Non-passage Of PIB, Massive Crude Oil Theft, Bane Of Dev't In 2014

 

The oil and gas sector in 2014 was mostly at a standstill largely due to the non-passage of the Petroleum Industry Bill (PIB). The situation was further compounded by the level of crude oil theft which was on the rise, resulting in numerous shut-ins and declaration of force majeure, writes Juliet Alohan, Leadership reports. 

 

Despite having a total of 159 oil fields and 1,481 wells in operation, which produces an average of 2.2 million barrels of oil per day, Nigeria, the largest oil producer in Africa, still operates outdated and cumbersome bureaucratic processes in the oil and gas sector.

 

This was the position of industry captains, representing the major international oil companies (IOCs) operating in Nigeria, during the 2014 Nigeria Oil and Gas (NOG) conference and exhibition in Abuja.

 

They decried the bureaucracy associated with doing business in the industry, describing the situation as frustrating, while harping on the need for reforms.

 

The experts, among whom are the former managing director, ExxonMobil Nigeria, Mark Ward, and chairman of Shell companies in Nigeria, Mutiu Sunmonu, lamented that the processes still being adopted in Nigeria’s oil and gas industry dates back to the 1960’s when the country first discovered oil. This development is as a direct consequence of the non-passage of the PIB, which has been in the making for years, despite assurances by the seventh National Assembly (NASS).

 

The bill is expected to holistically reform the oil and gas industry with a key objective to establish a progressive fiscal framework which will encourage investments in the sector while at the same time maximising revenues for the government. It is considered by both government and industry players as the only determinant of the success or failure of the industry. Its non-passage cast a gloomy picture on the oil industry in 2014 with investments worth billions of dollars put on hold.

 

Ward, in his remarks, attributed the inefficiency in the industry to the outdated processes occasioned by the non-passage of PIB, stating, “Clearly, there is a need for reforms. Reform is needed to solve some of the fundamental issues associated with the inefficiency we see in the system that dates back to the origin of the industry.

 

“Investors need to operate under a platform that will give them more confidence and we can’t do so without the PIB in place,” he said.

 

Also speaking at the Abuja Petroleum Roundtable, the former presidential adviser on petroleum matters, Dr Emmanuel Egbogah, said that there has been no major investment in the petroleum sector in the past five years due to uncertainties over the non-passage of the PIB by the NASS. He pointed out that any keen observer of the industry would have noticed that industry rounds and investments have been put on hold for about five to six years pending the passage of the bill to regulate the oil and gas industry.

 

Crude oil theft

 

With the theft of an estimated 400,000 barrels of oil per day, equating to a revenue loss of about $1.7 billion a month and $20.4 billion annually, Nigeria topped the list of countries most plagued by oil theft in the world in 2014. The amount represents 7.7 per cent of the nation’s gross domestic product (GDP) vanishing, or more than the country spends on education and healthcare combined, according to a report by oilprice.com.

 

The report maintained that “the numbers paint a harsh picture about the inability of the Nigerian government, and the multinational oil companies in the Niger Delta, to do anything about this rampant theft.”

 

The global financial initiative points out that “stolen Nigerian crude oil is transported on internationally registered vessels, sold to international buyers, processed by international oil refineries and paid for using international bank accounts,” and wondered why no workable strategy has yet been deployed to end this criminal trade.

 

In his submission to the Senate and House of Representatives Joint Committee on the Medium Term Expenditure Framework (MTEF) for the period of 2014-2016, former group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mr Andrew Yakubu, decried the persistent attacks on major pipeline arteries supplying crude oil to export terminals and stressed that the menace has impacted negatively on the nation’s economy. He stated that the daily crude oil production figure is often very erratic as a result of the several attacks on critical pipeline arteries. The corporation’s partnership with the Nigerian Army, Police, Navy and other security outfits with a view to putting an end to crude oil theft is seemingly yielding little or no result.

 

Assets divestment

 

In what analysts say is unconnected to the twin challenges of the non-passage of PIB and oil theft, over 20 oil blocks, with not less than four billion barrels of oil equivalent per day and a monetary value of about $11.5 billion, are estimated to have been divested by the IOCs by the end of 2014. Shell, Total, Agip, Chevron and ConocoPhillips leads the pack of divesting majors. The minister of petroleum resources, Mrs Diezani Alison-Madueke, disclosed this while delivering a key note address with the theme “Assets Divestment in Nigerian Oil and Gas Industry: Opportunities and Challenges” at the 2014 Offshore Technology Conference (OTC) in Houston.

 

“By the end of this year (2014), the total number of blocks that are likely to be divested is estimated to exceed 20 with not less than four billion barrels of oil and a monetary value of about $11.5 billion,” she said.

 

The minister, represented by the former NNPC GMD, Andrew Yakubu, however, allayed fears that the spate of divestment would not lead to crisis in the nation’s oil and gas industry. According to her, the divestment have continued to create an opportunity for participation in the industry by the private sector, adding that despite the divestment, the IOCs still remain very present in Nigeria with Shell still retaining ownership in 34 onshore blocks.

 

Sliding oil price

 

2014 saw the beginning of the fall of crude oil price which has plummeted to a five-year low of less than $50. This, analysts say, is a consequence of the decision taken by the Organisation of Petroleum Exporting Countries (OPEC), at its 166th General Meeting in Vienna, not to cut down on its oil output. With the boom of the United States (US) shale gas, the OPEC was expected to cut its oil output to reduce the surplus in the market and stabilise the price of oil. But gulf oil producers, led by Saudi Arabia, opposed the oil cartels production cut, thus, leading to the crash of oil price, a development that now impacts negatively on both the OPEC and non OPEC members. Nigeria being a mono-economic nation, largely depending on oil revenue to fund its budget, has already declared austerity measures.

 

There was, however, some good news for the country within the year under review as Madueke, blazed the trail when she was appointed the first female president of the OPEC. Barely three weeks after that, she made history again by becoming the first fema le president of the Ministerial Meeting of the Gas Exporting Countries Forum (GECF).