Thursday, 7 November 2013

Nigeria: Crude Theft, Vandalism Frustrating Nigeria's Petroleum Industry - PENGASSAN

PRESIDENT of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Comrade Babatunde Ogun, in this interview with Sweet Crude, speaks on the increasing incidence of crude theft, pipeline vandalism, divestment by multi-nationals, the delayed passage of the Petroleum Industry Bill, PIB among others that are gradually grounding Nigeria's Oil and Gas industry.
The issue of crude oil theft has worsened with international dimension to the extent that the national economy is already at risk. As an operator in the industry what is your take?
I think pipeline vandalism and crude oil theft have become a thorn in the flesh of Nigerian government. I also think that lack of seriousness of our security agencies and government response that is very slow is a challenge. As a union, we have engaged them on several occasions, why there must be maximum security and protection of all our gas installations.

As we speak, we are losing about 150,000 barrels of crude everyday, to theft and about 100,000 or 150,000 that is shut-in because this one is producible but cannot be produced because the pipelines have been vandalized. This means, we have a reserve that is producible and we are not producing it. Invariably, what it is telling you is this, the organisation is losing money and the country is losing money. That is why the nation's foreign reserve is going down and the revenue that is supposed to accrue to government is going down because they cannot produce what they are supposed to meet and they cannot meet the expectation of the market.
Secondly, organizations are been made to pay additional fund for production and how does this arise? First, you make organizations to provide safety wears and instruments for protection which are the responsibility of federal government. So, how do you expect an investor to be investing and producing at the same time, feeding the military and feeding the Navy on patrol? If you say, you are going to mechanize the security of pipelines to engage the pressure, how will you transmit, even when you have a distress call and you call, the time of reaction by them is very slow because they don't have the equipment to work.
Government cannot continue to fold its hands and believe everything will be done properly. As we speak, vandalism is there, Petroleum Industry Bill, PIB, has not been passed. In as much as an investor knows that there is uncertainty in the market, either the PIB is favourable or not, there is a serious problem. If PIB is signed into law today somebody can determine whether he wants to invest and business decision can be made.
As long as PIB is still in limbo, no investment will come to Niger Delta and no investment will come to oil and gas industry. The consequence for the union is that we are losing members, multi nationals are afraid of kidnaping., vandalism and uncertainty; they will keep back their funds or in the alternative, use it for other portfolio in other countries. That is driving away investors from Nigeria.
So, government must as a matter of urgency, address these issues of theft and vandalism of crude pipelines, if not, we might not able to achieve anything. In the last eight months the revenue from oil has been going down, our fuel reserve has been going down and it will not stop. Chevron as we speak, is divesting about three to four oil fields, SPDC has been divesting repeatedly and is going to do another one, while Total Oil will do as well.
So, before you know it, the multi-national companies will abandon Nigeria. Even if we believe the indigenous companies can do it, we cannot leave it in the hands of the indigenous companies alone .If you look at the downstream sector, that is left for the indigenous companies, it has been frustrated and that is why you can see monumental fraud in the downstream.
It is good for us to have a mix of both indigenous and foreigners or International Oil Companies, IOCs. With that, we can have a robust competition and business ethics can be good. Indigenous companies are trying and government, maybe politicians hiding under the current government are trying to frustrate the IOCs, so that some of these assets can be sold to them. If you are not careful, those successes we have been claiming in oil and gas industry might not just disappear one day.
You talked about divestment, what are the implications for the sector and the development of oil industry in the country?
The danger in divestment is this, some divestments have been done in the past but it depends on the ability to do it and secondly most of this stolen crude too might be as a result of some of these divestments by operators that are not well known or well established. So wh..en you are doing divestment, if this organisation is saying they are not interested in this part of the operation, this can be because of many reasons.
Some of them could be either they are having kidnapping issues or vandalism is becoming too uncontrollable, ungovernable and unmanageable and they believe that well, let us leave it for the people from that area. With that, if they are vandalizing it and government cannot do anything, it tells you that whoever that acquires it might as well be a criminal that can now be producing and be exporting it on its own.
In that case, you are not expecting government to recover anything form such divestment even when the production starts. Secondly, the way and manner some of these indigenous companies run their operations in Nigeria is in secrecy and is shrouded with falsehood. You cannot access them, they don't have Collective Bargaining Agreement, CBA, for their staff even the staff they are using are just casual staff and government does not have the means of monitoring them.
So, as a matter of fact, allowing indigenous companies alone is unthinkable. The question is, why did indigenous companies not start their own? Are we able to value what is being divested to them? Who determines the cost of that investment, and who determines the competency of somebody that is taking over? So, those are some of the challenges. Are we talking about the safety implications or the health hazard for the environment and other challenges?
Secondly, a new person is coming to take over the divestment you do not know when he is going to start operation. There are some that were sold by SPDC but for some time what we are getting from that divestment in Warri before has been going down. Nobody knows the actual reason, it
might be the formation or something else.
Even for those who are rushing to buy, the people who are divesting might have studied and looked at it that it may no longer be profitable in the future and want to get as much as possible now. So, going forward might not be profitable and Nigerians will rush into it. Same thing happened to MRS. MRS went and acquired downstream since then, it has been going down in production, in employment capacity and in satisfying the yearning of the downstream sector after the purchase. This is because either it was over-priced or other reasons as well.
You talked about PIB, as a stakeholder who has been part of the passage of PIB that has been in limbo in the National Assembly for years, how is it affecting in activities?
My candid advice about PIB is like nobody is sure of what the PIB is. But instead of saying PIB is in the progress forever, I think if we are not completely sure that we can produce a holistic or a complete book that will cover oil and gas industry, maybe we should look at those clauses in the Bill for now and resolve them. That will give us ample time to really study and come out with a better PIB.
One of those clauses is the secrecy surrounding operations, another one might be maybe the transformation of Nigerian National Petroleum Corporation, NNPC, unbundling it and putting it where it can be commercialised and be able to go to the market, so that at least, other people can partake. But while we are looking at the other areas that are creating this fear that IOCs who are major investors, are complaining bitterly, and the issue of government take, if there is going to be a serious problem on this, you might just not do the whole change at once.
But the idea of keeping the PIB in limbo where we are not going forward and backward, I think it should be discarded. Just like the way they are doing to the constitution of Nigeria, I think we should look at PIB in that contest, look at some changes we can do now and make do with so that everybody can go ahead and people will know that maybe 5, 7 or 10 years we can come back and finalize the Bill.
Source: Vanguard

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