The sensational report the other day that Nigeria lost N523 billion to gas-flaring between 2015 and 2016, is certainly no complimentary news. Data from the Department of Petroleum Resources (DPR) showed $850 million (N306 billion) was lost to gas-flaring in 2015, and Nigerian National Petroleum Corporation (NNPC) latest report put losses to gas-flaring in 2016 at N217 billion. According to the NNPC, oil and gas firms flared 244.84 billion standard cubic feet of natural gas in 2016. Besides, Nigeria lost $14.298 billion between April 2008 and October 2016, which the International Oil Companies (IOCs) failed to pay as penalty for gas-flaring. In a similar vein, the Nigerian Extractive Industries Transparency Initiative (NEITI), in its latest oil and gas audit report, said IOCs failed to abide by regulation stipulating a penalty of $3.5 for every 1,000scf of gas flared in the country. It is estimated that full implementation of the Gas Master Plan, which will reduce gas flaring to the acceptable industry minimum level, will require $25 billion. But decisions on such investments await the passage of the Petroleum Industry Bill (PIB), whose deliberate delay by the National Assembly is quite detrimental to national interest.
Speaking at the Nigeria content investment forum organized by SweetcrudeReports, in conjunction with the Nigerian Content Development and Monitoring Board (NCDMB) at the sideline of the Offshore Technology Conference in Houston, Texas, NCDMB Executive Secretary, Simbi Wabote, said gas-flaring has affected the environment and human health, leading to economic loss. Also, the Deputy Director and Head, Upstream, DPR, Pat Maseli, disclosed that the high level of gas-flaring had led to a loss of 3,500 megawatts of electricity and about $400 million carbon credit value. But the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said the federal government would set up an independent tracking mechanism to ascertain the actual volume of gas being flared in the country. “There is an urgency to drive the policy that will enable us get out of gas-flaring. We are putting up an independent tracking mechanism not relying on figures from the IOCs and the DPR to find out really what is the flare volume,” Kachikwu said.
Certainly, a more focused government, committed to the wellbeing of the people requires no more than a year to produce any law to guide activities in the country’s critical economic sector. Unfortunately, this is not the case in Nigeria. As soon as the government broached in 2000 the introduction of necessary reforms to enhance the impact of the petroleum sector on the economy, NNPC’s joint-venture IOCs rose in opposition and adopted a sinister filibustering to prolong as long as possible the existing state of affairs which favors them to the disadvantage of their host country. So it is that over nine years after the PIB was initially submitted to the National Assembly, the draft remains just that: a Bill. The result is the continuation of the status quo with the attendant inefficiency and corruption in the oil and gas sector.
For instance, after the IOCs sponsored representatives of the sixth National Assembly to Accra, Ghana, a trip that called to question the integrity of members of the legislature, the legislators turned their back on the national interest encapsulated in the PIB and aborted its passage on the self-damning excuse that different versions of the draft law were in circulation in the National Assembly. Today, the 8th National Assembly has before it, a watered-down PIB, which seeks to grant discretionary powers to the executive arm. The present administration is apparently less motivated than its predecessor that initiated the PIB. This well-planted loophole compromises the national interest and it is therefore unacceptable.
The existence of a full-time legislature makes abominable the planned partial surrendering of legislative responsibility to the executive arm through the instrumentality of discretionary powers under any law. For it is tantamount to empowering the executive arm to implement the affected laws selectively and on arbitrary terms by means of unwritten amendments. The corrupt abuse of the discretionary powers given to the executive to issue import waivers, an exercise that has ruined domestic production and destroyed thousands of jobs, is well known to all Nigerians. While the executive and legislative arms are employing delay tactics to foist on the country a Petroleum Industry law that may prove to be hollow, critical issues, such as promoting utilization within the country of large volumes of routinely flared natural gas, have seen little progress beyond the level attained before 2000. Natural gas has innumerable industrial applications. The unbundled Power Holding Company of Nigeria (PHCN) is the largest consumer of natural gas. But gas supplies to PHCN often suffer recurring interruptions owing mainly to backlog of unpaid bills for gas supplied.
Another source of heavy demand for natural gas was meant to be the National Integrated Power Plants. Despite the fact that complete funding in foreign exchange for these plants was provided upfront in 2005, they have fallen far behind their completion year of 2007. The scope of the projects included ancillary works for gathering, processing and transmission of gas to each plant as well as evacuation of power generated to distribution utilities. It is not clear how much work has been achieved though the power plants have been pronounced completed.
In 2008, anticipating that the initial PIB would be speedily enacted into law, government developed the Nigerian Gas Master Plan and Gas Infrastructure Blueprint as vehicles for rapid development of the gas sub-sector. But the abundant investment opportunities in the area did not arouse the desired response notwithstanding government approval of competitive gas-to-power prices and the signing of World Bank Partial Risk Guarantee for gas supplied to independent power plants. The Gas Revolution Initiative, which was announced with fanfare in April 2011, proclaimed that binding memoranda of understanding had been signed by the NNPC with Saudi and Indian firms to execute specific gas-related projects. But the Jonathan administration pussy-footed and doomed the initiative.
Incidentally, passing the PIB will also give birth to a Nigerian oil company that will be expected to hold its own, compete with the IOCs and not become a junior partner in any project jointly executed with another company. Can the expected company find the financial muscle for that role? Yes! The inherent blessing in deriving over 70% of government budget from oil dollar receipts should come in handy. It is also hereby reiterated that when the Federation Account begins to be allocated via domiciliary dollar accounts for conversion to realize naira revenue through deposit money banks, there will accrue substantial amounts of wholly federal-owned external reserves. Part of such reserves may be used as foreign currency loan to supplement cheap domestic bank credit that will become available in the process to enable a focused national oil company to carry out its functions.
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