The Long Road to Nigeria's Oil Industry Growth

Nigerian Minister of Petroleum Resources Diezani Alison-Madueke is the subject of controversy resulting from a probe into the fuel subsidy crisis in the oil-producing West African state. Protests over the cancellation of subsidies erupted in 2012., a photo by Pan-African News Wire File Photos on Flickr.

The long road to Nigeria’s oil industry’s growth

WEDNESDAY, 04 SEPTEMBER 2013 00:00 BY ROSELINE OKERE AND SULAIMON SALAU
Nigerian Guardian

THE political intrigues in Nigeria may have emerged the cankerworm that has not only eaten into the fabrics of the nation’s democracy, but also cracked critical sectors of the economy, such as the oil and gas industry.

The industry, which remains the mainstay of the economy is presently longing for workable framework that would put off the challenges to growth, production and security threats that has nearly crippled the industry in the past years.

Although, the roads may be rough, stakeholders believed that industry could still bounce back, if certain decisions are entrenched and the Petroleum Industry Bill (PIB) is passed into law.

The International Oil Companies (IOCs), the Nigerian National Petroleum Corporation (NNPC) and other indigenous players in the industry are all troubled with the lingering delay in the bill, just as they clamor for a fair legislation. However, the fact remains that the national aspiration of achieving 40 billion barrels oil reserves, four million barrels of oil per day production and gas monetization among others are based on the capacity performance of the industry players.

Facts obtained from the Ministry of Petroleum Resources showed that a total of 600 million barrels of reserves were added in 2012, representing 70 per cent reserves replacement. As at end of year 2012, the crude oil reserve base stood at 36.8 billion barrels, representing 0.06 per cent decrease as compared to year-end 2011 figures.

Gas reserves at end of year 2012 was 182 trillion cubic feet (TCF) representing a 0.01 per cent dropped as compared to year end 2011 figures.

This posed further concern on the strategic oil and gas reserves base, which stakeholders believed could be better exploited, if the regulatory framework is right.

The Minister of Petroleum Resources, Mrs. Deziani Alison-Madueke, pointed out that the enormous challenges would continue to drive innovation and change in government’s drive to delivering an oil and gas industry that was internationally competitive and was governed by open and transparent processes to ensure security of investment for both domestic and international investors.

She said that the government was committed to pursue the aspirations vigorously, as the ministry gave effect to government’s aspirations in the oil and gas industry and had a direct link with the ability of the government to deliver on transformation agenda through building sustainable industries with indigenous participation, delivering quality products to the Nigerians and creating oil and gas institutions of the future.

According to her, the PIB would provide for a transparent regulatory framework and competitive fiscal rules of general application, adding that the ministry had focused on building consensus around the key features of the bill and encouraging the National Assembly to speedily consider and pass this landmark legislation.

The minister, who recently captured the performance in the sector, in the past three years, said that the government had grown the NPDC’s (NNPC’s Exploration and Production Affiliate) production and reserve base to 1.7 billion barrels through strategic divestment initiatives.

“Crude oil production (including condensate) has been consistently maintained above an average of 2.30 million barrels per day (mbpd) despite illegal oil bunkering, crude oil theft and pipeline vandalism. Following the federal government’s amnesty programme, Nigeria’s production rose from an average of 1.9 mbpd in 2009 to a peak of 2.62 mbpd in October 2010.

“Sustaining production at these levels continues to be challenged by increasing pipeline vandalism and crude theft, which intermittently results in production falling below the programmed 2.46 mbpd and rebounding following government intervention to stem this menace.”

She, however, assured, “the government is tackling this problem through enforcement and the crude oil fingerprinting initiative.”

While analysing the landmarks recorded in the past three years, Alison-Madueke said that the gas sector had experienced increased supply to power plants, adding that it had also enhanced gas commercialisation, implemented the gas infrastructure plan and gas for industrialisation.

Going by the pressure to increase the refining capacity in the mid-stream, where Nigerians, particularly the masses are more directly affected, the minister assured that government was repairing and upgrading facilities in the refineries and pipelines distribution network in order to sustain in-country product supply.

She said: “We have progressed with plans for rehabilitation of the refineries commencing with the Port Harcourt refinery. Long lead items have been procured and seven shipments have arrived in the warehouse. Early works have commenced. Kaduna refinery and Warri refinery rehabilitation will follow in fourth quarter of 2013 and first quarter of 2014. Heads of Agreement have been signed for these and surveys are ongoing.”

Nigeria’s petroleum product consumption for white products is estimated at about 38 million liters Premium Motor Spirit (PMS), 12 million liters of Automated Gas Oil (AGO) and eight million liters of Dual Purpose Kerosene (DPK), whose production is inadequate for meeting domestic consumption even if they operate at design level.

This situation has led to importation of products from proceeds of crude exports to supplement supply from domestic refineries.

She said: “The plan going forward is to rehabilitate the refineries so as to obtain maximum production from them. This will meet about 70 per cent of the country’s needs. The deficit will be met by on-going plans to construct Greenfield Refineries. The ministry is also cooperating with private initiatives for construction of new refineries.”

Restoration work in the refineries and pipeline distribution network/storage systems have contributed to stable supply of petroleum products across the country despite the challenges of vandals and the criminal activities along this vital and critical infrastructure.