Fifty two years after independence and more than 56 years after Nigeria's first commercial oil discovery, the oil and gas industry is still battling with teething problems.
Oloibiri oilfield, Nigeria's first commercial oil field was discovered on January 15, 1956 by Shell Darcy, now Shell Petroleum Development Company of Nigeria Limited (SPDC) in Oloibiri, a small, remote community in the creek of Niger Delta. The field came on stream in 1958, producing about 5,100 barrels per day of oil in the first year.
By 1960, when Nigeria got her independence, exploration rights in onshore areas had been extended to other foreign companies. Chevron Nigeria Ltd discovered Nigeria's first offshore oil fields in 1963, while Agip and Mobil Producing started operation in Nigeria in 1962 and 1968 respectively.
By the end of the Biafran war in 1970, the international price of oil had risen and Nigeria was able to reap instant benefits as an oil producer. Since the oil boom of the 1970s, oil has remained the mainstay of Nigeria's economy and currently accounts for about 90 per cent of Nigeria's foreign exchange earnings and over 80percent of government revenue.
Nigeriahas 35 billion barrels of crude oil reserves and a production capacity of 3 million barrels per day. It is the world's 12th largest supplier of crude oil and currently produces about 2.7 million barrels per day (bpd), according to latest figures released by the Nigerian National Petroleum Corporation (NNPC).
In addition to being a major oil producer, Nigeria also has proven gas reserves of 187 trillion cubic feet, which places her in the 7th position in relation to other gas producers worldwide. With about 600 trillion cubic feet, in additional to enormous undiscovered gas potential, industry analysts say Nigeria could easily rank in the world's top three in terms of gas reserves.
Ironically, despite her abundant hydrocarbon resources, Nigeria still remains one of most undeveloped medium income countries of the world, as successive administration mismanaged the country's oil revenue. As Africa's largest oil producer, Nigeria still depends on foreign countries for refined petroleum products because the four refineries have been in a near dilapidated state for almost two decades.
In addition, inadequate and inconsistent gas to fuel the power plants have been a bane of steady electricity supply in Nigeria, while recurrent shortage of petrol has continued to take its toll on the economy. The irony is that after over five decades of oil exploration, rather than earn the country prestige, the discovery of oil has led to a multiplicity of problems.
The establishment of the first refinery in Nigeria dates back to 1965 after oil became commercially viable and local demand for petroleum products increased. Nigeria's first oil refinery, at Alesa Eleme near Port Harcourt, began operations in late 1965 with a capacity of 38,000 barrels per day, which was enough to meet domestic requirements at that time.
But owing to a rapidly growing economy after the civil war, this prompted the government to expand refining capacity at the Port Harcourt plant to 60,000 barrels per day, which was still insufficient to meet local demand.
Three other refineries were subsequently constructed in Warri, Kaduna and Eleme in Port Harcourt in 1978, 1980, 1989, respectively, increasing Nigeria's refining capacity to 445,000 bpd. Despite the demands of the rapidly growing Nigeria's economy, Nigeria's refining capacity has remained unchanged more than two decades after the last plant was built.
But in what appeared as a frantic move to boost Nigeria's refining capacity, the NNPC had on May 13, 2010, signed a Memorandum of Understanding (MoU) with China State Construction Engineering Corporation (CSCEC) for the construction of three Greenfield refineries and a petrochemical plant in Nigeria. The project had been envisaged to add 750,000 barrels per day (bpd) of extra refining capacity to Nigeria's current 445,000 bpd refining capacity and scale down importation of refined petroleum products. But there is now growing uncertainty about the feasibility of the project, which was scheduled to come on stream in 2015, as the NNPC is said to be unable to secure Federal Government's approval to begin construction. Also, the delay by the Kalu-Idika-led Refinery Task Force in submitting the report of its findings on the state of the existing refineries is believed to be a major setback for the project.
Massive Fuel Imports
Despite her being rated among 12 biggest oil producers in the world, Nigeria, a country of about 160 million people, still relies on countries that do not have oil deposits to meet local demand for refined petroleum products. It was shockingly revealed recently that Nigeria had started importing diesel from Niger Republic, one of the poorest countries in the world, which discovered oil only 11 years ago.
The newly built 20,000 bpd Soraz Refinery in Zinder, Niger was commissioned in November 2011, 46 years after Nigeria's first refinery was established. The continued massive fuel importation, which has cost the government huge amounts in subsidy payments, has drawn the ire of the public, which blamed it on mismanagement of the refineries by past administrations.
