Change the Direction of Nigerian Crude

By Layi Fatona

Nigeria will be better off without the current model, adopted by all the oil companies, of “Near or Almost Total Export” of its entire daily Oil and a substantial quantity of gas production.

There remains no better way to develop a people, than domestic-oriented policies. Even China, in its new five year plan, is calculating on higher contribution of domestic consumption to its GDP

The Department of Petroleum Resources,the country’s regulatory agency, puts Nigeria’s total export of crude oil between 2010 and 2013 at 3.266 Billion barrels and gas exports by NLNG (during the same period) at 4.203 trillion cubic feet (Tcf) compared to only 1.393 Tcf of total volume internally used in-country.

In my simple calculation or deduction, that is enough crude to keep 10 Refineries, each with an installed capacity of 250,000 Barrels of oil per day (all working at full capacity) all-together refining some 875Million barrels per year for some four to five years – Non Stop!

Let us imagine an UTOPIAN world – of a Hypothetical New Nigeria, which if we had it  5 or 10 years ago, with 10 functioning privately owned  (or even Government  invested)  refineries. We can estimate all the benefits that could have accrued to the economy of the Federal Republic, from rewards of eight (8) issues which I count as follows:

1. Refining and manufacturing,

2.Distribution of refined products (in country and through the entire sub region- Nigeria and West Africa)

3. Additional exports – to East, South and North Africa.

4. Full and ready availability of LPG and exports of same to the West African Markets

5. Power Generation.

6. The ample Foreign Exchange Savings (through elimination of imports of Petroleum products) How much has cost Nigeria to import Petroleum products in the last five years, in Billions of dollars?

7. The ultimate additional savings from (No Subsidy payments) and the ultimate country specific Independence of refined products.

I could have imagined further  – A  ‘Proposed Dangote Refinery’ of a day, will be more than happy  to buy Nigerian  crude oil, NOT  from an NNPC, but rather from a reliable Nigerian Independent producer for its supply.

So, would have been an efficiently working Kaduna, Warri, and Port Harcourt Refineries (in private hands) running sufficiently at installed capacities.

We can further imagine the petrochemical, pharmaceutical, health care and other industrial spin-offs from such an UTOPIAN situation. The Agro-based Industries that could have developed around such a ‘thriving Nigerian Petroleum Industry’ speaks to and for itself.

A  functioning Dangote  Refinery,  with those  others  in  Kaduna, Warri and Port Harcourt, leaves still an inventory of six additional facilities from my wish number of 10 in the UTOPIAN NIGERIA I  envision. These,  located in Calabar, Ikot Ekpene, Yenagoa, Degema, Koko,  and Lagos (Badagry), MAY get us to this utopian Oil and Gas Products independence for Nigeria by 2025, without any political correctness or otherwise of my thoughts on locations. Note all locations are, to my detriment, not including my home town- Ilewo Abeokuta!.

8. And finally in one simple magic wand, an illusory ‘elimination’ of all the unpleasantness and entanglements of the Nigerian Petroleum Industry will be a thing of the past. We will have a corruption free-Petroleum Industry, as there will be no national favours to give for either of export or imports of anything named Petroleum. Indeed, there may be NO NEED for a Petroleum Minister– or even a Group Managing Director of an NNPC!

Let me stop asking you to dream with me. Let’s get real.

Our nimble company NIGER DELTA PETROLEUM RESOURCES Ltd  (NDPR)–  has  moved along this unusual journey in very small and rudimentary strides.

On its own, incentivized at least, by a much underestimated Government Policy – which I stand here to commend, and which can be a major catalyst for growth in our industry.  The “Pioneer Status Programme” with its Tax Holiday incentives, and its extension to the up and coming Nigerian Independents need to be commended and must be retained.

The positive effects of this policy on NDPR, these past five years is a vivid demonstration of such good value creation through a good Government Policy. Our effective use of the tax relief, augmented with additional debt funding had enabled our investment diversification pursuit which today is in excess of $400Million. We are perhaps, the most diversified albeit on a small scale, of the emerging Nigerian Independents, who had travelled the journey – From the Terminal, back to the Well Head.

Our Ogbele Gas Processing Plant, with its 20km gas delivery pipeline, the Ogbele Mini Refinery, and the Ogbele Flow Station, as well as our successful acquisition of the divested interests of Shell/Total/Agip JV in OML-34, with other Nigerian partners, altogether make us a growing Integrated Nigerian Independent E&P Company.  Most importantly, we have achieved a full corporate Energy Independence, with 100% of our power and diesel supply from within our production and processing of oil and gas from our owned and operating facilities.

Looking at our attainments, we have delivered nearly 60Million Litres of domestically refined diesel into the Nigerian market these past three years. In addition, we have eliminated gas flaring and most recently, the Ogbele Field Gas Development won the 2015 World Bank Global Gas Flare Reduction Excellence Award. All of these, accomplished in the 10 years of sustained and uninterrupted production behind a  commercially negotiated  ‘Farm-out’ agreement for a marginal field from the NNPC-Chevron JV.

Now, NDPR needs more co-travellers on this novel and lonely but productive and fulfilling journey to the UTOPIAN NIGERIAN PETROLEUM INDUSTRY I HAVE BEEN DREAMING and talking ABOUT.

It is on this note that we  must turn to “Emerging Nigerian  Independents” who in the past three years, given the vastness of the financial resources they have put to use in acquisitions of assets,  (Some $10Billion in acquisitions and CAPEX spends between them all).

Together with them, Our Petroleum Industry, need to look backwards from the ‘Terminal’ and towards the ‘Well heads’ in the respective producing Oil and gas fields within their acquisitions.

This we must do for the re-creation of the New Nigerian Petroleum Industry. One that I see will be the foundation of a real new society, for Nigeria and Nigerians, and may be, by extension – for Africa.

First published in the November 2015 edition of the Africa Oil+Gas Report. Fatona, CEO of Niger Delta Petroleum Resources, delivered thus talk at the 40^th anniversary conference of the Nigerian Association of Petroleum Explorationists (NAPE), in November 2015.