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Mixed feelings trail Buhari’s energy policy during first term

Mixed reactions trailed President Muhammadu Buhari’s energy policy during his first term in office. As Buhari begins his second term, OLATUNDE DODONDAWA writes on the expectations of experts at taking the energy sector to the next level.

 

There is no gainsaying the fact that the federal government has performed below average in the oil and gas sector in the last four years. This is because the refusal to create a structure or legal framework as against directives maybe counter-productive to what he has achieved in the last four years. Notably is the refusal to sign the Petroleum Industry Governance Bill (PIGB), refusal to deregulate the downstream sector and refusal to ensure a cost-reflective tariff in the power sector.

Speaking with the Nigerian Tribune on the performance of the Muhammadu Buhari led administration, Mr Henry Adigun, an Oil and Gas Governance Consultant, argued that the present administration has not performed very well.

According to him, “Nothing has changed in the last four years in the oil and gas sector in my opinion. The present government inherited 35 million daily consumption of premium motor spirit (PMS) otherwise called petrol, but later increased it to 55 million litres daily consumption without corresponding growth in the economy.

“The government inherited a more transparent subsidy regime, but now runs a less transparent subsidy regime under the guise of ‘under-recovery’. The fuel subsidy is a scam and it is time to remove it. The government came to fight corruption but the fight against corruption in every sector has been very poor. The government failed to sign the PIGB, which would have helped in promoting governance structure in the sector.

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“The Nigerian National Petroleum Corporation (NNPC) governance structure is still as poor as before in terms of remittances and accruals in the oil and gas sector. Government has only been able to add about $20 million to the sovereign wealth fund (SWF). Things are just the same but a bit worse in some areas. As far as I’m concerned, I will score them 4/10 which is just below average.”

Another expert, a Geologist and also a Publisher, Mr Toyin Akinosho, argued that President Muhammadu Buhari inherited an energy crisis in Nigeria when he took charge of the country in May 2015. In his own view, Buhari took over an upstream sector gasping for breath: even as crude oil prices were crashing down as he took the oath of office, there were problems that were self-inflicted by the previous administration, which were wrestling with the sector’s legacy challenges.

According to him, operations in the oil fields of the Niger Delta had not entirely recovered from the historic MEND attack of February 2006, which had reset the dynamics in the region around the distinctions between licence to – and freedom to operate.

“The NNPC owed cash calls in a way that effectively disabled work programmes of operating companies. And by insisting on operatorship without the wherewithal to do so (competencies, governance, processes and funding), the Nigerian Petroleum  Development Company (NPDC), the operating E&P arm of the NNPC, had strangled investment in assets that Shell & Co had sold to five Nigerian independents since 2012. At the time Buhari came in, those companies had lost three years’ worth of aggressive investment to boost production.

In the midstream, he said the President met proposals to diversify the gas market from export-led to an inclusive, part export, part domestic beneficiation, which could establish an industrial economy with huge absorptive capacity.

“A crucial part of the challenge here was that a disproportionate percentage of construction of the midstream infrastructure was financed by the state.” he said.

In the downstream, he argued that President Buhari met a huge refining gap that ensured that over 90 per cent of petroleum products in demand were imported and a commercial model that entitled NNPC to take 445,000 barrels of crude oil per day of oil, while it was expected to beneficiate no more than 20 per cent of it.

“Millions of litres of gasoline were being imported at a cost significantly higher than what the government instructed the retailers to sell and as such the state was saddled with billions of dollars in subsidy claims by importers,” he said.

In the power sector, he said Buhari met rolling blackouts, with power generation averaging 4,000MW, mostly controlled by private actors; transmission averaging 5,000MW, still run by the state and distribution averaging 3,000MW, in the hands of the private sector. He said on the new president’s table were frames of ideas around the Petroleum Industry Bill (PIB) which was first presented in parliament in 2008.

“This set of laws had benefited from a robust national debate over the years; in its current form it engages every opportunity and threat in the hydrocarbon value chain, from state ownership and dispensing of oil and gas acreages, through community entitlements and responsibilities, to streamlining in the downstream  value chain of petroleum products,” he said.

 

Buhari’s policies, shortfalls in last four years

Akinosho argued that President Buhari’s government deserves credit for easing the bottlenecks in the cash calls for upstream work programmes and removing NPDC’s chokehold on Nigerian independents, allowing a more vibrant upstream segment.

“Investments have streamed into many Brownfield projects. There is an uptick in drilling activity, a marker of the health of the industry, even if several actors remain cautious. The CEO of NNPC has been allowed a free hand, even though the president himself was the minister of petroleum throughout the tenure.

“Discussions have picked up around Financial Investment Decisions for new field projects, especially in deep-water, but while the momentum is higher with this administration than the former government, the old habits of sitting on proposals and approvals for pecuniary gains have not gone away  because, in the absence of structured, legislated reforms, individuals still see themselves as the processes,” he said.

Another achievement by President Buhari’s administration is the increase in Nigeria’s proven gas reserves from 187 trillion cubic feet to over 200 trillion cubic feet. Adigun in his opinion credited  President’s administration for bringing stability to fuel supply in the country, but he asked,“At what cost?”

A significant shortfall of President Buhari’s administration, according to Akinosho, is the cold shoulder the president gave th e passage of the PIGB. He said President Buhari’s Ministry of Petroleum Resources has crafted National Oil and Gas Policy documents, but in the absence of an act of parliament reforming extant hydrocarbon laws and operational norms, with these policies at its heart, the documents have gone nowhere.

“Project delivery timelines have not improved. None of the gas pipelines under construction by NNPC, before President Buhari came in, will be completed before this current term of his presidency ends. The private sector is, largely, not keen on midstream infrastructure, and has not been sufficiently incentivised to change its mind.

“The president has not been able to work the downstream sector anywhere close to the little he has achieved upstream. The revamp programme for the refineries was a spectacular failure. It has been a hard sell to convince investors to put money in the revamp without getting equity and then allow NNPC, to operate the refineries after the revamp, and then hope they could make their returns from the sale of the products,” he said.

He however questioned the provision of $1 billion for subsidy or ‘under-recovery’ while the NNPC admitted it incurred some $2 billion between January and November 2018. He said the idea of reducing the billions of dollars lost to subsidising the cost of fuel import has been to appoint NNPC as the sole importer of petrol.

On power sector, Mr Akinosho criticised President Buhari for late appointment of commissioners to run the National Electricity Regulatory Commission (NERC), the sector’s regulator. The NERC Chairman was appointed only in April 2018. “But the big-ticket item remains adequate power supply. The Transmission Company is owned and operated by the government. At the end of  President Buhari’s four years, the volume that can be transmitted on the Nigerian power grid reliably and safely is 5,500MW.

 

Going forward

Adigun advised the President to appoint a substantive Minister of Petroleum Resources. “President Muhammadu Buhari cannot be the Minister of Petroleum Resources. The honest truth is that he has neither the capacity nor intellect to be. When the President takes up the responsibility he cannot deliver, he allows the people to do it. What we have had in the last four years is that people were running it on his behalf. These people might not have same interest as the President. So he should have appointed a Special Adviser on full time basis or appoint someone else because someone has to be in charge.

“The PIGB will be sent to the President in the next few days, he has to sign it. Signing the PIGB will give the oil industry hope that there will be governance structure in the NNPC and he must remove fuel subsidy.  Fuel subsidy right now is a scam. It is not benefitting the masses but very few people. We need a fiscal regime to replace the old fiscal regime. It is obsolete and doesn’t promote investment in the oil and gas industry,” he argued.

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