Oil in Nigeria: Five questions for the new government.
As fuel shortages force residents to queue for petrol once again, environmental activist Godwin Uyi Ojo has urgent questions for the new government.
1. Will it continue to be business as usual for the state oil company?
The Nigerian National Petroleum Corporation (NNPC), the state-owned oil company, controls vast resources, including the payment of all production and transaction costs relating to petroleum extraction and sales, even before the lodgement of oil receipts is made to the national coffers. But the rot caused by its duality of functions as both regulatory agency and marketing outfit for Nigeria’s petroleum makes it a weak institution.Various controversies have hit the NNPC in the past few years, including a damaging forensic audit conducted by PricewaterhouseCoopers (PwC) at the behest of the federal government. This resulted in an order to refund about $1.48bn. But there are already signs of change. In March, the minister of petroleum resources, Diezani Alison-Madueke announced that the NNPC has started refunding the $1.48bn, although how this has been refunded is yet to be disclosed.
2. How can justice be served by the oil spill investigation system?
When an oil spill occurs (there have been at least 400 spills a year in Nigeria since 2007), the company concerned is required to report it to the government body, the National Oil Spill Detention and Response Agency (Nosdra). A joint investigation visit (Jiv) is then organised. However, because Nosdra is under-resourced and lacks capacity, it is unable to detect oil spills independently. Instead, it relies on the oil companies to lead the Jiv process in preparing the logistics, selecting experts and conducting spills assessments.A 2013 Amnesty International report called this system “wholly unreliable as a basis for making claims about the cause of oil spills”. Prior to that, in 2011, the United Environment Programme (Unep) concluded that “government agencies are at the mercy of oil companies when it comes to conducting site inspections”.
The incoming government must equip the Nosdra to be more functional and alert to its statutory roles and responsibilities. Conversations with senior Nosdra officials revealed frustration that the agency continues to record abysmal oversight functions because it has neither the capacity to detect oil spills nor organise a rapid response to curtail them.
3. Who is afraid of oil extraction metering?
The volume of oil extraction in Nigeria is virtually unknown or undisclosed. The figures disclosed publicly refer to just the volume of oil offered for sale at the export terminal and other points of sale, which on average is about 2.4 million barrels per day (mbpd).The outgoing administration aspired to increase crude oil production to about 4mbpd. Many concerned citizens, however, believe the government is already fulfilling its aspirations because the amount of oil extracted per day is well beyond 2.4mbpd.
There are several levels of oil theft. Some is high-level, geared mainly towards export for international markets. Other oil theft takes place more locally, with oil diverted for local refineries, put through a distillation process and consumed locally. Artisanal refineries operated by local unemployed young people dot the landscape anywhere that oil can be found in the creeks and upland.
While these small refineries account for 20% of the oil theft market, major theft organised crime accounts for about 80%, and continues to thrive. It is responsible for about 400,000-500,000 barrel losses per day, according to Oilprice.com, and accounts for more than $ 1.7 bn per month in illicit trade. The government will do well in the short term to recoup these losses for national development.
A careful calculation of the oil extraction flows show monumental losses between the crude oil wellheads to the flow stations and export terminals. This indicates that Nigeria is nearing its aspiration of 4mbpd, if it is not surpassed already. It is puzzling and remains an act of irresponsibility that oil companies in Nigeria oppose digital metering of crude oil pipelines in the Niger Delta.
In a world of technology-driven extraction, real-time digital metering for flow calculations and security video surveillance systems with CCTV are being deployed in countriessuch as the US and Germany. Measuring and monitoring in this way aims to prevent pipeline vandalism and crude oil theft, which has become rampant in Nigeria. Resistance and failure to meter the pipeline route means that vested interests in government and oil companies allow oil theft to continue to hold sway.
4. How will you compensate those affected by oil spills and environmental degradation?
There is enormous waste through spills, leaks and blowouts. The Shell Bonga spill in December 2012 spewed out 40,000 barrels of crude oil. Chevron’s gas rig explosion caused a 46-day fire from January to March in 2012, prompting a $3bn fine. There are about 10,000 oil spill sites in the Niger Delta, the equivalent of one Valdez disaster per year, and they are rarely adequately cleaned up.Meanwhile, desertification has ravaged the 11 frontline states in northern Nigeria so much so that land for crop farming and grazing land for pastoralists have come under intense pressure. This has resulted in violent conflicts and deaths. The battle between Fulani herdsmen and farmers over land that was once limited to northern Nigeria is spewing to the southern regions, resulting in serious loss of livelihoods. In addition, stemming the tide of deforestation – at a rate of 4.2 %, which represents one of the highest rates in the world – may require declaring a national environmental disaster in the Niger Delta.
The government should introduce a national basic income scheme of about N10,000, payable on a monthly basis to all Nigerians who are unemployed or has suffered from environmental degradation. This should be irrespective of whether the environmental degradation was caused naturally, by the extractive industries, or by climate change. Such social security in a country where income disparity is high and the gap between rich and poor is widening has the promise to unlock creative potentials. It could also reduce crime and foster national cohesion and harmony, which are necessary building blocks to shore up citizens’ morale and patriotism.
5. Can the government ensure Nigerians have access to energy?
From the common citizen’s perspective, the Buhari regime will probably be rated by how the administration has in the end, advanced the quest for a steady and uninterrupted power supply, instead of our current epileptic electricity from the national grid.Although Nigeria has the capacity to generate 10,000 megawatts, its daily supply hovers between 2,500 megawatts to 3,800 megawatts, and demand far outstrips supply. For the average Nigerian, the privatisation and sale of the national electricity firm to cronies within and outside of government has failed to produce the projected benefits. The obsession for increased tariffs and fixed rates for mere possession of meter without electricity delivery must be abolished. However, in the APC-led government-in waiting is indicating that it will seek foreign direct investment in our economy, rather than look for alternatives.
So what positive signs are there for transformative change? Buhari has made at least two important commitments in his victory acceptance speech. One is the pledge to work in consultation with civil society groups and the other is a willingness to combat climate change. But transforming the economy and steering it away from oil dependency is a more challenging and forward-looking project. Although Nigeria’s oil receipts account for about 80% of national income, the transition from dirty energy such as oil and gas, tar sands and other unconventional oil and fossils fuels must begin in earnest, with the quest for alternatives in renewable sources of energy such as solar, wind and other non-grid systems.
theguardian.
