Odein Ajumogobia
The global oil industry witnessed two recent seemingly unrelated developments.
The first was Saudi oil giant, Aramco’s declaration of a whopping $111.1bn profit in 2018, overtaking tech giant, Apple’s 2018 $59.4bn, as the world’s most profitable company. This feat followed the envisioned prospect of taking Aramco public that created interest and excitement in global financial markets.
The second headline was ExxonMobil’s announcement that it would divest some of its coveted onshore and offshore assets in Nigeria to consolidate its new found interests in new deepwater developments in South America and making onshore plays in the North American Permian basin (Texas and New Mexico).There was also speculation about new gas projects in Mozambique and Papua New Guinea said to hold greater promise with far less drama and uncertainty
It would almost be rhetorical to ask why offshore Brazil or Mozambique would be more attractive to the multinational that made its first oil discovery in 1964 with production from its Idoho field in 1970, than Nigeria’s vast oil and untapped gas deposits.
We really should be asking ourselves what it takes for a national oil company like Aramco to be able to set such a milestone of profitability. In contrast, what has the international response been to the Federal Government envisioning NNPCs listing on the Nigerian Stock Exchange? – another rhetorical question that simply highlights the import of this article. Yet Nigeria cannot afford to be indifferent to these crucial questions, while the economic and social fabric of our society disintegrates before our own eyes.
Twenty-five years ago, Nigeria had a firm and competitive edge. We saw the development of a series of successive prolific deep offshore discoveries – soon to rival the over 2 million barrels a day volume of onshore production four decades ago.
Today, for Ghana, Cote d’Ivoire, Kenya, Tanzania, Uganda and Mozambique, to mention a few of Nigeria’s future competitors, Nigeria sadly still represents the second best example, after Venezuela, of how not to manage natural endowments of petroleum resources.
The perpetual postponement of final investment decisions on more than half a dozen prospective offshore deepwater oilfield projects in the country as a result of the lack of clarity in the existing governance framework and fiscal terms, only guarantees the indefinite deferment of additional reserves and production of close to a million barrels a day.
Meanwhile, government has become more constrained in providing even basic security, education, healthcare and infrastructure for its citizens as it struggles to meet its core obligations. This has also instigated unsustainable borrowing to cover the growing gap.
The irony however lies in the reality that the reform of our petroleum sector still remains the essential means out of our social and economic quagmire as a nation. These issues have, indeed, been the focus of the Nigeria Natural Resource Charter in its efforts to highlight tested precepts and principles to enhance management of natural resource exploitation for sustained economic development, through an a priori assessment of the oil & gas value chain; the structure and scale of the petroleum sector in Nigeria, including the NNPC Group structure, role and performance and the proper regulation of all companies operating in the sector.
NNRC, a non for profit policy institute promoting reforms in Nigeria’s extractive sectors, has thus developed a series of Benchmarking Exercise Reports as markers of progress in the Federal Government’s longstanding reform agenda for the industry, which government and stakeholders in the petroleum sector would do well to review in order to optimise the benefits of extraction and development.
Presently, with over $1trn earned from the export of crude oil over the last six decades the dubious distinction of having the largest number of people living in extreme poverty, simply highlights the crisis.
Nigeria demonstrates the self-evident economic principles that guarantee the continued increase in poverty, as our population growth continues to outstrip real economic growth. The need for improved natural resource management is thus dire.
NNRC and others have highlighted attention the inequities embedded in the joint venture arrangements between the government and oil companies. The non-activation of the relevant provisions of the Deep Offshore and Inland Basin Production Sharing Contracts Act 1993, by which Nigeria would have earned significant additional revenues since the price of oil exceeded $20 per barrel, remains an example of such unpardonable neglect and continuing loss.
The current relative calm in the Niger Delta is also deceptive. The challenges and high level of risk to operators and facilities are still only mitigated by a disproportionate and unsustainable security presence in the region that has already become apparent, with unprecedented insecurity rapidly spreading across the country.
For Nigeria to improve its investment climate, government must holistically address the legitimate grievances of the oil producing communities of the Niger Delta region.
The planned $1bn remediation in Ogoniland represents a token initiative in one small portion of an entire ecosystem covering several hundred thousand square kilometres in need of similar rehabilitation and the restoration of destroyed livelihoods through the gradual implementation the well-conceived Niger Delta Masterplan, even as a similar Blueprint must be conceived for the rehabilitation and development of the North East of Nigeria especially, that has been similarly ravaged by incessant violence and unprecedented dislocation and destruction of lives property and livelihoods.
The proposed reforms in the oil and gas industry must necessarily begin with the legal and regulatory framework contained in the revised Petroleum Industry Governance Bill. This must be passed into law as a first step. In making adjustments to the previously rejected Bill, all stakeholders must however recognise that for the PIGB to have the desired transformative effects on the industry, the revised Bill must provide an efficient, effective transparent and predictable governance and institutional framework for the Nigerian petroleum industry, in accordance with best practice.
While the supposed cure-all effect of the PIGB which in itself is only a segment of the required reform legislation, tends to be overstated, its passage is critical to a proper and effective legal framework that must be put in place at the earliest possible time.
It is now the task of the incoming Parliament to pass the PIGB and its equally critical counterparts dealing with host and impacted communities, fiscal terms and Administration. This Parliament must therefore be aware as they resume that Nigeria is being left behind by investors, markets and the competition.
We still have a small but closing window of opportunity to leverage our valuable natural endowments to uplift our people by a combination of policy and consistent and courageous implementation of same. I pray we do not squander the chance this time.
- Ajumogobia, a former Minister of State for Petroleum Resources, is Chairman of the Nigeria Natural Resource Charter
[Punch]
