Granting autonomy to refineries will engender profitability, says PENGASSAN chief

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 Babatunde Ogun is the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), an umbrella body of senior workers in the oil and gas sector of the economy. In this interview with DELE FANIMO, he spoke on the stalled Petroleum Industry Bill (PIB) and other sundry issues in the sector. Excerpts

WHAT is the major issue in the Petroleum Industry Bill (PIB) that has left it stuck in the National Assembly?

At the beginning when the PIB started, it created a lot of uproar and misunderstanding among many people. One of the knotty issues is transparency. The second one is fiscal regime, while the third is management of oil and gas industry.

There is no way the government would propose a law and all the policies, principles and processes of enacting it will not be transparent. The knotty issues need to be captured in the Bill. But whatever empowers a minister or the Presidency to give acreage to anybody without recourse to due process should be expunged from our laws. It should not be at the whims and caprices of the minister or Presidency or whoever is in office. These are the things that would create competition for other marketers to know that, for you to get acreage in Nigeria with this volume of oil, this is what you are supposed to do.  The power given to the petroleum ministry, either through the minister or the representative of the President, is ambiguous. It has to be clearly defined with a rule that for you to operate in the oil and gas industry, these are the things you need to do.

Currently, Nigeria is groaning under government's inability to fund its Joint Venture (JV) operations. If you go ahead without looking for real stakeholders that can invest in this economy, then you create a problem by underfunding the oil and gas industry. This invariably can affect the prospect of oil and gas exploration and exploitation. Nigerians have not totally agreed on whether subsidy should go or not, and you are saying that Petroleum Equalisation Fund (PEF) should exist. It does not work this way.  The minister cannot sit down in his office and singlehandedly decide for all Nigerian oil and gas industry players the number of agencies they should have. One of the recommendations we made to them is that PEF should be merged with Petroleum Product Pricing and Regulatory Agency (PPPRA). Let them be for downstream. If you are using them for subsidy today, we can now transform PEF to an agency that is going to be responsible for infrastructure.

Now, you are building power plants, you are not working on distribution network. When you finish building gas plants, you will now start looking for gas to power the plants. And after getting gas, you start looking for thermal stations and how to transmit. I think Nigeria must start to think holistically.

Also, the fiscal regime has been a challenge. The core investors who are here, International Oil Companies (IOCs), strongly believe that a change may not be palatable. But we have advised them, as oil and gas workers union, that there is need for them to get a consultant that can advise them on the type of model they should use because I don't see why there should be variations in result when you are using the same data. By our understanding, I think they are doing that because when you take too much and it is not competitive to other companies, it is a challenge. However, if we are taking what Angola and others are taking and that is what the government is demanding, we do not see why the IOCs should say it is too high. But with the way things are, there is a serious gap between the government and the IOCs, and they have not been able to convince both PENGASSAN and NUPENG on the actual fiscal regime. But I think with the consultant we have engaged, we will be able to engage them and we will know where we are going.

There have also been a lot of labour issues.  Our experience is that a lot of companies that were privatised have not done well. Instances are many: the Delta Steel, Aladja and NITEL. Our fear, for instance in the case of the refineries, is that we believe they should not be under the NNPC, we believe that they should be run as companies on their own. When they are run as companies on their own, they can now declare profit. The NNPC will hold in trust the shares of the Federal Government in them. Some of them can also be privatised.

The PIB must tell us the percentage of crude oil that must be refined locally. As a government, they must protect the industry, they should tell us the number of years we can import or export crude oil. This should be specified in the bill. The PIB should also be able to tell us how to share our income in the oil and gas industry. So if you have that type of formula, it helps you, and it is not going to be this minister or another government official dictating to you. All the problems of the country cannot be solved overnight, but if you have a template for planning, we can plan very well.

The PIB does not really say anything about the downstream. But there must be clear provision for downstream.

The constitution of the board is also important and should be provided for in the Bill. When you have the Minister of Petroleum being the chairman of the boards of all the agencies, you will discover that there is a problem. You cannot have an NNPC where you make the minister the chairman. That is why you see that in the last 10 years, NNPC has had 10 GMDs. There is no way an organisation can be run that way. The recruitment and sacking of the group managing director of the NNPC has to go through a process. There should be specifications and requirements stated, the post should be advertised openly, and you cannot sack the person unless with the approval of the National Assembly. If not, you make someone a GMD and you make him a political person in such a way that the politicians can influence that person and he can be removed overnight. It should be that it is only the President that can make recommendation for his removal, not the minister, especially when he is angry.

