The Niger Delta region has undergone a chequered history of socio-economic development in Nigeria.
The region has within the past years been at the centre stage of national discourse, as it is rife with consistent agitations over perceived development neglect and adverse environmental degradation as a result of the exploitation of its natural resources for the development of the country.
This unbridled quest for development attention on the part of the Niger Delta has no doubt remained Nigeria’s greatest albatross.
Several interventionist policies and programmes of successive governments to assuage the demands of the Niger Delta has unfortunately failed to abate the impending crisis of development in the area.
The latest of their palliative measures is the decision of the federal government to establish modular refineries in the Niger Delta.
The Federal Government’s position on the establishment of modular refineries in the Niger Delta was made explicit by the Vice President of Nigeria, Prof Yemi Osinbajo, then acting president, during a working visit to the region.
Addressing stakeholders in the Niger Delta, the Vice President disclosed that licences will be issued for the establishment of modular refineries to provide a more regulated and sustainable economic activity as a credible alternative for those who found solace in bunkering and illegal refining of crude oil as a major occupation in the region.
According to the Vice President, the decision was part of moves to stem the growing spate of crude oil theft and wanton destruction of oil facilities in the region, which has resulted into monumental economic loss to the federal government and untold damages to the natural environment.
The Federal Government’s policy on establishment of modular refineries has, however, formed the nucleus of contentious debate among experts and stakeholders.
While some stakeholders believe that the establishment of modular refineries will impact positively on the economic development of the Niger Delta, others are of the opinion that the policy is unrealistic and therefore unpracticable.
A workshop on Nigerian content, recently organised by the Port Harcourt branch of the Nigerian Society of Engineers, (NSE) and the Nigerian Content Development and Monitoring Board, (NCDMB), provided a platform for stakeholders and experts in the oil and gas industry to discuss the prospect and implication of modular refineries for the development of the Niger Delta.
Speaking on the sub-theme: Nigerian Content and Diversification of the Economy in the Proposed Modular Refineries Sub-Sector, a Chemical Engineer and University Don, Dr Awajiogak Ujile faulted the concept of modular refineries as proposed by the federal government.
Ujile, an Associate Professor and lecturer in the Rivers State University, said the idea of using modular refineries to replace “crude oil cooking” in the Niger Delta was not feasible because the operators of the illegal refineries lacked the technical capabilities to operate modular refineries.
He pointed out that the management and operations of conventional refineries in Nigeria over the years has been a dismal failure as a result of political interest and the deliberate isolation of experts with the requisite technology to drive the refineries.
According to him, the modular refineries will be no exception. “Will the modular refineries be built for the host communities, the state, or those involved in crude oil cooking. The truth is that the policy is not practicable. The demand for domestic consumption of petroleum in Nigeria is 60 million litre per day, and a modular refinery can only produce one thousand litre per day. That can not bridge the gap in consumption need, there is need for an integrated approach, government should bring experts into its policy making”, he stated.
Dr Ujile, who is also the Chairman of the Port Harcourt chapter of the Nigeria Institute of Chemical Engineers, also raised alarm over the activities of those involved in raw “cooking of crude oil”.
He said the indiscriminate burning of the energy reserves in the Niger Delta, pollute the entire stretch of Rivers and creeks destroying aquatic creatures and depriving the people of their natural means of livelihood.
Apart from the damage to the environment, he said, the activities of illegal bunkering has obvious health implications, for the people of the Niger Delta.
The expert who advocated for the privatisation of all refineries in Nigeria said, the privitisation policy should be devoid of political manipulations, but experts should be made to drive the policy for sustainability.
He urged the Federal Government to extend its amnesty programme to pipeline vandals and bunkerers, and get them reintegrated into the society through the acquisition of functional skills.
Dr Ujile also called on the National Orientation Agency (NOA) and other relevant bodies to embark on mass sensitisation campaign against the ills of illegal oil bunkering.
