Nigeria has the most active downstream market in Africa- Akabogu

Emeka Akabogu is a well-known maritime lawyer and Chairman, Oil Trading and Logistics Africa (OTL) Downstream.

In this interview with SHIPS & PORTS ‘ Shulammite Foyeku, he speaks on the forthcoming annual OTL Africa Downstream event, implementation of the Treasury Single Account (TSA) and its impact on maritime agencies, among other issues.

Excerpts:

 

As the Chairman of OTL Africa, what has been the experience in the past editions of the conference and what new things should stakeholders in the oil and gas sector be looking forward to in the forthcoming edition?

Essentially, the conference is an exhibition and dedicated week for activities which relate to the downstream oil and gas business, so it goes beyond the conference. We have the conference, exhibition, several networking sessions and an industry dinner. The essence of the OTL Africa downstream week is to focus attention on the Nigeria shipping and petroleum community and of course the Africa community on this important sector.

In doing that, we call in the various stakeholders who are within the sector because all of them are looking forward to a platform that enables them to renew their relationship and to identify new business opportunities to showcase what they already have and that is what this platform provides for them. That is what we have done over the years, the only thing is that in every passing year, we increase the scope of what we do and we challenge ourselves to also improve the standards of what we offer.

So this year, one of the very new things which we have in addition to every other thing we have been doing is that we have introduced an innovation award which is focused on encouraging research and development in technology for downstream oil and gas.

Essentially, what we are trying to do is to create a platform where we can encourage the innovation of technology to solve existing problems within the downstream industry. So this time around, we have quite a lot of universities and research institutions sending in entries for the downstream technology innovation award and we also have entries coming in from the industry. So that is one thing which is brand new for the event this year. It is not core operations of business but it focuses on the development of technology for the industry. Apart from that, we have a range of the usual things which we always put together. We will have much more sessions and speakers this year than we have in previous editions. As usual, we are covering the entire value chain for downstream oil and gas which is quite extensive, starting from the exploration and production process which is also the beginning of the midstream/downstream circle up to the point at which the consumer takes delivery of the finished product. So that chain includes shipping of crude, refining of the product, shipping of product, trading, marketing, logistics services, storage, terminals, distribution retail, professional services and of course regulation. So it is an entire chain.

 

You have held all the past eight editions of the conference here in Nigeria. Are there plans to move the event to other African countries next year or in the future?

The whole idea of OTL is to encourage Nigeria as a hub. It has been difficult trying to get people but gradually it is happening now.

Whether we like it or not Nigeria has the most active downstream market in the continent, so really if there should be any place, it should be in Nigeria. People who want to invest are interested in Nigeria. So our work is to promote Nigeria as a destination for business of petroleum in the continent. That is what we keep trying to do.

 

Recently, the GMD of NNPC said that coastal movement of crude oil is not sustainable. What do you think this portend for Nigerian ship owners?

I don’t think it portends any significant change for them because in the first place coastal movement of crude oil was not a practice for Nigerians. Coastal movement of crude oil was an interventionist idea at a point in time when it seemed the pipelines were being totally dismembered and movement of crude oil was no longer efficient and safe through the pipelines. So coastal tankers were engaged to move crude oil to refineries, it was an interventionist initiative. I don’t think it was ever meant to be a long-term initiative and I see the point the GMD of NNPC is making. If you add the cost of coastal movement within the Nigerian environment to the cost of the barrel, its significantly could potentially make you uncompetitive and you are working within an international environment where you want to be as competitive as possible, so there is a point in what he was saying.

However, concerning its implication to Nigerian ship owners, they have not actively partaken in coastal movement of crude to a large degree. So in terms of its impact, I see a sub-optimal impact. What Nigerian ship owners have been clamouring for is to move crude but not really to move crude within the coastal waters but to the international market. That is what the ship owners want.

We need to be able to move our product internationally. The newswire was awashed recently with the news that Nigerian crude is no longer that competitive because tanker vessels do not want to come to Nigeria because they do not subscribe to a ‘letter of comfort’ which have been demanded for them to operate and for me I will actually say that it is a blessing in disguise for Nigerian ship owners and an opportunity for Nigeria to strategically put in place a process which prioritises Nigeria in the movement of crude.

So these same foreign ship owners which Nigerian ship owners have been complaining of taking up the space which they would have wanted to partake in are now the ones who are now disinterested or circumspect about coming to Nigeria. So the NNPC as a matter of strategic national interest and maritime agencies should actually take this as a window to empower Nigerian operators and I think this is very simple, if we want to sell our crude, what we could do will be to offer to ship the crude to our buyers since they are finding it difficult to provide vessels to come and pick up the crude they have purchased. We should offer to ship it to our buyers. So that automatically places the cost and freight regime of crude oil sales which Nigerians have clamoured for a long time as opposed to Free on Board practice which has been the case. So I do see that as an opportunity which must be taken advantage of immediately.

