13 June 2012

Nigeria: Why Nigeria Must Not Sell Refineries - Peterside


Hon. Dakuku Adolphus Peterside, representing Andoni/Opobo/Nkoro Federal Constituency of Rivers State, is the Chairman, House of Representatives Committee on Petroleum Resources (Downstream). The lawmaker speaks on a wide range of issues in Nigeria's downstream sector. Amongst others, he says a new version of the Petroleum Industry Bill (PIB) is expected from the executive this June. EDEGBE ODEMWINGIE presents the excerpts:

The seventh House of Representatives recently marked its first legislative year, ; how will you score the Lower House on oversight - a key function of the legislative arm of government?

If you ask me, I think that the seventh National Assembly and, specifically, the House of Representatives has done well in terms of oversight. Whenever you give somebody resources, you expect some results. What oversight does is to ensure that we match resources with result. The other thing oversight does is to hold people accountable. Legislative oversight of Ministries, Departments and Agencies (MDAs) ensures accountability for tax payers money that is given to them to expend on behalf of the Nigerian people. Now, the other thing oversight does is to ensure that there are checks and balances. It is natural that when human beings are given power, there is a tendency that they might abuse it. The tendency is that people might access our common wealth and touch it in ways that is not prescribed or anticipated by the crafters of the constitution. I think that the current National Assembly has done very well and that is premised on three grounds. One is that leadership keep emphasising the importance of oversight. It is one of two key strands of our functions: the first one is to make laws for good governance of the country; the second one is to oversight the application of our commonwealth and resources.

The House leadership created a template to ensure that each committee, at intervals, must submit a report showing oversight assignments, observations, solutions proffered, and they usually follow up this oversight to ensure that MDAs implement observations and recommendations. That is what leadership has done; they have held committees accountable in line with their legislative agenda. If you notice, too, the result of this new orientation on oversight is that MDAs take their assignments more seriously than what it used to be in the past. Another result of the oversight is the fact that the people are conscious of the fact that they will be held accountable for every resource kept at their disposal. Finally, members of the National Assembly know that it is a sacred duty they are doing on behalf of the Nigerian people. And for you to do that duty, you must be on high moral grounds; you must yourself come with clean hands. So, for me, I think we have done well in terms of oversight.

If you are to assess the seventh House as an arm of government, how would you say it has impacted on the life of Nigerians?

One thing nobody has denied is the fact that democracy is about the legislative arm of government. In truly democratic societies one thing that distinguishes them from others is the legislative arm of government. The fathers of democracy envisaged a situation where members of the legislative arm will do two key duties. One is law making for good governance, the other is oversight. Meanwhile, oversight includes serving as checks and balances on the excesses of the executive and judicial arm of government. So, in terms of impact on governance, I am aware that several bills are at different stages. Some have been passed and that is commendable. We have had more number of bills passed in one year than all other previous legislative sessions - and that is also commendable. Investigations conducted have been brought to logical conclusion unlike in the past where we never concluded any investigation. I am aware that there was an investigation into how NNPC remits funds into the federation account, which has been concluded. We are waiting to lay it on the floor of the House and, of course, the House will take a decision on that. You are aware that investigation into the subsidy regime was carried out to its logical conclusion and of course follow-up actions will follow. People may have doubts about the outcome of some of these investigations but the fact that it was taken to a logical conclusion is commendable. Again you will not deny the fact that the present House is being proactive. The recent plane crash is a living testimony. As soon as that crash occurred the House at its plenary session mandated a committee to conduct independent investigation to the immediate and remote causes of the plane crash and ensure that anybody who is culpable is brought to book. You also recall that when government removed fuel subsidy, the House conveyed on a Sunday in the first time in the history of the National Assembly an emergency session and deliberated extensively which led to a partial reversal of government's decision. The current legislative arm of government, House of Representatives in particular has continued to be on the side of the Nigerian people. So, we have done very well in terms of Bills, motions and investigations to ensure that the Nigerian people get value for the resources God has endowed them with. We have done well in terms of oversight and the leadership has led by example. There is room for improvement. It is a learning curve. We have not had democracy for quite some time, so with each day there will be improvement. Like in any other institutions, there will be a few bad eggs. Whether in the army, church, mosque in the National Assembly, executive, everywhere, it is possible there will be a few isolated cases of persons who do not seem to go with the tide, who do not seem to understand the import and solemn nature of the duty they are called to perform. So, on the whole, we have done well.

Recently, the House Committee on Petroleum Resources (Downstream) took a tour of some oil and gas facilities, private and government-owned. You say government is a bad businessman; how is that?

