Sunday, April 17, 2011

Nigerian Petroleum Minister Says Gas Revolution, Panacea to Industrial Growth

DIEZANI ALISON-MADUEKE: Gas Revolution, Panacea to Nigeria’s Industrial Growth

Nigerian ThisDay
14 Apr 2011

She superintends over Nigeria’s most valuable natural resources and economic lifeline as Petroleum Minister. In the last four years, she has had the rare honour and privilege of heading two other ministries preceding her current brief transportation and mines and solid minerals.

Mrs. Diezani Alison-Madueke comes across as detached and straight faced Amazon, but that is before you meet her. She combines the rare attributes of beauty, brains, charm and elegance. She is surprisingly friendly, warm and appears on top of her brief. Even at her age, her almond eyes mesmerize. Her charm is enchanting and her grasp and articulation of issues impressive. As the nation increasingly yearns for alternative revenue base, and increased focus on agriculture, there is a renewed effort on the part of the current administration to tap into the nation’s huge gas reserve.

A fortnight ago, the president unveiled the new gas revolution that will lead to the creation of over 500,000 jobs. Nigeria is said to have a proven gas reserve base of 187 trillion cubic feet and an undiscovered potential of 600 trillion cubic feet. The gas revolution is aimed at achieving significant improvement in power availability for all and repositioning Nigeria as the undisputed regional hub for gas-based industries that would engender an unprecedented growth in Nigeria’s gas supply from the current one billion cubic feet per day to more than 10 billion cubic feet per day by 2020.

The petrochemical and fertilizer projects will attract more than $10 billion foreign direct investment between 2012 and 2014. SHAKA MOMODU engaged an elated Diezani on the gas revolution and a number of other issues in the petroleum industry.....

How does your typical day begin?

For me a typical day begins around 5.00am and the first thing I do as a wife and mother is to commit my household into prayers. I believe in the efficacy of prayers and I know for a fact that there is nothing God cannot do only if you believe and submit yourself to his will. Once I am done with that, it’s time to stretch my muscles a little bit. Exercise as we all know is good for the body and the mind. So I do my light push ups and tread mill before settling down for a light breakfast. Then I get to the office and the day is on course...

What is your biggest source of inspiration?

My parents anytime and any day remain my biggest source of motivation and inspiration. My mother is a first class woman who ensured that all her children received the very best in terms of upbringing and qualitative education. Growing up, my par- ents instilled the virtues of discipline, hard work and integrity in all of us while providing a great shower of love and affection. At the end of the day, I can tell you that I was not just raised in a house but was brought up in a home where happiness and the fear of God reigned supreme.

What has this government done since coming to power that you can flaunt as its achievement in the oil and gas sector?

In the last 10 months I can tell you that the oil and gas sector under President Goodluck Ebele Jonathan has recorded significant strides in the areas of transformation of the NNPC, the pas- sage and implementation of the Nigerian Content Act, the push for the passage of the Petroleum Industry Bill, the implementation of the Gas Master Plan as well as achievement of improved relations with critical stakeholders across the oil and gas value chain.

It is also on record that under President Jonathan, Nigeria has experienced an unprecedented stability in the supply and distribution of petroleum products across the country. Also it is an open secret that for the first time serious and practical attention are being paid to the issues of gas supply to power plants as well as the activation of a workable plan to attract new investors to generate employment opportunities for Nigerians.

Within this period we have created a workable programme to facilitate the domestic usage of Liquefied Petroleum Gas, LPG, also known as cooking gas which in turn would help fight desertification and deforestation in the country. Under President Jonathan, the Petroleum Ministry in conjunction with the NNPC have embarked on the intensification of exploration activities in the Chad Basin and other parts of the Inland sedimentary basins to increase our stock of hydrocarbon deposits.

Just last week the President launched the Gas Revolution Initiative designed to usher a complete re-birth of Nigeria’s industrial revolution. All these achievements have a direct bearing as well as positive domino effect on the Nigerian economy andthe happiness of the average Nigerian.

