Government can generate revenue from illegal refineries

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Bank Anthony Okoroafor is the chairman of Petroleum Technology Association of Nigeria(PETAN) and the Managing Director of CB Geophysical Solutions Ltd, a seismic acquisition, processing, interpretation and studies company. PETAN is a frontline local content advocacy and development vehicle for Nigerian entrepreneurs in the oil and gas industry. According to Okoroafor, PETAN engages in advocacy through“capacity building, collaboration, capitalization andcapture value in-country.”

In this interview with Foster Obi, he looked at the current and future state of the oil industry in Nigeria, how government could take advantage of the so called illegal refineries to generate funds, the local content policy, the unrest in the Niger Delta as well as the return of oil subsidy, amongst others.

Excerpts:

How do you assess the oil industry in Nigeria in the last five years?                                                                      

We have not made a lot of progress in terms of reserve addition in the past ten years. For us to become the beautiful bride, we need to pass the Petroleum industry bill (PIB) so that the governance and fiscal side becomes clear to all and we also need to put a lot more emphasis on exploration to increase our reserves. Our dream of four million barrels per day and 40 billion barrels in 2020 will be a mirage if we do not start exploring and adding more to our reserves.

How would you describe the local content policy in the oil and gas industry? Do you think the Nigeria government is living up to expectation in its implementation?                                                                            

A lot of progress has been made in the industry. The local participation in the industry has increased considerably. Now we have Nigerian owned companies owning Drilling Rigs, Marine Vessels, Wireline Companies, Slickline Companies, Heavy fabrication yards, Wellhead Companies, Engineering Companies, Waste companies, Coiled Tubing & Nitrogen companies, Pipeline Laying Companies, Training Companies, Seismic Companies, Pigging companies etc. These all would not have been possible without the deliberate attempt to increase the Nigerian content participation in the industry. This is still work in progress because we have to continue pushing the boundaries. We need to increase Nigerian participation in EPC contracts, we have to start looking at building FPSO’s in Nigeria.

One of the problems we face in the oil and gas industry is restiveness in the Niger Delta region. In your thinking how could this unrest be permanently contained?

The simple answer is to bring development to the areas. It is only development and opening of the area plus targeted mass communication and awareness that will abate the problem.

Recently there was a case brought against Shell Corporation by some communities in the Niger Delta which the UK court decided was better handled in Nigeria. Do you think the fears of the communities about not getting justice in Nigeria is justified?

Nigerian Courts have jurisdiction to handle most cases in Nigeria.

Also many Nigerians believe that we are being impoverished by oil companies that come to Nigeria and take all the profits offshore. How true is this?

We should look at our fiscal and monetary policies and put it in place. The PIB when in place should address all those fears.

Nigeria is reeling under the weight of fuel importation which is crippling our economy. In all sincerity how do we get out of this. How do you assess government efforts towards putting the refineries in place?

We should be adding value to our crude oil by refining. We should put fiscal and monetary policies that will make it attractive to build refineries in Nigeria and encourage investors to invest in refineries. Dangote and others should be encouraged to finish their refinery projects.

Many believe that the discovery of oil is a curse to Nigeria. How true is this?

It is not a curse. It is how we govern and manage it. We should pass the PIB, develop Niger Delta so as to stop militancy; maintain law and order and ensure sanctity of agreements and contracts. Once we do all these, all will be fine. Norway has made a lot of progress from Statoil. They have so much savings in sovereign wealth fund. Meanwhile Statoil is a state company.

Recently there was the issue of toxic fuel finding its way into the country which poses a threat to our overall existence. What is the best way to tackle this and what should be done to Nigerian oil companies that collaborate with foreigners in carrying out this illegal act?

On the toxic fuel, we must as a country hold responsible those in charge of testing and checking this fuel cargo before they are discharged. There must be a transparent process and agency with the responsibility to check the quality of this fuel before they are discharged. Another angle may also come from the illegal refineries where the quality standards have not been put in place. When we buy diesel from the various dealers, we test for specific gravity and contamination. There are kits out there that can be used to check the quality of these imported fuel.

