President Muhammadu Buhari’s ambition is to take crude output to three million barrels per day (bpd). Nigeria has not met its 2.1 million bpd quota due to disruptions of production by militants in the Niger Delta.  To appease the militants and stimulate the economy, the government unveiled a $10 billion infrastructure rebirth programme and also initiated a review of the 13 per cent derivation allocation to oil producing states. JOHN OFIKHENUA reports that peace is yet to return to the region even after its leaders presented the militants’ demands to the Federal Government.

WITH crude sales accounting for more than 85 per cent of Nigeria’s revenue, President Muhammadu Buhari cannot but admit that oil and gas production remains the mainstay of the nation’s economy.
To the President, disruption of oil production in the Niger Delta by restive militants is taking a debilitating toll on the economy. Nigeria could not meet its production quota following unending attacks on oil facilities. But the President said the effective application of the little proceeds was important. He has been holding talks with Southsouth leaders on the need for the militants to give peace a chance.
Buhari recently presented the ambitious plan tagged: “7 Big Wigs” to stakeholders in the Banquet Hall at the Presidential Villa in Abuja.
In his opening remarks, he said that the “petroleum industry remains critical to the Nigerian economy of today and the future despite our current challenges.
“The golden era of high oil prices may not be here now, but oil and gas resources still remain the most immediate and practical keys out of our present economic crises oil and gas still remain a critical enabler for the successful implementation of our budget as well as the source of funds for laying a strong foundation for a new and more diversified economy.”
Being short and medium term priorities to grow the industry between 2015 and 2019, the 7 Big Wins has been designed to develop a stable and enabling oil and gas landscape with improved transparency, efficiency, stable investment climate and a well-protected environment.
The seven pillars of the proposed solution to Niger Delta’s security are: policy & regulation; business environment & investment drive; transparency & efficiency; stakeholder management & international coordination; gas revolution & refineries and local production capacity.
A major setback to the industry has been the threat to oil and gas installations from different militant groups. Besides, the menace has held the country by the jugular, denying it the peaceful atmosphere for production to thrive and reducing the oil output by almost half.
The situation and all its concomitant challenges have partly plunged the economy into a recession. However, with the 7 Big Wins, the Federal Government looks set to pacify the aggrieved Niger Delta people.
Explaining the new deal, Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu, said the government has a plan to meet more than 50 Niger Delta leaders, including royal fathers, security chiefs and members of the Federal Executive Council (FEC) from the oil-rich region.
Buhari made good his promise on November 1, when he held a meeting with the leaders from the region. The leaders made 16 requests from the Federal Government.
On the shopping list are: ownership of oil blocs; review of Amnesty Programme; relocation of headquarters of International Oil Companies (IOCs) to areas of operation; approval of Maritime University; strengthening Niger Delta Ministry; revival of key critical infrastructure; resettlement of Bakassi indigenes; restructuring/funding of Niger Delta Development Company (NDDC); introduction of fiscal federalism; economic development, empowerment of Niger Delta people; improved power supply; security surveillance; protection of oil/gas infrastructure; meeting immediate needs of Internally Displaced Persons (IDPs); addressing effects of increased military presence in Niger Delta and Ogoni clean-up/ environmental remediation.
At their second parley with the Federal Government 15 days after, the Niger Delta leaders expanded their demands by including political reconstruction and fiscal federalism.
They said: “The fundamental concern is political reconstruction and fiscal federalism with legitimate and acceptable division of power among the constituents (the center and regions) and the principle and practice of ownership and management of resources by the constituents.
“The derivation principle should allow the different units annex and control their resources and pay appropriate and agreed tax to the centre.”
Lack of trust
But the presentation of the shopping list by the leaders has not gone down well with some groups in the region. The groups believe the leaders would hijack the peace deal for their personal benefits.
One of the groups, Oil and Solid Mineral Producing Area Landlords’ Association (OMPALAN), cautioned the President against allowing the political elite masquerading as representatives to hijack any of the demands acceded to by the government.
In a statement, OMPALAN Board of Trustees (BoT chairman, Bishop Udo Azogu, urged Buhari to ensure that whatever concessions granted benefit the common man and not the political class.
According to him, the elite have always reaped from the spoils of the region.
The statement reads: “The truth of the matter is that even when government allocates oil blocks to some indigenes of the region, or concedes to resource control, they will end up in the hands of the insatiable political class who has perennially benefited from the lingering crisis in the region.
“OMPALAN believes that it is justifiable and proper that oil blocks be allocated to the regions that produce oil but, it must be properly considered to meet the ends of justice to the benefit of the common man and not allocated to the same vicious oligarchy that shortchanges the system with impunity.”