For the first time in recent history we have more gas for power than we actually need, what is being done to ensure that this resource is not wasted?

Prior to this period, the issue of gas sufficiency to the tradition- al power plants was a major issue. Today, thanks to President Jonathan’s gas utilization drive which came up with a new gas pricing regime for power and industry, the much-needed confidence for the gas suppliers have been restored. The new policy also ensured adequate funding for domestic gas supply projects. The result is the unprecedented gas supply which as at today has surpassed the requirement of the existing thermal power plants. The surplus is now being diverted to export projects such as Bonny LNG. However, with the envisaged coming on stream of Alaoji Power Plant and other thermal plants, all the gas produced will be adequately utilized.

Nigeria’s investment in the upstream is said to be poor at a time like this when the country should be earning more from increased production due to the prevailing high oil price. What are you doing to boost investment in the upstream which we know has a big effect in terms of opportunities, employment generation, more factories and more revenue for the government?

There are a number of factors affecting investments in the upstream sub-sector of the petroleum industry. One of them is the ongoing reforms anchored on the Petroleum Industry Bill. As you know, upstream projects are usually very capital intensive and long- term. No investor would commit such huge funds on projects without being certain of the terms or laws governing the sector. This is what is responsible for the lull you referred to. And that is why we are working aggressively round the clock to ensure that the bill is passed as soon as possible to give investors confidence to come and invest. We are in touch with a number of high profile investors who are eager to come and do business here and they will come as soon as the PIB is passed into law. But that does not mean that nothing is happening in the upstream now. If you notice, there have been a number of activities aimed at getting Nigerian companies to participate actively in the sector; Nigerian companies are acquiring assets in the upstream at an unprecedented rate.

This is in tandem with the administration's local content vision to ensure that Nigerians do not continue to remain as bystanders or onlookers in the upstream sector. Besides this, the federal government has commissioned a project to intensify exploratory activities in all the inland River Basins. As we talk now, the seismic exploration of the Chad Basin is ongoing. The same company that discovered oil in parts of the lake that belong to our neighbours, Chad and Cameroon, is using the latest technology to explore our own part of the Chad Basin. This will be followed by exploration work in the other inland River Basins. The objective of this program is to diversify the source of our hydrocarbon wealth and at the same time increase our national reserves.

Also, it is important to clarify the insinuation that increase in oil prices would naturally spark off increase in production levels on

our part to consolidate on the gains. As you know our production output is primarily determined by the prevailing OPEC quota which Nigeria as a strong member of OPEC is obliged to adhere to. However it is a common knowledge that because of the successful implementation of the Niger Delta amnesty program under President Jonathan which has brought peace to the hitherto restive oil bearing areas, our production level has shut up from less than one million barrels per day to over 2.6m barrels of combined crude and condensate as at today. It is surely going to improve with time.

What’s your greatest challenge in running the petroleum ministry?

In an industry like this, it is really difficult to operate without facing challenges on a regular basis. However, the task really is to ensure that first, the nation gets the full benefit of its God- given resources by ensuring that the industry functions at optimal capacity in such a way as to provide returns for all stakeholders including the governments, host communities, investors etc. In pursuing that mandate, I must ensure that the nation does not leap back to the dark days before the amnesty program when our production levels reached an embarrassing low level. It is also a major test to ensure that the Petroleum Industry Bill is passed to sustain the ongoing comprehensive reforms in the oil and gas industry. Also, it is of great importance for us to sustain the unprecedented sanity in the supply and distribution of petroleum products which Nigerians now enjoy under the Dr. Goodluck Jonathan presidency. As you can see we have succeeded in sustaining the tempo and I believe that the President’s zero-tolerance for fuel scarcity principle has come to stay.

The Nigerian Content Act is one year old, what do you consider to be the most potent gain of the legislation?

