of over 1,000. The Company is dynamic, forward-thinking and innovative. Because of this, we have rapidly become one of the major players in the downstream sector of the industry.
The Company's Vision Statement is: “To become Africa's strongest and most innovative energy solution provider.” This drives our plans for the future. We are confident that the Company will be much expanded and diversified. Deregulation will result in the closure of most of the smaller and less efficient downstream companies. Because of our forward-thinking and infrastructure investments, we fully expect to fill the vacuum created by their demise.
with both national and international standards. What is impact of Nigerian Local Content Act on the operations of Capital Oil? I'm pleased to say that it will have no negative impact at all on our operations and rather strengthens our position because we already comply with the objectives of the Act. As previously stated, the Company is wholly Nigerian owned. 99.7% of the workforce are Nigerians. We only have three (3) expatriate workers and they are employed strictly within the Ministry of Internal Affairs guidelines with Nigerians understudying them. The vast majority of our capital purchases have been with Nigerian suppliers and we only source goods and services overseas when suitable local suppliers cannot be found
Ifeanyi Ubah, Capital Oil MD How is Capital Oil positioned in the event of full downstream de-regulation of the oil and gas sector? Our heavy investment in infrastructure and capacity building has and will, enable us to be much more efficient, effective and competitive than other companies in the downstream sector. As a result, we will be able to offer our customers good services and attractive prices for all products. We have seen some innovations by Capital oil such as the introduction of the 100 mobile dispensing trucks. How sustainable is it? Very soon, we will soon be using the trucks to launch a diesel delivery service to serve the numerous private and corporate institutions that rely on diesel-powered generators. The rationale for the service is based on high quality product and first class service. We firmly believe that our intended target customer base will value this superior quality service. All too often diesel is supplied by roadside 'pedallers', whose product is suspect and whose service is erratic. We have also received many enquiries from potential buyers for the trucks themselves. So, taken together, we are confident that our investment will return healthy profits for the group. There has been health, safety and environmental (HSE) concerns over location of tank farms in Lagos. With a 175 litres storage capacity, how is Capital Oil combating the HSE issues? As you may be aware, before any major oil and gas project is undertaken, approval must be obtained both from the Department of Petroleum Resources (DPR) and the Federal Environmental Protection Agency (FEPA). Needless to say, as a responsible corporate citizen, all of our developments have received the necessary permits. In fact, for the most recent expansion, we commissioned Haskoning Nederland, (who are world-renowned experts in this area) to do a worst-case assessment on the effects of a major fire. Their conclusions fully endorsed our own view that our site developments are safe and comply
We have seen Capital Oil participating robustly in local and international conferences and exhibitions. Does it in any way signpost foray into international oil and gas circuit? It has always been the Managing Director's long-term objective to expand the Company beyond Nigeria's shores and particularly the West African sub-region. We have contacts in most of the ECOWAS states and are always looking out for opportunities in the region. When the right combination of business and financial circumstances occur, we will not hesitate to exploit the opportunity. Where do you see Capital Oil 5 years from now? The Company's Vision Statement is: “To become Africa's strongest and most innovative energy solution provider.” This drives our plans for the future. We are confident that the Company will be much expanded and diversified. Deregulation will result in the closure of most of the smaller and less efficient downstream companies. Because of our forward-thinking and infrastructure investments, we fully expect to fill the vacuum created by their demise. We also wish to diversify into other petroleum related activities, such as refining, LPG/CNG and lube oils. One of our major assets is our multi-berth deep water jetty. This could be used for many purposes other than just petroleum products. In fact, we have already done some preliminary studies on a few of these and given the right business climate, we will certainly develop this valuable asset. As with many other areas of business life, we depend on funding by national and international financial institutions. Without their support, none of our plans can be realized. We have always been flexible and innovative. I believe that this is another key reason why we'll be a thriving, energetic company not only in 5 years time, but far beyond.
Shell Spends N5.53b On Economic Empowerment In Niger Delta S H E L L Pe t r o l e u m Development Company of Nigeria-operated Joint Venture said it spent N5.53 billion between 2005 and 2010 on various economic e m p o w e r m e n t programmes that have improved lives and raised the standard of living in the Niger Delta. Shell's Corporate Media Relations Manager, Tony Okonedo, in a statement, said the programmes include 241 micro-credit schemes, 35 agro and fisheries and 120 land and marine transport projects. Another set of skills and enterprise development programmes within the same period directly benefitted over 5,200 youths, the company added. "Our economic e m p o w e r m e n t programmes date back to the 60s," said Tony Attah, General Manager, Sustainable Development and Community Relations. "We began by awarding scholarships and expanded to agriculture, micro credit and small scale business development. "In fact, our intervention in health, sports and education is all aimed at economic empower ment of the Niger Delta region.
