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IMPACT OF OIL SECTOR REFORMS IN 2012

By NBF News
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http://www.nigerianbestforum.com/blog/?attachment_id=121973 In this report Juliet Alohan, examines how the petroleum sector fared in 2012 vis-à-vis the reform initiatives embarked upon by the minister of petroleum resources, Diezani Alison-Madueke, in the face of challenges faced by the sector as a result of fuel subsidy withdrawal crisis which further resulted in uncovered monumental frauds.

2012 was for the petroleum ministry a turbulent one for many reasons including the monumental fraud and governance inefficiencies uncovered by the various committees set-up by government following the January 1, anti-subsidy removal protest.

With the removal of fuel subsidy resulting in an increase in fuel price from N65 a litre to N141 a litre, the year was set on a stormy start with a nationwide protest.

The protests led to calls from Nigerians and Civil Society Organisations (CSO) for increased transparency and probity in the petroleum sector and in response to these calls, the minister of petroleum instituted four different task forces with a mandate to ascertain the level of inefficiency and corruption in the petroleum industry as well as among all parastatals under the ministry.

The committees include the Special Task Force on Governance and Controls within the Nigeria National Petroleum Corporation (NNPC), headed by Dotun Sulaiman and charged with the responsibilities of reviewing all management controls within the Corporation and its subsidiaries; the Kalu Idika Kalu-led National Refineries Special Task Force, charged to conduct high assessment of the refineries and review past reports, and the Nuhu Ribadu-led Petroleum Revenue Special Task Force which was mandated to determine and verify all petroleum revenues due and payable to the federal government, as well as the Special Task force on PIB headed by Senator Udoma Udo Udoma.

The Task force on PIB was the first to submit its report and the Bill was eventually submitted to the Federal Executive Council (FEC) after consideration before subsequent passage to the National Assembly for legislative action.

A striking feature of the new Bill is that unlike in the past when the PIB was faced with issues of forgery and different versions in circulation, this new Bill is imbedded with security features and tamper proof attributes and locked in with a code such that no one can add to or remove anything from it without the code.

According to Alison-Madueke, the new PIB was drafted with equity in mind with the concerns of the International Oil Companies (IOCs) taken into consideration so as to engender a win-win situation for Nigeria as well as stakeholders in the oil and gas industry.

Some of the new provisions in the Bill include those creating the Asset Management Company which will take over the management of the Joint Ventures from the NNPC which will be unbundled to make way for the establishment of a National Oil Company that will be competitive and profit-driven like its counterpart in other nations such as Petrobras of Brazil.

However, hopes of a speedy passage of the Bill within the year were dashed as 2012 ended with the PIB, rather than being passed, is enmeshed in conflicts of interests.  While there is the claim by some politicaians that the Bill is lopsided and over favouring a section of the country, the IOCs on the other hand are fighting the fiscal regime in the new Bill.

Furthermore, the findings of the Ribadu-led task force report revealed that between 2002 and 2011, the country was short-changed at almost every stage of accounting for oil revenues. The task force found that signature bonuses and royalties amounting to billions of dollars have gone unpaid, a revelation that generated so much debate and more calls for accountability.

Meanwhile, the other Task forces have also submitted their reports while work has subsequently begun on the white paper for consequent action by the federal government.

Apart from efforts aimed at enthroning transparency, the minister also embarked on gas-to-power reform initiative in line with government's desire of ensuring adequate gas-to-power stations. A 12-month gas supply emergency plan was designed to correct the misalignment and challenges in the nation's gas-to-power aspirations.

The minister noted that the delivery of gas to assure sufficient, uninterrupted supply to power plants in the country was a priority.

During the period, the ministry of petroleum resources, together with the NNPC and the gas producing companies deployed extraordinary measures which included strengthening the capacity and roles of the Gas Aggregation Company of Nigeria Limited (GACN), to accelerate opportunities for quick wins in order to ameliorate the potential gap between gas demand and supply, the result today, is improved power generation which hit an all high peak of 4,502.2MW on December 21, 2012.

Other interventions taken according to the minister was the aggressive infrastructure expansion and gas supply development initiatives. 'Specifically, with these interventions, we are now able to supply gas to the full requirements of Egbin, Sapele PHCN, Delta IV, Olorunshogo both PHCN and NIPP plants and Omotosho PHCN power plants. In addition, we are able to meet the requirements of two out of three turbines in Geregu and one out of two turbines in Sapele NIPP,'' she said.

She assured that 'in essence, Nigerians can expect continued growth over the current all-time peak recorded by the power ministry. Going forward this trend will continue as we finally address the underpinning challenges of the supply system. I am convinced that we have effectively come out of the deep with the Nigerian power situation and would expect a steady upward climb from here.''

The Hydro-Carbon Pollution Restoration Project (HYPREP) was also formed within the year in furtherance of government's commitment to implement the United Nations Environment Programme (UNEP) Assessment Report on Ogoniland. HYPREP has since swung into action and currently putting finishing touches on the blueprint to activate its mandate.

In the upstream, the major achievement was the Nigerian Petroleum Development Company (NPDC) a subsidiary of the NNPC engaged in the exploration and production of crude oil and gas, growing its daily production from 65,000bpd to 130,000bpd in 2012. This followed the assignment of 55 per cent equity stake in 8 blocks, OMLs 4, 38, 41, 26, 30, 34, 40 and 42, whose IOC's 45 per cent equity stakes were divested under the NNPC/Shell/TOTAL/NAOC Joint Venture.

This has resulted in the addition of over one billion barrels of oil reserves and about five trillion cubic feet of gas to NPDC asset base. The company now plans to grow production to 250,000bpd by 2015 based on a growth plan with detailed production and financial projections.

On the Nigeria local content initiative, reforms which would create productive employment for Nigerians by making sure that investment on field development and production bring about predictable employment generation was set in place. The reform is encapsulated under the Nigerian Content Development Monitoring Board (NCDMB) pupilage programme.

More so, Nigerians are now involved in lifting of equity crude, a market worth over $1.3 billion yearly, Nigerians now also own rigs and marine vessels , resulting in the retaining of over $2 billion out of the sectors annual spend of $3.8 billion.