As part of our legislative duty, we had an oversight tour of organisations, government departments and agencies that are related to the petroleum sector in the South West axis of the country. In the course of our visit, we visited Atlas Cove, Ejigbo, Ibadan and Ilorin depot of PPMC. We also took time and visited facilities owned by private firms in the downstream sector. At the end of our visit, a few things became obvious. One could draw an inference that government is not a good businessman. There are many reasons for it. One, most of the government facilities were not well kept and are not well managed; whereas the private concerns are well maintained and managed. Also, efficiency in the private firms was palpable; we could feel it, whereas in the government-owned downstream infrastructure, it was obvious that nobody really cared and it was not being managed efficiently. The other one is the issue of technology: most of the private firms deploy technology optimally, whereas government concerns were using technology of 1970 and, at best, 1980. Now another is the issue of morale of personnel. In most of the private concerns we went to, the morale of its personnel was quite high, whereas in the case of government, they were not only under staffed and under-utilised, they had issues of low morale. And so we came to the conclusion that, truly, government is not in the right position to deliver services optimally; it could really get people to do that for it. That is what informed our assertion that government is not a good businessman. There are several pointers to that fact.

This brings us to the country's refineries. Routinely, Nigeria pumps in money for the turnaround maintenance (TAM) of the refineries, yet they still cannot meet local needs, hence the huge reliance on costly foreign imports. Many say these refineries should be sold to private concerns to achieve maximal output; what is your take?

There are four dimensions to the issue of refineries. Currently, there are four refineries in Nigeria. All four refineries are owned by the government and managed on its behalf by the NNPC. They have three different business units managing these refineries. They were built at different times, but there is none of the refineries that is less than 25 years old. The second thing about our refineries is the fact that all of them are producing far blow installed capacity. This is because of several years of lack of maintenance, several years of lack of operational optimisation, inability of the operators to optimise capacity and because of the fact that for a very long time nobody has taken time to do a proper assessment of the state of these refineries with a view to enhancing it productive capacity.

The third strand is the fact that refineries globally operate at a very low margin. It is not a very profitable business globally. And that is why, in Europe, refineries are being shut down. It is only in the Arab region were they source their oil relatively cheaper because they are endowed with the oil and so the refineries are very close to the oil facilities. If not, globally, refineries operate at very low margin. It is not a very profitable business.

Finally, is the fact that like every other thing in Nigeria, refineries are not well maintained because people benefit from the fact of refineries not functioning. That is another dimension to it. Now, what inference do I draw from all of this? I have given the scenario. Ownership structure, years these refineries were built, the fact that globally refineries operate on a very thin margin and the fact that, like any other thing in Nigeria, these installations are not well catered for because people benefit from the fact of it not being catered for.

There are two inferences from the summary of all of this. One, there is urgent need for us to get private individuals to build refineries, run refineries. We must provide a right condition, we must provide incentives to encourage people to build refineries, run refineries and, of course, we the populace will benefit from such services. The second is that, as government, should we abandon our refineries? For strategic national security, the answer is no! Government must continue with its own refineries. But again, we must get private individuals involved in the running of our own refineries. And my position is clear, for strategic national concerns, we should not give up our refineries. We must get other people involved whether in the form of Public Private Partnership (PPP) or any other format. If not, these refineries will not work.

There is the Petroleum Industry Bill (PIB) which, in part, is supposed to drive local content (participation) and commercialise the operations of the NNPC. That Bill remains in a limbo. Where are we on that?

There was a version of the PIB that was submitted to the last House. Unfortunately, it was overtaken by political activities and so the House could not see it through. At the resumption of the seventh legislative assembly, it is on record that six of us - Emmanuel Jime, Usman Bello Kumu, Fatai Akinderu, Aliyu Madaki, Dakuku Peterside and Irona Gerald, sponsored a Bill for an Act to provide for the establishment of the legal and regulatory framework, institutions and regulatory authorities for the Nigerian petroleum industry; establish guidelines for the operation of the upstream and downstream sectors (HB.54) which of course is popularly called Petroleum Industry Bill (PIB). Now that Bill is properly before the floor of the House. It was documented in the National Assembly journal of July 27, 2011. When we were about to take off with the process, we got wind that the executive arm of government was framing a new and more comprehensive version of the PIB. So, we decided to slow down, hoping that the executive will forward a new Bill to us. Indeed, no Bill has been forwarded either to the House or to the Senate. We have received assurances that before the end of June, we will get another version of the PIB. One thing I know is that once we receive the new PIB, it will be dealt with expeditiously.