On his part, a Professor of Petroleum Engineering, Joel Ogbonna, decried the lack of full value chain in the Nigeria oil gas sector.
He said establishment of modular refineries was not a solution to the diversification of the Nigerian economy as there were no incentives for its optimal operations.
Prof. Ogbonna, who is the Head of Department, Gas, Engineering, and Director, Centre for Petroleum Research and Training, Institute of Petroleum Studies, University of Port Harcourt, listed the challenges in the Nigeria oil and gas sector to include; aging oil production facilities, lack of enabling environment and poor technology.
He called on the Nigerian Content Development and Monitoring Board (NCDMB) to encourage Nigerian professional and indigenous companies in the promotion of Nigeria local content, through the provision of enabling policies and laws.
For sustainability in the production of petroleum product for domestic consumption and enhancing the value chain in the oil and gas sector, Prof Ogbonna recommended that every oil production company should have a refinery attached to its platform. He noted that the persistent decline in the price of oil in the international oil market was an ominous indication of the obsolesce of fossil oil in the near future, and advised that Nigeria should diversify into other sectors of economic development.
In his presentation, a technocrat and development expert, Elder Elkanah Hanson, attributed the problem of technological development in Nigeria to the lack of vision in improving inherent potentials and total dependence on foreign technology.
For the proposed modular refineries to succeed, he said the local technologies invented in the creeks of the Niger Delta should be improveed upon.
“There is nothing like illegal refineries in the Niger Delta, what we have is the first stage of Niger Delta refineries, the only thing illegal in the operation is the process of acquisition of the crude, the Nigerian Content Development and Monitoring Board should partner with the operators of the so-called illegal refineries to improve their local inventions to adulthood and ICT stage. We can’t talk of local content development when we gloss over the potentials in our local technology”, he stated.
He called for the restructuring of the present federal structure of the country to reflect the ideals of fiscal federalism and the concept of comparative economic advantage, where natural potential in the various parts of the country are fully harnessed for economic development.
Earlier in his keynote address, the Executive Secretary of the Nigerian Content Development and Monitoring Board, Engr Simbi Wabote, had stated that the theme of the workshop; “Nigeria Content and the Diversification of the Economy”, was very apt, as it was in line with the Economic Recovery and Growth Plan (ERGP) launched by the federal government.
He said the policy was a 10-year vision and strategic initiative, targeted at achieving structural economic change with a more diversified economy, focused on six priority sectors; agriculture, manufacturing, solid mineral, services, construction, real estate and oil and gas.
The Executive Secretary, who described the Niger Delta Region as critical to the development of the Nigerian economy, said before the Nigeria Oil and Gas Industry Content Development (NOGICD) Act was signed into law in 2010, all fabrication, engineering and procurement were done abroad, resulting in estimated capital flight of about $380bn in 50 years.
Over two million job opportunities were also estimatedly lost in the Niger Delta region. The consequence was protracted development crisis in the area. He pointed out that the vision of establishing modular refineries in the Niger Delta was part of the initiatives of using local content as a key development imperative in the Niger Delta.
According to him, the estimated $28bn spent every year and $76m spent every day to import fuel in the country was huge economic burden that would have been appropriately channeled for the development of social amenities and creation of jobs for the teeming youths in the region.
He pointed out that the federal government’s strategic initiative in correcting the unsustainable business model, was to achieve 100% local fabrication of modular refineries for production of 10% of our local needs. “Part of our Nigerian oil and gas park scheme layout has been set aside for training local modular refiners for fabrication of the units. The parks which will be operated as sites and services scheme will also host manufacturing and oil and gas service providers, we are currently working on 5 of the parks in Akwa Ibom, Bayelsa, Cross River, Delta and Imo States. We need to move away from pride in export of crude oil to pride in export of refined products”, he stated.
With the 2019 deadline for the stoppage of importation of petroleum products in Nigeria, Engr Wabote, said the NCDMB, was working hard to ensure that the objective is achieved.
