Oil & Gas policy Agenda for the Next Government

Unfortunately most African and developing economies depend on high value export commodities, such hydrocarbons, that decimate the real productive sector of their economy. As evident in Nigeria and in almost all rentier economies, industries built on the back such commodities are characterised by opacity, runaway corruption and operational and systemic deficiencies.

Examples abound of countries with similar population, demographics and level of development as Nigeria that were able to turn their oil & gas fortunes around in a minimal amount of time and re-channelled it or a part of it from being a encumbrance on the economy to being a blessing. Indonesia successfully substituted kerosene with LPG as domestic cooking fuel, Iran successfully converted most of its vehicles from using gasoline to LPG, Saudi Arabia successfully created a parallel economy out of its gas reserves through its Master Gas System (MGS), Brazil created skill and competence certification system that gave millions of its young people access to jobs in its energy industry, Malaysia created a very aggressive and technically competent National Oil Company, Petronas.

The oil & gas agenda of the incoming government should be anchored on boosting the benefits of Nigeria’s hydrocarbon resources to its citizens by maximising the benefits accruable to every strata and region of the country.

A caveat here is that the actualisation of the suggestions below should be tethered on (A.) Transparency, (B.) Accountability, (C.) Policy Stability and (D.) Identified Focus as its four cardinal pillars.

To expand on these; the twin evils of opacity and unaccountability gave rise to the corruption that, like cancer, is destroying the essence and future of the industry and infecting the wider Nigerian society.

The incoming government should, as a matter of priority resolve the issue of policy direction. Whatever governance tool is finally adopted should be rolled out (and protect from selective application of policy somersault) without delay to fill the gulf of uncertainty in legislation, regulation, fiscal terms and compliance issues which are currently stifling investments in the industry.

The country should also agree on what the general focus of the industry shall be. The national oil company, the regulatory agencies, the international oil companies, the products marketers, the gas monetisation investors, the oil producing communities the Nigerian public and all other stakeholders must all be aligned, in the ways relevant to each of them, to achieve that singular focus.

Considering that Nigeria has over 40% youth unemployment and even a greater percentage in underemployment, with consequential social and security issues, that singular focus should be job creation.

The four  humble ideas listed below all share the ultimate aim of getting as many Nigerians involved with, and deriving their livelihood directly, indirectly or remotely from, the industry.

1. Unleash The National Oil Company:

By making it independent and fully commercialised. The NNPC is one of a few national oil companies that can boast of a home market of nearly two hundred million people or over 350 million people in its home region of western Africa. Considering the low energy consumption pattern of the entire region there exists an energy market the surface of which has not even be scratched. A market NNPC can dominate with refined and processed petroleum products, gas and other services. To achieve this the country needs to boost its refining capacity by several magnitudes through revamping and or bringing on stream new refineries and petrochemical plants.

At the upstream end, the Nigerian Petroleum Investments Management Services (NAPIMS) and the Nigerian Petroleum Development Company (NPDC) should be positioned to spearhead the company’s exploration and production activities with clear mandate to raise the nation’s reserve base and improve its daily production.

A good example here is Oilibya and Mexico’s Pemex. Oilibya, a petroleum product retailer founded in 1993 with head office in Mauritius, which is operating in 1250 retail forecourts in ten African countries including Chad and Cameroon that border with Nigeria. An NNPC fuel forecourt, fertilizer bag or cooking gas cylinder should be as ubiquitous as Nollywood movies in Africa. Pemex, the national oil company of Mexico, is fully integrated and has on its payroll about 140,000 personnel; nearly ten times the number of people currently employed by the NNPC. Processing even half of the national oil production locally at local refineries and petrochemical plants will guarantee employment for millions of Nigerians.

2. Monetise Gas for Job Creation:

Pursuance of a much expanded policy on gas monetisation should be espoused through the realising of the ambitions of the Nigerian Gas Master Plan and the Gas Revolution. Creation of gas industrial parks (GIPs) will support major gas based industries that use gas as a raw material and to power their plants while the use of gas as fuel for power plants, homes and vehicles will improve standard of living, revive moribund industries, improve the production capacity of existing factories and create/revive hundreds of thousands of small scale industries thereby creating millions of jobs. In most developed economies, a greater majority of people work in small and medium scale enterprises. The Domestic Gas Supply Obligation as contained in the Gas Master Plan can be used as a path to elevating domestic gas supply to power plants and industries to a national security issue.

Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) should substitute kerosene/firewood for homes and petrol for cars similar to what happened in Indonesia and Iran respectively in less than a decade.

Oil producing communities should also be incentivised to participate in gas monetisation by creating local projects (mini IPPs, small & medium scale industries, etc) that use gas that was hitherto flared in their backyard.

Finally, with access to gas, small- and mega-scale agro-based industries in the northern part of the country can be positioned to create millions of jobs and earn more foreign exchange for the country than oil through production of primary and processed agricultural products for internal consumption and export. An industrial corridor from the Niger Delta to the Lake Chad based on the twin factors of access to gas and availability of raw material is achievable in less than a decade.

This will create a gas sub-economy that has the potential to rival that of oil. The potential for job creation in such an economy in immeasurable.

3. Launch ‘Nigerian Content Initiative; Part II’ :

In the last ten years, there has been undeniable gains from the Nigerian content drive. The next stage should be to roll out the next step aimed at making Nigeria a hub for technical services and manufacturing in the region. These actions include the review of the existing compliance regime for companies, the creation of a technical training and certification body, removal of impediments for Nigerians to invest, travel and work in the Gulf of Guinea region, listing oil & gas ventures and service companies on the Nigerian Stock Exchange and creating linkages for skill and technology transfer from the highly technical oil & gas industry to other less developed sectors of the economy.

As things stand now and despite all efforts by the Nigerian Content Development & Management Board (NCDMB) statutory compliance is still hurdle for small Nigerian companies wishing to access patronage in the industry.

There is also a need for a Nigerian technical certification body to oversee the standardisation of skills and competencies which companies are compelled by law to recognise. One of the major obstacles to finding worthwhile careers into the petroleum sector by young Nigerian jobseekers is the difficulty in obtaining foreign technical/trade certifications recognised by the oil companies in areas like welding, inspection and health & safety. Prominp (the Brazilian National Oil & Gas Mobilisation Programme) has over one hundred and eighty technical training programmes leading to recognised professional certifications in oil & gas technical skills on its books. Little wonder that in a little over ten years Brazil has increased the number of direct jobs in shipbuilding from 7500 to about 100,000 - just one example in one country.

At the corporate level, greater market participation by Nigerian investors can be ensured through the listing of oil and gas operating and service companies on the Nigerian Stock Exchange and incorporated joint ventures. The government should continue to encourage international operating companies sitting on proven but undeveloped fields, especially those of gas, to transparently divest such assets to the NPDC or indigenous operators interested in developing them.

This will bring the gains of the industry closer to the wider population and give Nigerian investors the opportunity to have a more beneficial stake in their commonwealth.

4. Set a Timetable to End Products Subsidy and Energy Importation:

For myriad of reasons there is a need for Nigeria to be energy independent. A highly  populated country that produces, processes and consumes its own oil & gas will alleviate poverty, have an economically active population and free itself from the vagaries of the ever-volatile and unstable international energy market. Just ask Indonesia.

But to achieve that, energy has to be properly priced. It is imperative that the country puts a thought on ending or, at the very least, reigning in petroleum products subsidy. A way to drive investment in the midstream and downstream oil & gas industry is to retail energy at the right price. Once the policy framework to achieve this is adopted the country should draw a time table to end petroleum products importation.

Even when monetisation of gas being rolled out, industrial gas consumers, north and south of the country, should be made to pay for gas at a price that will encourage future investment in the sector.

Finally, these suggestions are limited to the four that are easily achievable  and are presented in broad strokes because space and time do not lend this effort the luxury of details. Issues such as oil theft, vandalisation, illegal refineries and other similar endeavours are also not discussed because these are not in themselves the disease but symptoms of systemic failure. A disciplined and democratic culture with enhanced level of economic activity, job creation and a raised standard of living in the oil communities will snuff the oxygen of legitimacy from the perpetrators of such actions. Those that adamantly refuse to desist from such criminality can be left to contend with the law.

The above are not in anyway exhaustive but they are achievable goals that can, within the life of the next government, see oil and gas playing a prominent role in raising the standard of living and quality of life of Nigerians.