Now, what does the PIB seek to achieve? The PIB is basically a comprehensive reform Bill that intends to address all issues in the petroleum industry in a comprehensive and strategic manner. The PIB literally absolves or collapses almost all the existing laws governing the industry into one single legislation. It seeks to unbundle the NNPC into different independent business units that will make for more efficiency, effectiveness and more accountability. It seeks to promote more transparency in the industry. More than anything else, the PIB seeks to make provision for communities were this oil is being exploited from to accommodate them in the arrangement which we believe will reduce security concerns. Also, the PIB seeks to increase federal government revenue derivable from petroleum resources. In relation to royalties, petroleum profit tax and all of that, the PIB will review all of that, create a new framework, protect the interest of the International oil companies as well as protect the interest of the Nigerian people. So everybody benefits maximally from petroleum resources. PIB also seeks to protect the environment. We know that, daily, the environment is exposed to activities of oil exploration, and nobody really cares.

But beyond the PIB, our concerns as lawmakers have always been with implementation. We have got several good laws in this country but how are they being implemented? If you look at implementation, you know that that is one gap that we must address, and it is within the purview of the executive arm of government. We must step out of our comfort zones where we are just contented to leave laws for the judiciary to interpret. The positions of law are not optional; it is mandatory that the executive must implement laws passed by the legislative arm of government assented to by them. Even if those laws were passed through veto, it is mandatory for the executive to implement it. But that is one area we have not done so well so far. So, on the whole, on the PIB, the executive has a lot to play. The legislative arm of government is very much ready.

Is there any executive communication to the House to hold on the version presently before federal lawmakers?

The executive cannot do such communication, but there are discussions at that level -leadership of the legislative arm of government and the executive arm - about a new version of the PIB; that I can tell you.

You have several times blamed the constant kerosene on lack of transparency and even greed on the part of players in the trade; what informed that opinion?

At the advent of the seventh National Assembly, an ad-hoc committee was set up by the House of Representatives to look into the scarcity of DPK. If you recall, the Minister of Petroleum Resources, Mrs. Deziani Allison Madueke, was invited to the floor of the House and she was interviewed on the issue of scarcity of DPK and she said, if you recall, that the country imports more DPK than it needs, but she doesn't know where the DPK flies to. That is the true picture. We thought a lot would have improved after that session, but that as not happened. In the course of our oversight function, many facilities we went to - private and public - said they had not received DPK for a very long time. We sought to know from NNPC, and they showed us records that they were still importing DPK and that the products were still being allocated to people. Two things became deductable; one, when the kerosene is allocated, people take it to neighbouring countries as aviation fuel. Again the only reason to explain that is greed, because people are extremely greedy. The second dimension to it is that people use it for other purposes - road constriction, to mix with asphalt and so many other purposes - and that makes it impossible for the end users who are supposed to use it as domestic fuel to have access to it at the government-approved rate. So that became a sort of a challenge. We have decided to open another round of discussion with NNPC, major marketers, depot owners and tanker owners to ensure that we solve this problem. Ultimately, what we have established is that there is a high rate of diversion of kerosene for other purposes.

Something that we cannot ignore for too long is the urgent need to transit from using kerosene as source of domestic fuel to the use of gas, specifically LPG, as domestic fuel. Smaller and less endowed countries like Ghana and Cameroun are all transiting to the use of gas as source of household fuel. But ours has been very slow. The reason is simple. One, government has not taken out time to do some re-orientation so that people know that it is cheaper, cleaner and more environmental friendly to use gas. Another is that we need to develop gas infrastructure to support the use of gas, so that anyone can take a gas cylinder and go to the closest LPG plant or filling station and have a refill. The same way we have PMS stations everywhere, we should have LPG stations everywhere. Nigeria needs a gas revolution to bring about a reorientation and redirection to the use LPG as source of domestic fuel. It is key!

What would you say about the double standards employed by oil multinationals in terms of safety and environmental impact of their operations in Nigeria - polluting host communities - in view of the strict standards operational abroad.

There are two reasons for it. One is the fact that we do not take regulations very seriously. The current laws can protect our environment very seriously. The second is that we need to further strengthen our laws, because, right now, if you flare gas, how much do you pay? A pittance! Meaning - anybody can flare gas and pay. If we review these laws, strengthen these laws, then people will not do some of the things we do here. I agree with those who allege that operators of the oil industry in Nigeria apply double standards. It is a different standard in Europe, and it is a different standard here. Truly, I agree with them. The difference is that, in Europe, life matters and they are often held accountable for their actions.

There is a relationship between sustainable development and the environment. Sustainable development will be a mirage if we do not make conscious effort to safeguard the environment. Our case in Nigeria is not lack of laws that safeguard the environment - though existing laws needs to strengthened, but the enforcement of existing laws is crucial. The consequence of not enforcing the law is that we are daily exposed to degradation and our people are at risk.

Copyright © 2012 Leadership. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.