FG Admits Adjusting Petrol Pump Price …… Blames Scarcity On Smuggling
The Federal Government has admitted to adjusting the pump price of petrol to cater for the impact of high AGO diesel price on the cost of product transportation across the country.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which made this known in a statement, Friday, also said it was making special provision of diesel to marketers at a reduced price.
Recall that the Minister of State for Petroleum Resources, Chief Timipre Sylva, had in the wake of the increase in the price of petrol at filling stations, said the Federal Government did not give approval for such action.
In a statement titled, “Update on the Supply and Distribution Of Premium Motor Spirit (PMS) Nationwide”, the NMDPRA attributed the current fuel scarcity in the country to the activities of smugglers, “who divert PMS meant for Nigerian market to neighbouring countries where PMS prices are significantly higher than Nigeria’s regulated price.”
The authority said it was engaging and collaborating with the Nigeria Customs Service to address this issue.
It said the price arbitrage between Nigeria and neighbouring countries has continued to grow due to inflation and the regional impact of the Russia-Ukraine conflict on the global energy value chain including international freight rates and coastal vessels charter rates.
The Authority reassured of petrol sufficiency, with available volume of over 1.6 billion litres as of 26th January 2023 both on land and marine, while the NNPC has additionally made firm commitment to supply more volume of PMS for the months ahead to guarantee national energy security and nationwide availability at the government regulated price.
According to the statement, “NMDPRA and key stakeholders including NNPC have put various measures in place to address the issues, including: Modest adjustment in the cost of product transportation to cater for the impact of high AGO price on transporters, while making special provision of diesel to marketers at a reduced price; Automation of products sales interface; Emplacement of a monitoring system in collaboration with government security agencies for distribution of products to retail outlets; Extended operating hours both at the loading depots and some selected filing stations as well as Rehabilitation of critical fuel distribution road network through federal government’s tax credit scheme by the NNPC amidst regular stakeholders’ engagements; among others.”
According to the agency, the ongoing government effort to rehabilitate strategic Nigerian roads ahead of the rainy season has necessitated rerouting of tanker trucks conveying petroleum products to alternative roads, therefore increasing transit time and associated cost of product transportation.
It also said, “We have reinforced our monitoring teams and appropriate sanctions to checkmate the activities of erring marketers who are distorting our planned product flow to designated outlets in order to profiteer from price arbitrage have been emplaced.
Equinor To Divest $1bn Stake In Nigeria’s Agbami Oil Assets
As the gale of International Oil Companies (IOCs) divestment from Nigeria deepens, Norwegian energy firm, Equinor, has hired Standard Chartered to assist in the sale of its major stake in an offshore oilfield in Nigeria.
The potential sale of Equinor’s 20 per cent stake in the Agbami field offshore Nigeria could fetch up to $1 billion, according to Reuters’ sources.
Equinor is reportedly looking to sell its Nigerian oilfield stake to focus on more profitable and newer projects, the sources said.
U.S. supermajor, Chevron, is the operator of the Agbami Field, which lies 70 miles off the coast of the central Niger Delta region and spans 45,000 acres. Chevron has a 67.3 per cent interest in the field, whose production has dropped in recent years. To offset field decline, infill drilling continued in 2019, Chevron says.
In 2020, the field produced 29,000 barrels of oil equivalent per day (boepd), down from 36,000 boepd in the previous year, according to our source.
The rumored sale makes Equinor the latest oil major looking to either exit or downsize operations in Nigeria.
ExxonMobil is trying to sell shallow water assets offshore Nigeria, but President Muhammadu Buhari made a U-turn in August on his initial approval of the asset sale to Seplat after the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, declined to approve the deal.
TotalEnergies and Shell are also looking to sell assets in Nigeria. In May 2022, TotalEnergies launched the sale of its 10 per cent stake in a joint venture, SPDC.
Shell said as early as in 2021 that it did not see its upstream oil operations in Nigeria as compatible with its strategy to become a net-zero energy business.