I must say that it is difficult to undertake a proper appraisal of the achievements of the Nigerian Content Act in less than 12 months of its operation, but the fact remains that so much activities have taken place in this regard with- in the period. The drive to achieve domiciliation of a huge chunk of the projected $20 billion annual oil and gas industry spent has started yielding dividend. So far the Act has created the avenue for the creation of over 30,000 direct employment and training opportunities. Within the last one year, the coming of the Act has fast-tracked the successful conversion of the SCC Pipe Manufacturing Plant in Abuja from a water pipe mill to one that produces pipes for the oil and gas sector. This is the first of such plant in the country which employs over 300 Nigerians. Also, the Nigerian Content Board and the Petroleum Training Development Fund have collaborated in establishing a N100 million Welders Training Workshop in the premises of the Kaduna-based Defence Industries Corporation of Nigeria (DICON) to train Nigerians in welding skills that will meet oil and gas standards and requirements. Generally, candidates from all parts of Nigeria are being trained in “Human Capacity Development Programs” organized by NCDMB and PTDF to develop a national skills pool in oil and gas sector. Over 1,000 trainees from the Northern part of Nigeria have passed through the program. Going forward, the Nigerian Content Act has huge potential for the economy which are too numerous to dwell on exhaustively.

Looking at the issue of product stability, what have you put in place to ensure sustain- ability of the products supply chain?

Shortly after assumption of office as the Honourable Minister of Petroleum Resources, I was mandated by Mr. President to bring to an end the perennial fuel scarcity in the country. Accordingly, my office in conjunction with the NNPC immediately hit the ground running by putting adequate measures in place to ensure that fuel scarcity is banished for good. The result is that every obstacle that has impeded the smooth supply and distribution of fuel across the country was removed. Today, with supply outweighing demand, the laws of economics has stabilized the price of PMS at N65 per litre in all parts of the country, notably in the East and far North which had never enjoyed price parity with the rest of the country.

To guarantee that the current product stability is sustained, I have further directed NNPC to design and implement practical measures to ensure that steady fuel supply to all parts of the country is sustained in the medium to long-term basis. The NNPC is working aggressively towards increasing its refining capacity through the building of three Greenfield refineries as well as the massive expansion of its retail outfit to check the incidence of artificially-induced fuel scarcity.

The PIB has not been passed yet why is that so?

The PIB is perhaps the singular most important bill ever debated by the legislature in recent memory. It is an extremely important bill and a particularly complex one for that matter. It is in my opinion better to be painstaking than to rush such an important bill. However, I assure you that this bill will be passed during this administration. The beauty of democracy is that everyone has a voice and a say in whatever concerns them. The price of democracy is that it takes time. I believe that this bill has received the most intelligent of contributions from all sources. The amount of intellectual and financial resources that has been com- mitted to the debate of this bill, in my opinion, will not qualify as delay in passage. I am convinced that when passed into law, we will all appreciate the benefit of allowing that debate to have taken place. Having said all these, I am confident that we are now on the last lap and expect the bill to be passed into law within weeks, certainly before the end of this administration. The principle of governance in this administration is sustainability of policies, institutions and benefits. Sometimes, this takes time to cook, but when done, the benefits are enduring.

In the upstream sector, our daily production has risen as a result of the amnesty programme of the government and the peace in the Niger Delta. Is the current situation sustainable?

Many of you will recall that eight months ago the nation’s crude oil production was as low as one million barrels per day. However, as I speak to you today, thanks to the vigorous implementation of the amnesty programme of this administration, the story is different. Our production today stands at over 2.6 million barrels per day. What does that mean to Nigeria? It means increased revenue into the coffers of the Federal Government with which government is now providing the much-desired dividends of democracy to the citizenry. Whether you look into education, roads or health care, there is improvement in the provision of these services to the citizenry of this nation.

Can you comment on the possible outlook in a post-PIB Nigeria?