Bombings continue
Despite waving the olive branch at the region, bombings and destruction of oil and gas facilities have not stopped. The absence of peace in the Niger Delta has discouraged oil companies to resume full-scale production.
Only last week, the Nigeria Electricity Supply Industry (NESI) lost 4,368MW to vandalism of gas pipeline that resulted in gas shortage.
The NESI was forced to shot down production at Geregu I and II, Alaoji National Integrated Power Project (NIPP) and Odukpani power stations shut down production by 6pm on November 30, when it could no longer cope with the assaults by militants.
Also not spared are the Escravos Lagos Pipeline Service and the Trans National Pipeline which aggravated gas constraints in the power sector.
Although the Organisation of Petroleum Exporting Countries (OPEC) has exempted Nigeria from production cut in order to scale up the price of crude, there are skepticisms on whether vandalism and crude theft would allow the country to leverage on the organisation’s gesture.
Derivation formula
under review
Determined to take the challenges head-on, the President has started the review the application of the 13 per cent derivation allocation from the Federation Account Allocation Committee (FAAC) to the oil producing states.
According to Kachikwu, the Federal Government will be appealing to the state governors, who take allocations as their main budgeting tool to channel the funds to the core areas where oil is produced in their domains.
His words: “The President is also reviewing the proposal made to him. He is looking at how the 13 per cent derivation is applied. Right now, it is a budgeting tool for state governments. We are going to be appealing to them to begin to put that into the core areas of the oil producing communities and not just see it as a budgeting number.”
The 7 Big Wins, actually seems to have planned big for the Niger Delta, the host communities of the nation’s cash cow.
Plan for infrastructure
rebirth underway
The plan for infrastructure rebirth, Kachikwu said, will culminate in the launching of $10 billion infrastructure development programme in the region. He noted that the fund which will be released in installment will not come strictly from the Federal Government, but also from individuals, concerned international organisations and state governments.
He said state governors in the region, will have to meet to prioritise the application of the fund.
His words: “Finally, we are also launching $10 billion infrastructural rebirth investment programmes in the Niger Delta region. This is not money that is going to come strictly from the Federal Government. It is going to come from investors, individuals, who are ready to do private sector infrastructure, obviously states and federal governments as the case may be and international organisations who have shown interests to help.
“What is more important is not the number but the conceptualisation of the process. It is a fact that governors will have to come together from the region to begin to look at cross-state investments whether there will be railways, whether there will be power facilities, whether there will be specialist hospitals or whatever.
“But right now there is low investment in the region and that is not helping the region. So, we are going to be pulling in NNPC and groups like that and ensure that we look at cross border investments in the region.”
The minister said the government was looking into the Amnesty Programme ahead of its planned wind-up next year.
According to him, the issue with the programme was that people have taken it to be “a social collection point… We are going to be looking at issues like coastal control and Niger Delta subsidiary policing and para military types of organisations.”
Going forward
The government will focus on creating stability, incentive schemes- jobs, investments, contracting opportunities for the zone. It will use marginal field allocations to state governments and indigenes to help reduce tension and get buy-in. The minister pointed out that to do this certainly requires creativity, innovation, technology and robust partnership amongst various stakeholders.
Government, according to him, will “set up a robust security apparatus involving oil companies, communities and security apparatus to prevent, track and isolate criminal elements in Niger Delta region and enforce peace for development.”
The peace that government envisages from restructuring of everything about the administration of the region to the benefit of the people is definitely expected to provide an enabling environment for accelerated oil and gas production to thrive.
Kachikwu, who Buhari has challenged to stimulate the economy with oil, has started thinking outside the box on roadmap to “provide a workable plan that would ensure that adequate infrastructure is put in place to ramp up crude oil production to a target of about 2.8 million barrel per day, while contributing positively in the area of gas to power by boosting gas production to 10 bscfd by 2019 respectively.
“Among other plans for the region as far as business stimulation is concerned, is government’s plan to increase income streams to support infrastructural development, economic diversification, and agriculture.
“The focus will be to increase income streams through raising bulk funds for the Federal Government through successful leveraging of some of our assets.”
Kachikwu also spoke of a plan by the government to revive the business environment by raising investments through positive policy mixes and opening of all sectors to greater private sector participation and funding.
In the first instance, the minister said the government has a target to raise $5 billion within one year and $15 – $20 billion in the mid-term (2 – 3 years).
According to him, the new policy would cut contract approval time from two/three years to six months.
“The government is also looking into the reduction of the stranglehold on oil sector by the government to cut down over supervision,” the minister said.