Chevron Has Robust CSR GENERAL Manager, Public, Government and Policy Affairs, Chevron Nigeria Limited, Mr. Femi O d u m a b o, s ay s t h e company has a very robust corporate social responsibility programme, which cuts across various sectors of the economy i n c l u d i n g e n e r g y, education, health and sports, among others. Odumabo while fielding questions at a New Year media party organised by the company in Lagos for journalists said Chevron's inter vention is well established in different sectors of the Nigerian economy. On education, he said: " We have a robust intervention in education offering over 10,000 scholarships, which cut across all disciplines at the national level and in the communities where operate." He also said the company has plans underway to donate about 100 computers to some institutions.
ISSUE 1 | February 22, 2011 | Page 6
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION
ANALYSIS
NEWS BRIEFS
Exxonmobil In Big Reserves Leap EXXONMOBIL said its oil and gas reserve additions last year more than doubled its production levels, marking the biggest jump in more than a decade. The US supermajor, led by chief executive Rex Tillerson, said it increased its proven reserves by 3.5 billion barrels of oil equivalent, or 209% of its production, bringing its reserve base to 24.8 billion barrels of oil equivalent. Reserve additions from acquisitions and subsequent revisions totalled 3 billion oil-equivalent barrels. Additions also came from the Sakhalin-1 Arkutun Dagi project in Russia and other countries including Canada, the United States, Nigeria, Norway and Abu Dhabi, the company said. Liquid additions totalled 905 million oil-equivalent barrels for a 102% replacement ratio and gas additions totalled 2.6 billion oil-equivalent barrels for a 328% replacement ratio. The proved reserves base is split between 47% liquids and 53% gas, and includes oil sands extracted by mining and equity company reserves. The reserves increase marked the biggest jump in more than a decade, with gains fuelled by the oil company's purchase of US natural gas producer XTO Energy. Despite the jump, the highest since Exxon and Mobil merged in 1999, shares in the giant fell more than 2%, a drop analysts linked to the quality of the reserve growth again related to the XTO purchase. Edward Jones oil analyst Brian Youngberg said the numbers had looked strong on the surface. “But the majority of it is natural gas, and much of it is in the United States, where prices are very weak,” he said.
The Crisis in Egypt & the Oil Market By Stephen Ishola
POLITICAL unrest in the Middle East and North Africa has sent tremors through the world oil market and triggered fears of long-lasting economic damage if the crisis deepens. Though the crisis is unlikely to hit the economies of Gulf oil producers and their crude output may not be impacted, there are concerns that shipping through the 120 mile Suez Canal may be impacted by the crisis in Egypt and other parts of the Arab states. Since the crisis first broke out in Egypt towards the end of January, crude oil price witnessed a spike in the international market. From $85.64 on January 24, 2011, prices rose sharply to $92.19 by January 31 - the highest since October 2008 over concerns on the possible interruption in oil supplies. At the moment, the price of Brent crude has crossed the $100 per barrel mark, while WTI (West Texas Intermediate) is trading at around $92 a barrel on the New York exchange. Speculation is rife that the prices will rise even higher,
Maersk In Newbuild Orders MAERSK Drilling has signed a $1.2 billion contract with Singapore fabricator Keppel Fels for the construction of two high-capacity, ultra-harsh environment jack-up drilling rigs, as earlier reported. The first rig is scheduled for delivery at the end of 2013, with the second unit following seven months later. The newbuild contract includes an option for one additional jack-up to be declared by July this year. The newbuilds will represent a new generation of rigs, based an enhanced version of the proven Gusto MSC CJ-70-150MD design, and are intended for operation in the harsh environment of the North Sea at water depths of up to 150 metres. The high-capacity features include offline pipe handling and simultaneous operations as well as an enlarged cantilever reach. The rigs will be particularly targeted at the Norwegian market and will comply with the strict regulatory regime in Norway. “We believe in continued strong demand for high-capacity jack-up rigs on the Norwegian continental shelf,” said Maersk Drilling chief executive Claus Hemmingsen.