Efficient acreage management resulting in oil reserves and production increases: the upstream will have a new acreage management system in place comprising the following: one, a one-time mandatory acreage relinquishment of all parts of blocks for which companies are not willing to make work commitments. Two, acreage that will be returned to the government will be offered under a competitive bid award sys- tem to all companies that are willing to invest in Nigeria. Three, new licenses and leases will be subject to modern acreage management and subject to substantive work commitments. Relinquishment provisions will encourage active exploration and development of the blocks on the basis of the “drill or drop” system which will significantly result in production increases. With the release of acreages, it is expected that exploration activities will increase. Attractive fiscal terms for the production of gas and condensates through royalties which are capped at 12.5 percentage and substantial production allowances on the Nigerian Hydrocarbon Tax creating an overall government take of about 65 percentage will significantly result in increased exploration and development of gas fields. Participation of indigenous oil companies in marginal fields, fabrication, services and supplies will greatly be enhanced. Already, the Nigerian Content Act has started yielding results. The target is to have infrastructure that will support FPSO partial integration in Nigeria which will significantly increase scope of services in fabrication yards. An independent commercially- managed National Oil Company will be of immense benefit to the country in terms of employment and domestic manufacturing. It is expected that with the passage of the bill, NPDC production will increase from the cur- rent level of less than 100, 000 barrels a day to a medium operator of 250,000 barrels a day within 2-5 years. In order to provide a strong incentive for investments in gas infrastructure, the creation of a strong midstream regulator that will guarantee access to pipelines, terminals and gas processing plants on the basis of an open access system will encourage investment in the gas sector. Every producer will have equal rights to transportation and processing. This will encourage infrastructure development that will attract gas-based industries. It is on this note that I affirm that the above and many other holistic benefits are going to be derived from the full implementation of all the policies that are entrenched in the Petroleum Industry Bill when passed into law.

What are the specific ingredients or benefits of the recently unveiled Gas Revolution and how does it affect the common man?

The gas revolution is targeted at re-energizing the gas-based industries which include those industries that utilize gas not as fuel, but as feedstock like fertilizer, petro- chemicals and ethanol. These industries have an amazing transformational impact on the GDP of any economy as they are capable of stimulating many secondary industries, which in turn enable wealth creation. Through these industries, we add value to natural gas, a step away from our historical approach of just exporting the raw gas.

As in earlier approaches, we have taken a systematic approach, by starting with a focused effort on three critical investments which were launched last week by the President. The Central Processing Facility (CPF). One of the 3 planned CPF will be located at Obiafu in Rivers State. The CPF will be built by a consortium comprising Agip and Oando.

The second investment relates to the world scale petrochemical plant. The proposed capacity is for 1.3 million tonnes per annum polyethylene and 400 thousand tonnes polypropylene. This will be the biggest plant of its kind in Africa and will be located in Delta State around the Koko FTZ Area. From this plant, numerous secondary industries will be born, producing from low end plastics and packaging products to high end products such as Printed Circuit Boards etc. In view of the size of the plant, there will be a need to redevelop and expand the Koko port to enable evacuation. The third category of investments comprises the element that links with agriculture – to world scale fertilizer plants with 1.3 million tonnes per annum capacity each, to be located in Lagos and Delta States. In addition to these plants, 5 fertilizer blending plants are planned to be located across the country. Our strategy is to bring fertilizer nearer home to the point of use and blend it in a customized way for the specific soil requirement in the area. This approach will enable improved yield.

Of recent, you have made some significant attempts to explore oil in the Chad Basin. What is the situation report?

First of all, I want to point out the fact that the renewed search for oil is not limited to the Chad Basin but covers what is known as the entire Nigerian Frontier Inland Sedimentary Basins. These basins include the Anambra, Bida, Dahomey, Gongola/Yola and the Sokoto Basins alongside the Middle/Lower Benue. The driving force behind the rejuvenated search is to expand our oil and gas reserve by extending the search beyond the Niger Delta region.

However, in the Chad Basin we are encouraged by the fact that commercial hydrocarbon deposits have been discovered in neighbouring countries of Chad, Niger and Sudan which have similar structural settings with the Chad Basin. So the argument of the experts is that there is a strong possibility that oil may be found in commercial quantity in the Nigerian side of the Chad Basin. The president believes that no responsible government will close its eyes to such practical possibility.

The president has since approved the comprehensive hydrocarbon mapping of the entire Inland Sedimentary Basins to guarantee precision in the renewed search for oil.

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