In its plan for gas revolution, the government has opted for a revolution through new infrastructure and gas terms that would encourage the roll out of a national blueprint for backbone gas pipeline and processing infrastructure that will enable flexibility in supply delivery and provide a viable source of income for the country.
Another essential aspect of the roadmap was to upgrade the nation’s refineries and increase local production capacity with an objective to reduce importation of petroleum products by 60 per cent in 2018 and for the country to become a net exporter of petroleum products and value added petrochemicals by 2019.
The minister explained that the objective of government “is to improve our domestic capacity for local petroleum products production. This will entail the injection of private sector investments and expertise in revamping the existing refineries and implementation of modular refineries in the oil producing region.”
On the target, he said that the sector is poised to achieve 100 per cent of local refining capacity by 2020 and reduce importation by 60 per cent by the end of 2018.
Noting that his ministry would be refurbishing all refineries in two years with private capital, Kachikwu stressed that the deal will license specialty based refineries, modular refineries and co-located refineries.
Kachikwu explaind that the abundant gas resources will be harnessed to generate wealth and save the environment by converting gas flares to power.
The focus of this initiative will include the promotion of investor-led gas infrastructure development to ease the government the burden of funding.
He said: “There will also be domestic gas utilisation for power and households will also be promoted to support threefold increase in the nation’s power generation capacity by 2019. The sector will open up commercial gas flare opportunities and drive CNG, LNG and LPG programmes through incentives.”
On stakeholder management and international coordination, the government has a plan to deploy a potent communication strategy, build and maintain robust relationships with stakeholders (within and outside the petroleum producing community).
The oil and gas industry has been battling with the challenges of bringing new policies and laws to bear in the sector since almost a decade ago that it started the Oil and Gas Industry Implementation Committee otherwise known as (OGIC) that was headed by Dr. Emmanuel Egbogah.
However, the Petroleum Resources ministry said that it was reviewing old and moribund policies, gazette for new policies and entrenching robust fiscal instruments and regulations with key attention given to the passage of the Petroleum Industry Reform Bill.
On the passage of the Petroleum Industry Bill (PIB), Kachikwu praised the National Assembly for their support and called for cooperation towards the speedy passage of all legislation required to deliver on the objectives of the roadmap.
He said: “We strongly desire to remedy challenges in the Nigerian Oil and Gas industry through robust policies and laws that drive efficiency, encourage investment and improve local participation in the sector.
“This aspiration is embedded in the new Petroleum Industry Reform Bill which contains the most fundamental legal requirements that will apply to the entire petroleum industry in Nigeria.”
The policy planks of the new roadmap are based on the following specifics:
•Use policy and regulations to aggressively position the industry to a quantum leap in all parameters – production volumes, costs, earnings etc.
•Gazette the Nigeria Oil Policy
•Gazette the Nigeria Gas Policy and Gas Terms
•Approve Executive version of the Petroleum Industry Reform Bill after Federal Executive Council and submit to the National Assembly.
On transparency and efficiency, the minister acquiesced to the fact that there has been a lot of “trust-deficit” in the sector and that has informed the ministry to make it one of the pillars of roadmap.
The focus includes:
•Install transparent, fast and efficient processes in all oil and gas contracts
•Provide investors and government with fiscal clarity and the balance of objectives between risk and reward
•Joint accounting for oil producing companies to ensure transparency in funding and expenditures
•Target a 30 per cent cost savings on transparency
•Institutionalise performance management in public agencies and private companies.
The President said it would require creativity, innovation, technology and robust partnership amongst various stakeholders for the sector to remain the fulcrum of the economy.
He sought the need to instill a new culture of transparency and efficiency in the industry, streamline operations along best practices by championing and implementing strategic reforms at every layer of the industry.
Buhari said: “This will help us improve oil and gas production, explore our frontier basins, improve our local refining capacity and above all build sustainable partnerships with the oil producing communities.
“If we are able to plug the leakages, and tighten loose systems that characterised this industry in the days of high oil prices, we are convinced that we can do even more with the little that we are getting at the moment than we did even in the time of plenty.
“As you are aware, recent developments in the Niger Delta have temporarily limited our oil and gas production and supplies. However, let me reaffirm that, whatever challenges we are currently facing in the region, our resolve and capability to work with all stakeholders to restore normalcy will guarantee success.”
As ambitious as the “7 Big Wins,” roadmap look, its success, according to stakeholders and observers, will depend on government’s will power to work its talk to create the enabling environment for the much-needed peace in the Niger Delta to attract fresh investors.