Last year, Shell put on hold the sale of its onshore assets in Nigeria to comply with a Nigerian Supreme Court ruling to wait for the outcome of an appeal regarding an oil spill in 2019.
2023, Another Strong Year For Oil Industry
Last year was a good year for the oil industry. Despite predictions of its looming demise as renewable energy leads to electrification that in turn leads to the death of oil, fossil fuels were the stars of the year, with demand for all, including coal, notably rising.
Meanwhile, opposition to Big Oil grew louder and protests turned more extreme, with activists gluing themselves to streets and buildings, and vandalizing world-famous works of art in order to raise awareness of climate change.
Oblivious to this rise in the amount of activism, Big Oil went on to rake in record profits thanks to higher prices for the commodities it produces.
According to Reuters, Big Oil majors will report combined earnings of close to $200 billion for 2022, with many of the supermajors booking record quarterly profits during the year thanks to the combination of strong demand for energy and limited supply.
The industry also had a chance to reduce debt, thanks to the strong performance of its products last year.
Per Reuters, the combined debt of Big Oil has fallen to $100 billion, which is the lowest in 15 years and down by more than 50 percent from 2020, when it reached more than $270 billion as companies borrowed to survive.
But it’s not all smooth sailing from here on out. First, there is the windfall profit tax that the EU and the UK decided to impose on energy companies in order to generate some money for its energy aid programs.
Shell said it expected the effect of the UK and EU windfall taxes will cost it $2.4 billion. It also said it may have to reconsider investment plans for the North Sea in light of that hit.
Meanwhile, despite political opposition to developing more oil and gas reserves in the UK, more than 100 bids were submitted this month for new exploration in the basin.
French TotalEnergies also said it would take a substantial hit from windfall taxes in the UK and the EU. According to the supermajor, it would come in at about $2.1 billion. As a result, the company said it will reduce its investments in the North Sea by a quarter, noting that the levy did not provide for any adjustments in case oil and gas prices fell.
Meanwhile, oil and gas prices did fall. Right now, oil is trading at around the same level it was trading a year ago and natural gas prices have fallen substantially in both Europe and the United States—its biggest supplier.
“The energy industry operates in a cyclical market and is subject to volatile commodity prices,” Jean-Luc Guiziou, TotalEnergies’ British head of exploration and production, told the FT this month.
“We believe that the government should remain open to reviewing the energy profits levy if prices reduce before 2028.”
Exxon took it a step beyond criticism, filing alawsuit against the European Union to get it to drop the windfall tax. The company argued that the tax is counterproductive, would discourage investments and undermine investor confidence.
Yet Big Oil has some big investment plans, just not for Europe. Exxon and Chevron, per Reuters, plan to spend 10 percent more this year than they did last year, to the tune of a combined $41 billion.
BP will be spending more on its U.S. shale and Gulf of Mexico operations even though European supermajors as a whole are expected to be more cautious with their money because of the windfall taxes. But they will continue spending heavily on low-carbon projects.
“The European majors appear much more attractively valued than the U.S. majors on our estimates,” HSBC said in a recent note quoted by Reuters. It is among banks that predict stronger share performance for European Big Oil majors after last year U.S. supermajors ruled the stock market.
If investment in low-carbon projects is the guarantee for stronger share performance, then HSBC is right.
Indeed, pressure is growing on the oil industry to set itself more stringent emission-reduction targets and make stronger commitments to decarbonize.
This pressure is unlikely to let up this year as governments in the EU, the UK, and the U.S. double down on their climate change plans, too.
Chances are that 2023 will be another strong year for the oil industry simply because those companies came in strong into the new year and demand for oil and gas is not expected to fall—on the contrary.
The EU will need to buy more gas to refill its storage and it will continue using oil products that it no longer buys from Russia. China is reopening and most observers expect a rebound in oil and gas demand to come sooner rather than later. Even the U.S., for all its green ambitions, is unlikely to stop being the biggest consumer of oil in months. The immediate future of Big Oil is certainly bright.
Slav reports for Oilprice.com
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