The ringing of the alarm bell which has currently risen to high decibels in the oil/gas industry in Nigeria was first carried out by Mr. Tony Elumelu, who had cried out after he invested over $1.1 billion in 2021 to acquire 45% of the crude oil drilling asset OML 17 in which Shell, Total, Eni had given up their equity in the partnership with Nigerian National Petroleum Company Ltd, NNPCL, which owns the balance 55% on behalf of Nigerians.
After the purchase, it was to his utter surprise and disappointment in 2022, that only a tiny fraction of the crude oil produced in his wells and fed into the Excravos pipeline ended up getting to its designated destination.
That is because the bulk of the crude that his firm was drilling was being lost to oil thieves who had perfected the art of illegally tapping into the Escravos pipeline conveying crude oil from his drilling well.
It is common knowledge that the crime of siphoning our crude oil into vessels from where they are transported to unknown destinations by thieves who are robbing our country of critically needed foreign exchange via oil sales has had dire implications for our nation’s economy.
So, it was unsurprising that in a recent interview with the Financial Times of London, Elumelu revealed that crude oil theft still takes away about 18 percent of production: “This is oil theft, we’re not talking about stealing a bottle of coke you can put in your pocket. The government should know, they should tell us. Look at America, Donald Trump was shot at and quickly they knew the background of who shot him. Our security agencies should tell us who is stealing our oil. You bring vessels to our territorial waters and we don’t know?”
Perhaps in response to Elumelu’s direct challenge to our country’s security agencies, a special task force was set up by the chief defense staff, General Chris Musa, to rein in the crude oil syndicate ravaging the sector, and some success has been recorded, giving the NNPCL the courage to project in their 2023 annual report an increase from the current estimated 1.3 million to 2 million barrels next year.
The next local investor in the oil industry to cry out against the perfidy in the downstream of the oil/gas sector in Nigeria is Alh. Aliko Dangote, who recently floated a $19.5 billion refinery with 650,000 barrels per day single train capacity.
Mr. Davakumar Edwin, who is the vice president of Dangote Refinery, sounded the alarm bell so loudly that it is still reverberating across the broad spectrum of the local and international oil industry by accusing international oil companies, IOCs, of starving the brand new Dangote refinery of crude oil feedstock, hence it has been unable to commence supply of petrol to Nigerian market on schedule. Here is how he put it:
“To set the records straight, we would like to recap the facts below. Aside from Nigerian National Petroleum Company Limited (NNPC Ltd), to date, we have only purchased crude directly from one other local producer (Sapetro). All other producers refer us to their international trading arms,”
He then reaffirmed his position thus:
“As an example, we paid $96.23 per barrel for a cargo of Bonga crude grade in April (excluding transport). The price consisted of $90.15 dated Brent price + $5.08 NNPC premium (NSP) + $1 trader premium. In the same month, we were able to buy WTI at a dated Brent price of $90.15 + $0.93 trader premium including transport.
“When NNPC subsequently lowered its premium based on market feedback that it was too high, some traders then started asking us for a premium of up to $4 million over and above the NSP for a cargo of Bonny Light. Data on platforms like Platts and Argus show that the price offered to us is way higher than the market prices tracked by these platforms. We recently had to escalate this to NUPRC”.
While doubling down by reiterating the point earlier made by Mr. Edwin, the president/ founder of Dangote Group, Alh. Aliko Dangote, exonerated our national oil behemoth:
“The NNPC is doing its best, some of the IOCs, they are struggling to give us crude, everybody is used to exporting and nobody wants to stop exporting”.
The president/founder of Dangote group, Aliko Dangote, has since doubled down on the allegation made by the executive director of the refinery.
Also in response President Bola Tinubu has set up a committee led by Wale Edun, the finance minister, and charged the team to create a framework that would enable the sale of crude oil in naira to local refineries starting with Dangote Refinery. The team has after interactions with stakeholders reportedly targeted next month for petrol to start streaming out of a local refinery again and relieve the treasury of the pressure of providing foreign exchange funding for the importation of petrol.