Expro gains Pole gas position OILFIELD services contractor Expro has secured its first well testing contract in Poland with work on an unconventional gas play. The award, valued at $1.5million, covers well testing work and associated services on the Siekierki Tight Gas project in Poznan for Energia Zachód, a 90%- owned subsidiary of London-listed junior Aurelian Oil & Gas. Under the contract, Expro will provide Energia Zachod with specialist well testing services, sampling and analysis services, equipment and personnel on the Trzek-2 and Trzek-3 wells. Trzek-2 will be the first multi-fractured horizontal well on the Siekierki field and the first well of its kind in Poland. Expro's Europe CIS region director Keith Palmer said: “This is a significant first for Expro in providing well testing services to the emerging shale gas markets in Poland, a province we see as having considerable potential for growth.” He added the contract “gives us a great platform from which to expand our unconventional gas operations in Poland”
Mubarak While Egyptian oil production does not present a huge risk to oil supplies, given that Egypt is a minor oil producer, and has seen its production falling from 941,000 barrels per day (bpd) in 1993 to about 685,000 bpd currently, it does control around five per cent of the world's oil and gas delivery through the Suez Canal. About 1.8 million barrels of oil per day (mbd) move through the Suez Canal and another 1.1 mbd pass along the 200 mile long Sumed pipeline linking the Red Sea to the Mediterranean. Any interruption here would move the oil market into considerable volatility, requiring a re-balancing of contracts and a noticeable escalation in prices. A decline of even one per cent in global oil supply availability, without an equivalent decline in demand, pushes the average crude oil prices up by $10 a barrel. That would translate into an almost overnight Nymex price level of $140 a barrel and a Brent price pushing to $150. Though there are no indications that oil supplies or transportation will be impeded at this point, the situation is fluid. The unrest in the region could not have come at a worse time, as the world was beginning to come out of the financial recession that had seen almost the entire Western world being severely impacted. Any instability or crisis in the West Asian region, home to the world's largest and residual oil reserves will have a pronounced effect on the global energy market. More importantly, if the contagion that began in Tunisia and spread to Egypt extends to other oil producing and exporting nations, this could have a devastating effect on oil prices. It bears mention that the economic grievances that have triggered the mass protests in Egypt exist across several countries in the region, a fact that is borne out by the mass protests that have been witnessed in Syria, Sudan, Jordan as well as Yemen. Leaders in Algeria, Jordan, Libya, Kuwait, Morocco, Syria and
While Egyptian oil production does not present a huge risk to oil supplies, given that Egypt is a minor oil producer, and has seen its production falling from 941,000 barrels per day (bpd) in 1993 to about 685,000 bpd currently, it does control around five per cent of the world's oil and gas delivery through the Suez Canal. About 1.8 million barrels of oil per day (mbd) move through the Suez Canal and another 1.1 mbd pass along the 200 mile long Sumed pipeline linking the Red Sea to the Mediterranean. Any interruption here would move the oil market into considerable volatility, requiring a rebalancing of contracts and a noticeable escalation in prices.
Yemen have sought to stave off real or perceived uprisings or even their possibility by announcing concessions on jobs, housing and prices. Though Egypt is a marginal producer of oil, it has been increasing its development offshore, especially of natural gas in the Nile Delta, the Gulf of Suez, and the deeper waters of the Mediterranean Sea. Several major Western companies own oil and gas assets in the country, namely, BP, Exxon Mobil Corporation, Chevron Corporation, Royal Dutch Shell, Eni, British Gas Group, Edison, and several mid-sized companies. In addition, there are the substantial assets of leading drillers, including Transocean Ltd., Diamond Offshore Drilling Inc. and Baker Hughes Inc. All this have made Western countries quite concerned about the situation in Egypt. Also, the discovery of large gas deposits over the past several years has catapulted Egypt into the fast track lane for LNG exports to the European Union. A relatively small oil producing country like Egypt can add risks to the oil price outlook if there are prolonged uncertainty and risks of unrest. The riots started in Tunisia then spread to Egypt and they are now spreading to the Middle East. Crisis in a major oil exporting country could reduce supply significantly. The stability of democracies in the Middle East has always been in question. Historically, uncertainty in the Middle East, which accounts for 30% of global oil output, always have strong impact on oil price. In this sense the oil price behaves like a risky asset; political uncertainty in the major oil producing region definitely increases oil price.
