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Published On: Wed, Nov 13th, 2019

The rot in oil and gas industry

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Prior to 2015, the magnitude of the rot in the Nigerian oil and gas industry was so monumental that several analysts came to the conclusion that the sector was the main channel through which the economic saboteurs of the country were milking the nation dry.
The World Bank had equally submitted that most of Nigeria’s oil wealth get siphoned off by 1% of the nation’s population. It stated that since 1960, estimated 300 to 400 Billion dollars has been stolen from the oil and gas sector.
It is on the basis of this and the absence of commensurate developments to justify the massive potentials and accumulated revenue from the industry, that several scholars adopted the resource-curse theory in discussing the Nigeria oil and gas industry. The argument has been that the nature’s free gift has become more of a curse to us than it is a blessing.
Down the path of facts, Nigeria is recorded as the number one crude oil producer in Africa and the world’s seventh largest exporter of crude oil as well as the tenth highest holder of proven gas reserves in the world.
The same Nigeria, in paradox, is rated among the poorest nations globally as at early 2006. Despite the constant and cumulative daily income from crude oil and natural gas sales over the years, we still count among the most heavily indebted nations of the world until we were partially freed in 2005 when part of our debt was magnanimously written off by the Paris Club of Creditors.
It was estimated as at then, that almost 75% of about 150 million people of the country live below poverty line.
The scenario got more worse in the early 2010s and got to its peak in 2015 when holders of power and managers of the industry threw caution and their conscience to the wind and plundered the sector with reckless abandon, without concern for the national economy or the masses of Nigeria who were getting poorer
In 2014, the Governor of Central Bank of Nigeria and the current Emir of Kano, Mr. Sanusi accused the then Minister of Petroleum Resources, Alison-Madueke Diezani of mismanagement of $3.5 billion of proceed of oil and gas sales without approval. The same governor of CBN claimed and raised alarm that only 24% of revenue accrued to the nation from oil sales between the period of 2012 and middle of 2013 were remitted into the federation Account. Calculations put the said unremitted revenue in the region of $20 billion. Mr. Sanusi was arbitrarily sent out of office for daring to exposed the underground national theft.
Then we got wind of the almighty Halliburton scandal; the monumental scandal ushered in another record of bastardisation of the sector and the extent of inbuilt corruption that prevailed therein. According to the confession of the American company involved in an American court, a whooping sum of $180 million was paid in bribe to top Nigerian government officials to secure four contracts worth over $6 billion for the purpose of building an LNG plant facility for the country
The life of the scandal span through eight years beginning from 1994 to 2002 and a number of erstwhile respected high ranking members of the nation were deeply involved.
That was a glimpse of the treatments that revenue base of the country has been getting from those who were supposed to be the custodian of the resources. These people had created every available channel to rob the nation off the oil revenues and opportunities.
Another of those channels was the oil sales regime of the NNPC over the period lasting till recently. On behalf of Nigeria, those people had gone into very poorly and disadvantage designed oil for product swap deal at about the same time NNPC started unilaterally taking part of the crude oil proceeds without passing it through the Federation Account or providing accountability for its retirement.
It was a period of boom; 2011 through 2014; we were selling our crude for as high as $110 per barrel but our treasury receipt kept falling significantly. The balance and unaccounted revenues, we lost to oil thefts by the few Nigerians
Then we play the Domestic Crude Allocation (DCA) card. The DCA was originally designed to feed the nation’s four refineries but as the refineries were utterly non-functioning, NNPC unilaterally exported 75% of the DCA crude allocations without any proper retirement of the payments. It is assumed that the unremitted balances were discretionally spent by NNPC all through to 2015; this amount to a sum of about $6 billion yearly. The DCA became the main node of waste and misappropriation of the national revenue from oil sales. In only 2013, the Federation Account was shortchanged by as much as $7.056 billion having received only $9.744 billion of the total $16.8 billion of the worth of the sales of the DCA crude.
Another channel they had devised to sap the nation was the revenue retention principle of NNPC and its subsidiaries. They invented a makeshift regime for self-financing thereby creating a devilish opportunity to retain un-accountable, ever-growing lump sum within the ministry. Through the NNPC five oil trading subsidiaries, while acting as middlemen on large sales volume platform of close to 144,000 barrels per day with worth of $6 billion in 2012 and raking in commission , never disclosed to the public or remitted any to appropriate government coffer, commissions accrued on those sales
Not limited to that, NNPC had also over ten years, retained huge revenues accrued from the sales of 110 million barrels of oil from a field controlled by NPDC at about $12.3 billion
Then the discussion of the nation oil-for-product swap agreement took center stage. Between 2010 and 2015, we made seven of such agreements. We released oil worth $35 billion to swap deals in various agreement that are openly one sided; the nation was obviously always on the losing side. NNPC routed about 210,000 barrels of crude per day, approximating 10% of our total production capacity through these deals
The list is endless. Celebrated oil theft is another means devised by these elements within the nation to rob the country. These people use various method ranging from hot tapping of flowing pipelinesto cold tapping of the same to steal off crude . this became rampant due to lack of oversight from the federal government and a large network of corruption involving high ranking members of the society.