Indeed, an industry expert, who craved anonymity said, that Nigeria cannot boast of a fully functional refinery, more than fifty years after independence means that the government has failed woefully. According to him, the refineries were mismanaged by corrupt officials in the NNPC, Ministry of Petroleum and the Department of Petroleum Resources who were entrusted with the responsibility of managing the refineries.
"If you trace the track record of our refineries, you will agree with me that they were well run in the past. But for some time now, we only hear about TAM that is never carried out; we only hear about billions of dollars expended on TAM, but the refineries have remained in the same state to date. The truth is that our leaders have failed", declared the source.
Also, National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr. Babatunde Ogun, noted that government is not serious about fixing the refineries. He expressed regrets that the poor condition of the refineries over the years plunged the country into massive fuel importation.
Long Wait New Legislation
The Petroleum Industry Bill (PIB) is an amalgamation of 16 the existing oil and gas laws that will define and shape the future of Nigeria's oil sector as well as transform the NNPC into a fully commercialised National Oil Company that will compete favourably with global its contemporaries. The oil industry reforms bill, which has been in the works for about 13 years, industry analysts say, is the first authentic step to reform Nigeria's oil and gas sector after 56 years of oil exploration.
The bill was first presented to the sixth assembly in 2008, but efforts to sign it into law were hampered by what industry experts described as political intrigues and wrangling between the National Assembly and executive. Also, the existence of different versions of the bill was said to been the major reason why it was not passed by the sixth National Assembly.
The delay in the passage of the bill has continued to create investment uncertainties in the nation's petroleum sector, which could hamper Nigeria's goal to remain an investment destination for the oil and gas industry. Also, the seeming lacuna created by the non-passage of PIB has equally affected the aspiration of NNPC to metamorphose into a strong National Oil Company (NOC). In terms of losses, the oil and gas industry is said to have lost in excess of $28 billion in investments in 2011 alone.
To fast-track the passage of the bill, the petroleum minister, Mrs. Diezani Alison-Madeke, on January 19, this year, inaugurated a special taskforce, with a mandate to review the various versions of the bill submitted to the sixth National Assembly and produce a new one that would be presented seventh National Assembly for passage. The new draft bill produced by the Senator Udo Udoma-led committee was presented to the President Goodluck Jonathan in April, who in turn, submitted it to the national assembly in July.
Although the National Assembly is expected to start debating the bill soon, there are growing concerns that the bill may face fresh hurdles following reports of the different versions in circulation. It was gathered that the version submitted by the president was at variance with the copy produced by the PIB task force.
The existence of different versions of the bill was said to be the major reason why it could not be passed by the sixth National Assembly. Senate President David Mark confirmed that the multiplicity of versions of the oil industry reform bill was the major stumbling block to its passage by the two arms of the National Assembly.
Although, the duo of President Goodluck Jonathan and the petroleum minister have maintained that the authentic bill was the one personally signed by the minister, it is feared that the passage of the bill may not come as soon as expected as the Senate said it will introduce its own bill to accommodate the interests of all stakeholders in the sector. Besides, contentious issues, particularly with regards to fiscal terms, which had stalled the passage of the former bill, are beginning to rear their head again. Alison-Madueke had assured that the issue of fiscal terms had been trashed out, insisting that the new bill was fair to all operators and prospective investors in the industry.
But it is obvious that International Oil Companies (IOCs) are not happy with the fiscal terms as provided in the new draft bill. The SPDC, which was at the forefront of the campaign against fiscal provisions in the former bill is again contending that the tax terms in the new draft are uncompetitive and could make offshore oil and gas projects unviable. The IOCs, THISDAY also learnt, have picked holes in the new PIB to the effect that the deep-water fiscal terms offer a poor deal in comparison to what the oil majors get under the existing terms.
Also, the northern governors are opposing the exclusion of the formation of a limited liability company to be known as the Oil Exploration Agency (OEA) in the PIB currently before the national assembly. Their contention, according to THISDAY investigation, was that the exclusion of the formation of the OEA, which was in the bill submitted by the late President Umaru Yar'Adua to the sixth assembly in 2008, meant that government wants to discontinue the search for oil in northern Nigeria. The former bill had provided for the creation of the OEA, which was to be charged with the responsibility of exploration in the Sokoto, Niger and Chad Basins, all in the North. With the stiff opposition, the bill may not be passed into law this year.