ISSUE 1 | February 22, 2011 | Page 7
DAILY NEWS OF NIGERIA OIL & GAS CONFERENCE/EXHIBITION
OPENING DAY GOLF
BOOK EXCERPTS
NIGERIA & HER OIL
How Nigeria's Energy Policy History Reached The Crossroads TODAY'S nation-states emerged in different ways. Some evolved as modern expressions of congealed cultural history, like Israel and the nation-states of Europe. Others emerged through political andeconomic necessities. Nigeria is one of the latter; a product of colonial carpentry, which itself was an administrative superimposition on an outsized colonial outpost to make commodity exploitation possible. Since then, Nigeria's economy (and politics) has revolved around control of the country's natural resources, be it palm produce, the grains and groundnuts from the savannah up north or the eventual discovery of crude which welded Britain back to Nigeria through Shell, after the colonial construct became unfeasible. These resources were always at the centre of social and regional conflicts. The current dominance of resource issues in government policy and action didn't start with the nation's military rulers sharing oil blocks, as is often easily concluded. Hence there was the Petroleum Act of 1969, which reads like a transactional memorandum for assigning oil output and revenue. It was hardly good enough for much else than that, not for gas, nor for taking care of the environment, nor for taking care of the socio-economic aspirations of the citizens. Of course, it couldn't have foreseen oil price reaching the dizzying heights of 2008, much less provide for how the state could cream off bumper revenues, as now contemplated in the new sets of legislation. As the gaps in, and the inadequacies of, the Act emerged over time, the government piled new regulations, guidelines, afterthoughts, borrowed ideas and plain mush, onto the framework. The collapse was the mess everyone has had to pay for, namely the militancy in the Niger Delta which has helped to shoot up the oil price all the way to
As the global recession climaxed in 2008, Nigeria was deep in thought about how to renegotiate its terms of engagement with oil producers. Looking through the pile the country found that decades of errors had so compounded that it couldn't begin to fix one thing without touching the other.
the street pumps in Europe and America.3 In that time period the country experimented with broad ideas like incentivising exploration through reserves addition bonus, a forward looking concept that was blighted by corruption, and others like the marginal field program, the indigenous concession program and special deepwater concessions. The deepwater concessions and bonuses had encouraged the big oil companies to head into the deepwater and find big fishes like Bonga, Agbami and Erha Fields, with no corresponding incentives for onshore projects that were less remote and held more
opportunities for locals, and thus escalating the prevalence of poverty. As volumes fell due to facility damage and shut-in, and consequently revenues from onshore and shallow water projects dropped, it hardly showed on the government's books because the oil price was going strong and offshore production was increasing, and so the government virtually went to sleep, expecting the high tide to continue. As the global recession climaxed in 2008, Nigeria was deep in thought about how to renegotiate its terms of engagement with oil producers. Looking through the pile the country found that decades of errors had so compounded that it couldn't begin to fix one thing without touching the other. In 2005, the country issued a comprehensive National Energy Policy which sought to define its aspirations about everything from coal to nuclear, though in a skimming fashion. That policy however lacked the force of law. To propose a comprehensive energy law, the government constituted the Oil and Gas Sector Reform Implementation Committee (OGIC). The ultimate product of that policy machine is a proposed Petroleum Industry Bill which has been in the National Assembly since 2008. It is the culmination of the ten year-old work of the OGIC, and of over five decades of muted resource nationalism.. Yet at a deeper level, there are cumulative historical developments that created the momentum some say necessity for such sweeping nationalistic legislation to emerge in Nigeria. Among them are: ! The very basic inadequacy of Nigeria's
!hydrocarbon resource endowments relative to economic needs of the population. A Chatham House report captures the dilemma: “Nigeria produced 2.23 million barrels a day of oil and gas in 2003. This makes it the world's 11th largest oil producer. However, with a population of 124 million, it ranks only 37th on a per capita basis, well below the UK (22nd). It is clear that Nigeria cannot be transformed by petroleum alone.” Following the escalation of crisis in the Middle East in the decade before 2000, the Gulf of Guinea which Nigeria dominates, became the new destination of choice for new investment to find oil to satisfy the energy needs of the US and other Western economies. Nigeria began to feel a certain pride and assertiveness about what it possessed, plus a certain regret that it wasn't getting quite as much as it could from it, since the existing terms were built on incentives. This is a classic inflection point. Every resource state gets to it, the penny drops and the state turns from eagerly wooing investors to impetuously demanding a “better deal”. The Gulf War windfall was an eye opener for Nigeria. The spike in oil price during the first and second Gulf Wars hardly translated to real gains for Nigeria, for two main reasons: production contract terms with the IOCs were locked in, based on a pre-war pessimistic oil price outlook, and even the amount that accrued to the state was grossly embezzled by the governments of the day. This diversion of resource revenues eroded the foundations of the rest of the economy, particularly manufacturing.
Nigeria & Her Oil written by Dozie Arinze is available at www.a-specialists.com