Attempots by the present administration to target and apprehend suspected facilitators of these oil thefts has only led to increasing violence as they fought back. We all remember how the prosecution of Government Ekpemupolo, leader of a local militia group highly involved in oil theft led to the creation of the Niger Delta Avenger
Then we had the corruption embedded in the past administration of the oil subsidy regime. Originally designed to pass on benefits to the poor but hijacked by the few who rearranged the arrangement such the benefits started going to importers of fuel and oil majors.
Despite the enormous subsidy payment by government, black market prices prevailed at all corners of the country; fuel scarcity was a regular sight in Nigeria. We accepted long lines at the filling stations as a norm rather than an exception
The Federal Government paid subsidy on products that were mostly subsequently transported to our neighboring nation states at the detriment of the Nigerian citizens. Yet in the ten years from 2006 to 2016, we spent N9 trillion to finance fuel subsidy regime that had no impact on the common man. A research work shows that between 2012 and 2015, we lost on the average N971 billion to fuel subsidy; the then coordinating Minister of the economy, Okonjo- Iweala brought to book several fuel marketers for overcharging Nigeria for refined products they never delivered. Just imagine, we spent about N409 billion on subsidies in 2009, n667 billion in 2010 and then sky rocketed to N2.105 trillion in 2011 while our national refined product consumption level hardly changed.
As bad as all those already discussed are, they are still the icing on the cake when the other created avenues are unraveled. The worst corruption regime in our 63 years old oil and gas industry is those perpetrated by the alliances of the multinational oil industries and some elements in Nigeria. In the late 80s, the prospect of offshore drilling became the new bride in Nigeria; we have discovered huge offshore deposits and those who acted for us, caring more about personal cuts, concluded what is best for us at the time was to enter into agreements that bring almost nothing to the country
The structure of the deep offshore production sharing contracts (PSCs) we agreed with the oil companies, in the name of offering incentives was stupid and of near no benefit to Nigeria. Agreed, the risk was higher and the technology more expensive but that shouldn’t have warranted us giving out everything.
The agreement said in part, if they hit oil beyond 1000 meters, Nigeria get nothing in terms of royalty and for oil recoveries from the inland basin, we get a mere flat rate of 10% among several other cut down payments to Nigeria. We gave it all to the oil companies; the coast was clear for the multinational companies, they were making all the monies and Nigeria getting the peanuts
Sometimes in 1999, the Nigeria government saw the need to get more and made a law to regulate the PSCs in Nigeria’s deep offshore and inland basin. The law says in part, if the crude price exceeds $20, the PSCs would be reviewed for the country to get its due share of the revenue and even in the event of the price not exceeding $20, the agreement would still be reviewed after 10 years and subsequently after every 5 years.
That wasn’t okay by the multinational oil companies, they moved into action, and less than two months after the law was made it was amended to read 15 years in pace of the 10 years. They had infiltrated the rank of the policy makers and the lawmakers and the threshold shifted to continue favouring them
That was in 1999 and in 2006, when the agreement was due for review, oil was already selling for over $90 per barrel and the companies were already taking about 80% of all offshore oil production. Yet everyone pretended not to remember it is time to reorder the PSCs. Even when the DPR in a way reminded the National Assembly, the lawmakers turn a deaf ear and chose to look the other way
The price of oil continue to rise until it hit $110 per barrel in at a time; the oil companies were raking in gold, their Nigerian counterparts and collaborators smiling to the bank and the nation getting poorer for all its god’s given blessing
Just as much as these elements intentionally allowed the nation’s refineries to go down so they could perpetuate their economic sabotage of the sector , has all other avenues be fully accessed to take it all from the common man. No wonder, the World Bank submitted that it is as if only 1% of Nigerian population own and control the nation’s oil assets
Though we had expected that the President Muhammadu Buhari led administration would have acted earlier and stop the indiscriminate and unholy milking of the nation through all the listed channels but it is better late than never
One after the other, inbuilt corruption in the sector is being taken care of; we are no longer breeding consistence and overnight billionaires in the oil and gas sector of our nation; the economic sabotage of the fuel subsidy regime is now a thing of the past; petroleum scarcity has become a long forgotten occurrence in Nigeria and now, the unholy alliances that delivered the country economic main stay to the hands of the multinational oil companies broken by the recent signing of the amended PSCs.
No more zero royalty for any level of production; more must legally come to Nigeria as production increases and price increases and it is estimated that only in 2020, Nigeria would get additional $1.4 billion from offshore productions
Just imagine what we have lost for refusing to do what is right by our nation over the year.
It is now very easy to comprehend how ordinary human would just by virtue of heading the nation’s oil company, the NNPC, or being close to the system could buy choice properties across the globe, accumulating yachts, private jet and spending billions on jewelries only.
We now know why the enemies of this present administration cannot afford to back down; the blow is hot; so much has been taken off them.
Many thanks to President Muhammadu Buhari for all his good works and more importantly the latest unexpected clinically executed coup against the perpetrators of the unhealthy PSCs over the years.
God Bless The Federal Republic Of Nigeria!

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