NIGERIA OIL AND GAS INDUSTRY : THE URGENT NEED TO WAKE A SLEEPING GIANT UP!

By Noma S. Patrick

It will be quite incredible to say that an industry that has seen crude oil produced at 2 mil b/d and sold at a price of $120 per barrel with guaranteed buyers across the globe has actually been a sleeping giant. Yet the sad reality is that, just as with many other sectors of the economy like Agriculture, Solid Minerals, Power etc., Nigeria's Oil industry, despite it's relative vibrancy, has indeed been a sleeping giant. One can but conclude then that with the recent free fall of international oil price, it wouldn't be wrong to say the industry is headed towards being a 'dead giant'. The fact is that the potential in this industry is so tremendous and we never cared and still don't seem to care about exploring such; rather we chose and still choose to depend on just the 'crumbs' it has to offer. The good news is that this giant can be awaken and made to reach it's maximum potential and the present administration should not miss the great opportunity that this presents ~ a chance to prove it's worth in the business of 'progressive change'. Having this alone done is enough to place Nigeria at an unprecedented level economically.

The consumption of refined petroleum products in Africa is enormous ranging from PMS, gas, bitumen, synthetic plastics to aviation fuel. Even more is the consumption at this time when every country is struggling hard to develop and advance. This is supposed to be a big opportunity for a country like Nigeria with huge reserves of the most wanted commodity on earth. The great majority of African nations have continued to depend on countries virtually all outside Africa for their refined petroleum products needs. The biggest irony is that these are mostly countries that don't produce crude oil themselves but depend on importation of the crude products. The reversal of this prevailing situation is a chance Nigeria must open it's eyes to and take seriously because it comes with an assured golden prize of taking our economy to an unprecedented vibrant level.

The economic advantages that Nigeria stands to gain within the ECOWAS alone in the business of refining and sale of petroleum products is overwhelmingly immeasurable. Add other African sub-regional market we can tap from and one can clearly see the great economic position that awaits us as a Nation.

We have long depended on countries like America to buy our crude oil placing ourselves deliberately at their mercy so that whenever they sneeze we instantly catch cold. This is what is happening right now. America can't buy from us and the rest of her suppliers any longer because they are now self-sufficient as far as their crude oil needs is concern and the international oil price have no option but to fall freely like a body under gravity. If only we weren't sleeping, if only we apply our understanding of economics and submit ourselves to its motivations and refine our products within our shores and add value to it before selling to whoever need them after helping ourselves to contentment with the products, we wouldn't be in this economic mess we have found ourselves.

Then are we going to fold our arms yet and keep biting our lips in regret while we just look? Not at all! in fact there is no time for regrets right now. The most important thing needed is action by the government and people of Nigeria. Nigeria should be a hub for petroleum refining business and the number one supplier of PMS, gas, aviation fuel, LNG, LPG, petrochemicals and related products to the entire West Africa and beyond. The market is huge. Africa had a total refinery capacity of 3.317 million b/d as at 2011 with an actual throughput of 2.219 million b/d giving out products mostly used up (albeit unsatisfactorily) in far northern and Southern Africa. They still have to import. The rest of Africa like the West, East, central and parts of Southern region wallow in scarcity and high cost of the products as they depend largely and almost wholly on imports of the refined commodity.

The government seriously need to take up this huge opportunity and turn the economy of Nigeria around. Nigeria has to invest heavily in the refining business and knock our foreign suppliers out of business as far as the great majority of African market is concern. We can't continue to depend on these foreign nations to give us both what we don't have and cannot produce and what we have and can produce. We are doing our selves great economic harm to their advantage. We import technological products from these countries; we should not be lazy to the extent of importing even what we have as a natural resource right under our feet. We should not leave the markets of such a commodity like fuel that is closer to us than them for them to be the ones to enjoy such markets.

Nigeria needs to build five more mega refining complexes like the one being built by our beloved business mogul, Alh. Aliko Dangote as urgent as possible. Larger refineries have proven more profitable, feasible and cheaper when the overall operation is considered, this is more so considering the prevailing economic condition of the oil and gas market. Such refineries will produce fuel and other products at a cheap rate to the west African market and beyond and knock out smaller refineries that are more costly to operate as they will ultimately find it impractical to compete favorably with us. We can actually make countries like South Africa and other big African economies that depend on imports from overseas for their refined petroleum products needs to turn to us for supplies. This will go a long way in building the foundation for a stronger economy for the country. It can take us to a position where we may even begin to be the ones importing crude oil for refining from countries around us.

This will also go a long way in supporting other sectors of our economy. It will lead to the supply of diesel and gas at an unprecedented cheap price level to power other sectors of our economy. Electricity will be stable and cheap and investment in other sectors that depends largely on power supply will be spurred. It will increase interest in the fabrication of agricultural machineries for food processing because the demand for such will grow in the face of cheap and available energy. Transporting these produce will come cheaper because fuel for the transport sector will be available at cheap rates. We will produce and process agricultural produce competitively and start exporting these in enormous quantities overseas. It is definitely going to be a blessing to us that will come in thousand folds and even much more unforeseen ones.

With the rise in demand of electric vehicles for cleaner energy use the demand for plastics is bound to go high. Companies like BMW are leading the way already in their Leipzig factory where the entire electric car chassis is made of plastic. There is high likelihood that manufacture of such vehicles will commence in Africa too in the near future since they are simpler as regards the technology involved. Nigeria will then ultimately be the supplier of chemicals for the plastics needs of these and other potential industries. Meanwhile there is already a very high demand of plastic products ranging from containers, PVC pipes to textile materials just within Nigeria. We wouldn't have to jostle to import these again and the pressure on our forex reserve will go considerably lower pushing the value of our Naira up. No Nigerian road will be left untarred as bitumen will be more than enough.

America has and is still strategically trying to cripple the oil and gas industry through technology, a mix of politics and international relations and economic policies. The aim is simple, make crude price go as low as possible so that energy can be cheap for them. They are now going into the business of exporting crude after strategically opening the door for Iran. It will therefore be a stupid and a total economic suicide for us to still depend on them and others for petro-chemicals and other related products.

What should the government do? Removing subsidy and deregulating the petroleum sector holistically is the first and necessary step. Government should not fear the removal of subsidy simply because it is cautious of loosing popularity among the masses. Make laws compelling all oil companies that wish to be given exploration license to build refineries and refine at least 50% of crude they produce within the country. Enter into partnership with the oil and gas industries (indigenous and international) to build refining business replicating the NLNG model. Our locally owned oil companies like SAPETRO, OANDO, FORTE, CONOIL and the likes should be made to understand the gains of investment along this line. The business of producing crude alone is no longer sustainable in the present era. Dangote with excellent business foresight has seen this already. Next the government should produce an action plan that will guide implementation and follow it as if the country is no more without that. Even if this is the only economic plan that this government focuses on it will certainly prove to be worthwhile at the end of the road.