Illegal refineries constitute a major challenge in the attempt to restore sanity in crude oil production in the country. Do you think the matter will be solved by open destruction of the refineries by the government and engaging the youths in some legal trade?

We can legalisethese refineries, train them and set and enforce quality and environmental standards for all of them. Then get them to buy crude oil legally and also charge them all the relevant taxes. This can help bring sanity to the entire value chain. As of now, there is no quality standard, no environmental standards and no payments for crude oil or any taxes. This will also eliminate illegal tapping of crude oil from the pipelines and open up the business to the country at large. Imagine a situation where the about 300,000 barrels of crude is legally sold to these refineries and they refine as per satisfactory standards of quality, environment and safety. It will be a win-win for all.
Recent reports show that the government is bringing in oil subsidy through the back door and may likely increase fuel price in the immediate future. How justified is this?

 

Am not aware of this. Let’s not feed ourselves with baseless rumour. Wait till you have a clear statement from government. These are difficult times and the fluctuating exchange rate is not helping matters.
Nigeria hopes to reduce importation of refined petroleum in 2019 by at least 60 percent. Looking at the state of the refineries, do you think this is feasible?

Well, the installed capacity of our refineries is 445,000 barrels of crude per day but they have not been operating at a good capacity utilisation. From January 2015 to September 2016, they worked at an average of only 8.55% of their combined capacities. There were many months that the refineries did not work.

But the present Minister of State for Petroleum,IbeKachikwu and Group Managing Director(GMD), Nigerian National Petroleum Corporation, (NNPC),DrMaikantiBaru are doing their best to increase the capacity utilisation. Nigeria’s hope to reduce importation of refined petroleum in 2019 can be done if Dangote’s 650,000 bpd refinery comes on stream and the capacity utilization of the present refineries are improved considerably. The average consumption of petrol in May 2016 was 35 million litres per day.
 Why do you think the PIB has been stalled from passage? Do you think it is politically motivated?

We have wasted over ten years on this PIB. We just want the present Senate headed by BukolaSaraki and House of Representative headed by YakubuDogara to pass it. The present splitting of the PIB into four will make it easy to pass.
The crude oil price has been low for some time which is one of the major reasons for the present recession. How can the Nigeria leverage the advantage it has in the oil sector to bring the country out of recession?  

 

Let’s solve the Niger Delta crisis first, so that we can produce and sell more oil and get more foreign exchange to fund our budget. Let’s implement the minister’s 20-point agenda. Let’s handle the things within our control first before looking at the other issues.

 

What is the impact of PETAN in positioning the oil and gas industry both in Nigeria and abroad?

PETAN has been in the forefront of domestication of Petroleum Technology in Nigeria and showcasing Nigeria abroad as a place to invest in oil and gas value chain. We have been leading the Nigerian team to OTC in Houston, offshore conference in Aberdeen, and oil conferences in Canada, Abu Dhabi etc. We fought for the Nigerian content that eventually got signed into law. It is an association of Nigerian Indigenous Technical Oilfield service companies in the upstream, midstream and downstream sectors of the Oil industry. The association was formed to bring together Nigerian Oil and Gas entrepreneurs to create a forum for the exchange of ideas with the major operators and policy makers, to acquire, develop, advance and promote Petroleum Technology for the benefit of Nigeria, to foster co-operation as well as high ethical standards among Indigenous Technical Oilfield Services companies and to monitor and work to improve the performance and quality of services rendered by member companies.

It was also formed to ensure and encourage fair patronage of member companies by Oil Producing companies in Nigeria. To liaise with government on matters affecting the interest of members, to educate and advice government and its agencies on developments in the Oilfield Services sector of the Nigeria economy; to promote the economic wellbeing and social welfare of the Oilfield environment and the larger society as well as to embark on and promote research and development in the Oilfield Services sector.