By Jude Inyangetoh
In considering the present posture and past efforts of government at addressing the lingering crisis of the Niger Delta which fundamentally revolves around militancy and pipeline vandalism. It might be pertinent to ask: Is the Niger Delta problem truly devoid of solution? Has successive administrations ever been sincere and forthright in their approaches to addressing the problem? How does the crisis impact on the journey of our nationhood? Is military confrontation the way out of this logjam? How about the recent calls for dialogue as a means of resolving the impasse?
Indeed, the all-in-one answer to the above posers is well captured in the dictum that, ” Every locked door has a key”. Just as it is true that every problem has a solution; the Nigerian problem cannot be said to be devoid of solution. Be it the Niger Delta debacle, Boko Haram, threat to secession and even the spirited calls by well-meaning Nigerians for the restructuring of our present system of government. We can gallantly exit our parlours state and rise to greatness if our leaders would muster the political will to do the right thing at all times.
THE PROBLEM WITH NIGERIA
One way of doing the right thing when necessity calls is to understand the wisdom of “using what is available to get what is needed at the most efficient cost”. But from every indication, it appears to me that the Nigerian State has wittingly or unwittingly failed to tap into this sound concept of development. Our government seems to dignify the warp notion of building from outside than from within. Whereas our government wishes to ‘Leapfrog’! She has however undertaken a backward and ominous course from the “unknown to the known”, as against the forward and progressive course of stepping from the “known to unknown”. This is the problem with my country!!
THE U.S EXPERIENCE
Let’s journey into history and find out how the United States of America developed her oil refining potentials to become self-sufficient. Prior to the 19th century, Petroleum was known and utilized in various shades in Babylon, Egypt, China, Persia,Rome and Azerbaijan. However, the modern history of the petroleum industry is said to have begun in 1846 when Abraham Gessner of Nova Scotia, Canada devised a process to produce kerosene from coal. Later in 1854, Ignacy Lukasiewicz began producing kerosene from hand-dug oil wells near the town of Krosno, Poland. The first large petroleum refinery was built in ploesti, Romania in 1856 using the abundant oil available in Romania.
In United States, the petroleum industry began in 1859 when Edwin Drake found oil near Titusville, Pennsylvania. The industry grew slowly in the 1800s, primarily producing kerosene for oil lamps. However, prior to World War 2 in the early 1940s, most petroleum refineries in the U.S consisted simply of Crude oil Distillation Units(CDU) also known as Atmospheric Crude oil Distillation Units. Later on, other components were added like the Vacuum Distillation Units as well as the Thermal Cracking Units. In summary, all of these constitute the basic component structures required to set up a cottage refining business as presently found in the Niger Delta region of Nigeria. It was on this crude technology that the U.S leveraged on to bring about the present 21st century technology that is hi-tech, more sophisticated and very costly to run. But quite typical of a scenario where humans can draw good out of a pretty bad situation. The U.S made tremendous good out of the apparently bad war situation by using the available human and material resources at that time to kick-start the booming enterprise of Crude oil distillation. In what appears like a miracle, within 5 – 10 years after the war had ended, almost all the local distillation enterprises in the U.S had become commercially viable. Today, some of these companies that started as mushroom business concerns have grown so rapidly to become key players in the global refining industry. As of January 1, 2016; a total of 141 petroleum refineries were in operation in the United States.
BUILDING ON QUICK SAND
Back to the subject matter. Whereas the Federal Government has an ambitious plan of setting up mega hi-tech refining facilities across the country. Government has primarily failed to address the very problem which has made it practically impossible to safely deliver our Crude oil at the various refining locations in the country.
Whereas some people have again voiced their concerns for the re-award of pipeline surveillance contracts to ex-militants and Community Chiefs as a way out of the crisis. The truth is that, this may offer some sort of reprieve in the interim. But it will certainly remain what it is – a quick fix measure and not a lasting solution.
