Nigeria’s Oil & Gas – PIB Model And Strategy

Until the PIB (Petroleum Industry Bill) is unanimously passed in both houses of the National Assembly, Nigeria’s oil and gas industry will remain visionless, without strategy or end game, and without a model to compete in a globalized economy.

For the first time in its over five decades of existence, a group of dedicated, above self-interest Nigerians, have worked relentlessly to establish the legal and regulatory framework, institutions, and regulatory authorities for the Nigerian petroleum industry, in order to establish guidelines for the operation of the upstream and downstream sectors, and for purposes connected with the same.

The delay in passage of PIB has exposed fundamental strengths and weakness of the deal makers. Point number 1: The IOCs (International Oil Companies) are powerful. They hold a monopoly of financial control, equipment, and globalized oil and gas knowledge. Nigeria’s oil production capacity and revenue remains a mystery because some IOC companies base their estimation on volumes arriving at terminals and take-off points, and not on how much was originally pumped from the wells and flow stations. The amount of oil produced at the well head is not really known because DPR (Department of Petroleum Resources) has no system for measuring production other than through monitoring terminal receipts. Accordingly, the DPR has no reliable data from which possible product losses between the production point and the terminal can be estimated, measured, or inferred. Point number 2: The Nigerian Government is weak, and do not have the capacity to organize or agree within themselves. Its only option is to negotiate, because the IOCs cannot, and will not, be intimidated, due to their inherent advantages. Nigerians are thus made to play subordinate roles, because we lack the required technology to take over the jobs from the foreigners, or to even to adequately compete with them. Nigerians play subordinate roles because of low skill, low knowledge, and low technology.

It would have been a “win-win” proposition for all if the powers at play were fair and balanced. If we take an objective, non-partisan, dispassionate view of the issue, we cannot help but conclude that our legislative leadership have their priorities wrong. It can lead one to feel breathless at the ignorance of those elected to pass laws for the common good of their fellow citizens, but once elected, they fail to realize the damage done to the revenue stream and infrastructure of the country when it is losing $300 million per month for non-passage of the PIB package. So, are the legislative bodies (house and senate) for or against the progress of its citizens? The global leadership of our engineers and scientists need to be put to task in strategic considerations, since most of them possess information of enduring value, comparable to any foreign entity hired by their government.

For us to compete with others in the OPEC cartel, we need to restore confidence between Nigeria and the IOCs. For us to inspire confidence, we have to be less unpredictable, and understand the budget implications of our actions with respect to investment and unemployment in the country. People are counting on the government, and we cannot support or condone the actions of a few individuals who siphon tax payers money, earmarked for development and education, offshore without any repercussions. Similarly, how can we justify importing toothpicks for $1.537 billlion and paying consultants for not met project services $4 billion?

We cannot continue to blame the IOCs. They are in the business of maximizing profit for their shareholders. We have to learn the vital role of technology in the systematic transformation of the production systems and capacities in the development process. Development depends always on the internal innovative capacities of a society, for it is man, rather than machines, that creates development. That is why we cannot maintain or know the sophisticated mechanisms involved in machineries and equipment bought overseas, and why we will always remain dependent. Only nations with new means of production, capital formation, and technical knowledge will all be able to sustain economic growth. This sustained economic growth is then further ignited, accentuated, and escalated by increasing technical wisdom. This is the reason why I emphasized earlier the impact and multiplier effect of the new emerging gas and petrochemical small/medium scale industries on new jobs and standard of living for developing countries, specifically, Nigeria. By increasing physical infrastructure, we make other development activity possible, which simultaneously provides jobs. By increasing industrial production, we increase the supply of things people need as well as provide jobs and exports. By educating and training the people, the government helps its population to acquire knowledge and necessary skills to compete.

The world is changing and WILL NOT wait for us. China, India, Brazil, Korea, are all globe-trotting the world to sell products, made by their people, to the rest of the under-developed world. Most of these countries imported technology, and soon thereafter, learned from it and became strong to the extent of being net exporters today. On June 13, 2000, Jeroen van der Veer, Shell Oil Chief, told the World Petroleum Congress: “For my part, if the world thinks that carbon monoxide emission should be reduced, I see this as an opportunity. The Stone Age did not end because they ran out of stones….but as a result of competition from the bronze tools, which better met people’s needs”.

Let me reiterate: The world is changing and WILL NOT wait for us. The need for environmentally clean, quiet, and highly fuel-efficient power sources is driving the development of fuel cell technology. Fuel cells are emerging as one of the most promising technologies to meet future global power requirements. Fuel cell power sources produce electricity, heat, and water, electrochemically, with no moving parts, noise, or pollutant emissions.

What internal combustion engines, batteries, and fuel cells have in common is their purpose: all are devices that convert energy from one form to another. The internal combustion engine used to power virtually all of the cars driven all over the world today, run on noisy, high temperature explosions, resulting from the release of chemical energy, via burning fuel with oxygen in the air. Internal combustion engines, as well as conventional utility power plants, change chemical energy of fuel to thermal energy to generate mechanical and electrical energy (as is the case with power plants). Fuel cells and batteries are electro-chemical devices, and by their very nature have a more efficient conversion process: chemical energy is converted directly to electrical energy. Internal combustion engines are less efficient because they include the conversion of thermal to mechanical energy, which is limited thermodynamically by the Carnot Cycle.

The future belongs to those who prepare for it to today. So, let us get to work for the future of our country.

•Godwin Igwe is a Fellow of The American Institute of Chemical Engineers, and is also a McNamara World Bank Fellow. He was Sr. Research Engineer with U.S.-based IOC (Conoco. Inc.), and E.I. DuPont de Nemours Co. Inc. for over 10 years. He was Peer Reviewer and Panelist for U.S. Dept. of Energy, and U.S. National Science Foundation. He was Director, representing Nigerian Federal Government/NNPC on Board of Flopetrol Nigeria Ltd. He is Author and Inventor.