Hopefully, the anticipated flow of petrol out of the Dangote refinery would also relieve Nigerians of the double jeopardy of not only paying for petrol through their nose, but also spending their precious time that could have been used productively in queuing for the purchasing of petrol which is such a shame that we hope President Tibunu’s current intervention would address permanently.
It is so striking that while on the one hand, Mr. Elumelu is shocked about the audacity of crude oil theft in the downstream sector where he and by extension, our country, is losing revenue to the thieving syndicate, on another hand, Alh. Dangote is facing challenges from IOCs who are denying his refinery of crude oil feedstock for refining in the ultra-modern facility that would also enable our country to end the importation of petrol which constitutes a huge chunk of our country’s import bill as the government had been subsidizing the pump price of petrol over the years.
Incredibly, the two highlighted challenges that gave the two indigenous multi-billionaire investors in the oil/gas industry sleepless nights are critical as they have the capacity (if we get them well sorted) to change the negative narrative about the socioeconomic development of our country from negative to a positive one.
Fortuitously, having been rankled enough to speak up against irregularities in the industry by the two indigenous investors who are relatively new entrants, the industry is currently receiving what might be referred to as face light through strengthening by implementing the true letter and spirit of the Petroleum Industry Act, PIA, which was passed into law in 2021, but which rules are yet to be vigorously enforced.
The foregoing are existential and critical reasons that the toxic international petrol politics in Nigeria which is being discussed in detail in this piece should be of interest to all Nigerians.
Furthermore, it is important to factor in the reality that the oil/gas business is our cash cow and the economic mainstay of our country which we all should be guarding jealously.
Practical evidence of the pivotal role that crude oil and its derivatives play in our economy and lives can be found in the high cost of living crisis that the removal of subsidy on the pump price of petrol by President Bola Tinubu on his inauguration on May 29, last year, has triggered in our country.
Now, the pertinent question that may be agitating the minds of some readers would be: are these aberrations currently causing the rumble in the industry new?
The truth is that the challenges have been with us since crude oil was discovered in 1957 and its exploration commenced in Oloibiri in modern-day Bayelsa State.
But the reason the identified challenges besetting the oil/gas business in Nigeria which include crude oil theft and its allocation for refining into petrol locally is being magnified is basically because private investors who hold accountability as the holy grail are now involved in the business.
Hitherto, when oil/gas business was solely carried out between the government and lOCs where efficiency was not a guiding principle for those working on the side of the government, having invested $1.1 billion into oil exploration in the case of Elumelu and Dangote plowing nearly twenty folds the billions of dollars ($19.5 billion) that Elumelu committed into refining of the commodity, the duo will do all they need to recoup profit or reap the benefits of their bold and brave entrepreneurial efforts.
Hence, the pair of Elumelu and Dangote, who were perplexed when they faced the grim reality of the absurdities that define the oil/ gas industry, started getting restive and even descended into the realms of agitators when their investment plans seemed to be getting awry when saboteurs from unanticipated quarters started making their return on investment calculations go askew.
When one contrasts the private sector’s efficiency and effectiveness from the prism of the popular but perverse notion that the government’s business is nobody’s business, which is the pervasive mindset of public servants, it would be clear why many public servants charged with the responsibility did not care about what happened to Nigeria’s 55% equity in the joint venture with the IOCs which Elumelu has acquired. A similar attitude of not protecting the interest of Nigeria (which smacks of lack of patriotism) in the crude oil production sharing agreement with IOCs is the reason there is no metering system to determine the volume of crude oil pumped into the pipeline and what comes at the other end of the quantity shipped abroad by partners until private investors like Dangote got into the mix with his refinery that has enough capacity to refine at least half of the volume of crude oil produced in Nigeria.
Arising from the above, instead of seeing the schism stirred up by Elumelu and Dangote as a problem, I would like to frame it as an opportunity.
That is based on the fact that the game seems to be changing for good in the industry since the pair who are concerned investors started asking justifiably questions about what happens to their huge financial commitments in their respective crude oil exploration and refining ventures.