 

But we don’t have the vessels to move the crude.

We don’t need to have the vessels. It is the cargo that creates the opportunities for the vessels. If a ship owner is now aware that there is a market for the movement of crude oil, any number of ship builders or indeed even existing ship owners will be happy to place their vessels at the dispensation of the government or group of people who have assurance of the cargo. It is as simple as that. If for example, NNPC decides that it will now on its own at least for starters ship the cargo, will NNPC deny its own self of the opportunity to ship cargo because of a so-called ‘letter of comfort’?

So if that is the fear, NNPC can take up that challenge which has been identified in the shipment process and which it has sought to edge against by virtue of the request for ‘letter of comfort’ from the foreign ship owners.

So I am in support of the letter because it is a legal requirement. The only thing that is expected is that it does not become an avenue to impose impossible conditions but as far as the conditions which are imposed are reasonable conditions, I think it is a very valuable and valid request.

 

What do think of the Federal Government’s inclusion of maritime agencies in the Treasury Single Account (TSA) implementation?

I think the government is trying to achieve some measure of transparency and control over the funds which accrue to it. Of course it is important that every single maritime agency which has responsibility to the industry and day-to-day challenges which must be met as a matter of their mandates should be able to meet those mandates. So if the operations of the TSA will encumber or constrain the operations of the maritime agencies, it does make sense that they should be excluded.

If is true that agencies are unable to meet their responsibilities as reported, the course of the operation of the TSA is evidently not something to encourage. However, if the TSA can operate in such a way that its process is well streamlined and the approval which are necessary are readily obtainable in such a way that day to day operations of key government agencies are not encumbered, then it is a good thing. I think it is a matter of process. There must be a means to ensure that these agencies operate and meet their mandates and at the same time do it transparently to the extent that the government of the day is still able to achieve its goals of monitoring its funds without the corrupt tendencies which the policy was meant to take care of.

 

How would you rate the maritime sector 55 years after independence?

We certainly are very far from where we should be and everybody knows that. The painful thing is that, we have been saying the same thing for the last 20 years so it doesn’t seems to make any difference what we are saying. Everybody should take the opportunity of the change in government to also re-orientate themselves and the industry and probably see if we can do much better going forward.

I will encourage that there should be more strategic approach to dealing with issues relating to the industry from government. That strategic approach should include ensuring that there is a holistic plan for the growth of the industry, engagement of the industry with other industries and that such a plan is actively driven by a set of people who understands what they need to do managing key bodies both in the public and private sphere. That is what will give us a strategic approach towards growth.

 

What do you think we should do after 12 years of failed implementation of the Cabotage law?

Cabotage has been a huge failure of regulation. It is simply a failure of implementation because Cabotage has simply required that every ship which is not a Nigeria ship which is operating within Nigeria waters be constrained from doing so which was simply a matter of enforcement. It does not require a lot of money to achieve. It simply requires affirmative action from a regulatory and enforcement point of view which has not happened. It is unfortunate.

The cabotage law has everything which is required to achieve its purpose.  Some people have said that cabotage has not worked because the law was unduly restrictive. I bet to differ. The sole reason why cabotage has not worked is because the enforcement of cabotage has been relaxed.

For example, tanker vessels operate within Nigeria waters, tanker vessels do not have any special specification which Nigeria cannot get. Nigerians own and operates tanker vessels so how come as at today that the most active fleets of coastal vessels in Nigeria is owned by a foreign company moving Nigeria’s products within Nigeria’ coastal waters from offshore Lome, Cotonue into Nigeria?

The company with the most active fleet of vessels is not a Nigeria company. The simple thing that has happened is that the company keeps operating while Nigerians are not given the opportunity to operate.

Of course there is the issue that Nigerian companies have been labeled not to be up to standard but I bet you where the regulator is enforcing standards and also enforcing the cabotage law, you will find Nigerian companies which would come and meet the required standards and at the same time be able to completely take control of that coastal space.

All it takes is simply to put out a patrol vessel, board the breaching vessel and stop the breaching vessel from working. Once that happens and it happens regularly, the foreign interest will reduce because it costs them much more to attempt to operate within Nigeria waters.

 

Are you saying NIMASA has failed in the enforcement of the cabotage law?

NIMASA has been ineffective as far as enforcing cabotage law is concerned. I really don’t know what is going on there. I want to believe that once ministers are appointed, things will go much faster than they are at this point in time. I am also aware that there are lots of probes going on in NIMASA. So chances are that the acting DG has very little time to actually do anything relating to actual work when he has to face the probes from the EFCC and the counterpart agencies almost on a daily basis. So I think that should be resolve once a substantive appointment is made so that, the substantive appointee is able to view the agency with a fresh perspective.

  

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