Second, you need to look for competent Nigerians that can be chairmen of these boards while the minister will only represent the President at that level. With that, we can compare notes from the minister's angle and the man that is superintending over some of these boards.

The host fund too must be explicit. We don't want a Bill that is left for the people to go and interpret. There should be an addendum that states that we can see and sight how it is going to be managed. The initial feeling is that it is going to be for the host community alone. But everybody that has an oil installation in the country is a host community.

We think the whole of the petroleum ministry itself should be highly skilled and technical, and not just be a sector for all comers. Apart from the administrative cadre, it should be a different ministry staffed with competent people, and that is when they can perform the oversight function. They should also be saddled with the responsibility of providing laws and regulations and ensure compliance.

Why are our refineries not working?  And why is it that, despite the granting of licences to private investors over the last five years, none has been built?

There is an issue with the refinery. The government itself promised to build new ones, but as we are speaking, about four years after, we are still waiting. This is to tell you that the level of commitment is not high even at the government level. If you consider the stupendous amount that is being expended on subsidy, then the government should be serious about it. The rate of recovery in refinery is very slow compared to other businesses. And that is why the government must be committed to building refineries. Several people will tell you that they will build a refinery but when they look at the profit margin, they will back off. That is why you see that most IOCs are more interested in the upstream. Another thing is that if they are doing it separately, and the Federal Government too is doing it separately, there may be conflict of business interest. So, the government must work out a process of guaranteeing crude supply to anybody who wants to build refinery. Also, there should be a provision to guarantee the person that when he produces, the government can buy from him at international rate. So with that, if the government now decides to subsidise, then it does it to whosoever it decides to sell to. Again, government must take up the responsibility of some serious social services such as power, rail services, road and fuel. The government must take a larger chunk of those investments. That is the only way such things could be available. If we are waiting for those investors, they may not come. Some of them just collected the refinery licence in a bid to negotiate for crude to export. People should build their own refineries. They should not be interested in buying the ones built by the Federal Government. People are only interested in acquiring Federal Government's own in an underpriced value. I think the government needs more commitment and it must include those conditions of giving acreages. Investors cannot come here without adding value to the citizenry. They must be interested in the way of life and economy of the country. They should not be interested in only making money without adding value.

A lot has been said about oil subsidy, whether to remove it or not. The court judgment is however not conclusive. What is labour doing about this?

I think the court is just trying to play politics with the judgment. The court said based on the law, deregulation is illegal, however, the government has a right to determine price. So if you say somebody cannot deregulate but can determine price, what does it mean? Nothing has changed. The court judgment is not for the government, it is not for the masses, it is more of a political thing.

That is why we have the PPPRA which is supposed to be a body where we can see the reality, but many factors are not playing out. If the government seriously wants to do that, it must call a stakeholders meeting where we will agree on the things we need. Government must look inwards. There must be proper engagement of stakeholders. I think what is fundamental about it is that the government has to engage a broader stakeholder forum to look at things holistically. We must look at the cost and benefit of continuing to run the oil subsidy the way we are running it, the cost and benefit of having a change, ensuring that the money that would be saved from the subsidy is fully utilised. As we speak, we do not have confidence in the SURE-P, and do not envisage that the way they are running it will give us accurate return of our expectation.

In spite of government apparatus and all, there still exists oil theft on a large scale. Any hope that this monster will be tamed?

I think it is high time the Federal Government came out and let Nigerians know that it lacks the wherewithal to handle security problems in this country. Our advice over the years is to reach out to our foreign friends like the UK, the U.S. and Israel, for assistance. The Nigerian government security cannot handle it. Our security operatives are already compromised. Most of them, one way or the other, have connived with the people perpetrating these acts and they are deep into it. That is why most of the time they said that a barge has been seized and the crude oil burnt. How could you burn crude oil? Why can't you return the crude to Nigeria? Who took the measurement? Who was there when it was burnt? There is no oversight function. There is corruption, ineptitude everywhere. Let us get foreign aid. We can pay for this if need be. The amount of money we are wasting in Nigeria is too much. It should not be seen as colonialism, but the fact that unethical practices, lack of exhibiting work ethics and corruption have eaten deep into the fabrics. If you lose 3,000 barrels on a daily basis, it is more than what Ghana produces.



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