Whereas our government hopes to Leapfrog; Successive administration have continued with the established tradition of frittering away our foreign earnings in the guise of importing petroleum products and whereas our country is blessed with surfeit of local potentials which can adequately be harnessed to provide for our domestic consumption and even for export within the West African sub-region.
Whereas the 41- items currently banned by the Federal Government gross less than 35% of our Forex, one wonders why petroleum products which draws more than 65% of our Forex is deliberately excluded from the list of import-banned items.
Whereas Government professes the need and urgency to grow the local industries, one does not understand its paradoxical stance in disallowing small-scale investment in the petroleum refining business.
A double-speak attitude of government smacks of insincerity and the ill-desire to do the needful. It hampers growth and development.
THE SELF-IMMOLATING WAR BY THE STATE
There is no gainsaying the degree of devastation the incessant clampdown on the so-called ‘illegal refinery operators’, has visited on our environment and ecosystem in general. Each time any of the marked ‘illegal refineries’ is uncovered. The facility will be targeted and invaded by agents of government particularly the NCDC,Navy or Army. Products ranging from PMS,AGO and DPK are often seized and in the most reckless and outrageous manner, spilled on the earth and ignited with fire to burn to ashes, not minding the attendant negative impact this unwieldy exercise could exert on the environment. The dark cloud of smoke that results from the process always carry the weight of impact similar to that of a War missile dropped on a battle field. This sadly has become a kind of daily ritual in what the State as termed ‘a fight against vandals’. Consequently, the Niger Delta has been turned into an assault ground where she has been economically ravaged and ruthlessly subjected to a slow but steady destruction of her rich potentials.
A recent SOS message sent to President Muhammadu Buhari by the President of Ijaw People Development Initiative (IPDI) – Mr. Austin Ozobo reads thus: “Operators of local refineries are not oil thieves neither are they pipeline vandals. They buy to refine. They are different from oil thieves,vandals and saboteurs who are always seeking for pipeline repairs and surveillance contracts. Oil thieves are those who use vessels and barges to siphon Crude from pipeline for export. These group of persons include NNPC top staff, top politicians and top Army and Navy officers.” According to Mr. Ozobo, he claimed this is the source where local refinery operators get their products to refine. “If the local refineries are allowed to thrive, the enterprise can help to checkmate the problem of militancy and piracy in the region as thousands of jobless persons would be gainfully employed in the business. Therefore Government should regulate instead of destroying the enterprise,” he noted.
As a matter of fact, the so-called ‘operators of illegal refineries’ may not be what they are said to be. Rather they are very ingenious and resourceful Nigerians who crave for a commodious and enabling environment to ply their trade as well as a favourable government legislation to urgently legitimize their businesses.
From available statistics, more than 10,000 Cottage Refineries has so far been destroyed by government in the last 17 years. If a proper regulatory framework had been put in place from the outset,it does imply that over 10,000 Cottage Refineries would have gained root within the Niger Delta and across the country. Judging from the United States experience, the positive impact of such micro investments over a period of time can least be overwhelming. There is no doubt the fact that if allowed to thrive, such budding enterprises have the potential of growing in leaps and bounds and undergoing the full transformation chain by metamorphosing from Cottage to Modular and eventually becoming big industrial concerns. In business, this is called, “the art of starting small to grow big.” It is the simple but effective development strategy required to efficiently address the myriad of problems in the Niger Delta region.
BANKING ON A DISINCENTIVE
Even though Government claims it looks forward to seeing investors come in to explore the huge benefits of the oil refining business in Nigeria. The truth cannot be denied that the current disposition of government as it concerns the development of this critical sector of our economy is anything but inviting. The criteria for award of operational license is as exorbitant as it is non-achieveable .
Presently, an interested development partner is required to part with a whopping Fifty Thousand Dollars (50 US Dollars) as statutory application fee. Another Five Hundred Thousand Naira (#500,000) must go to the DPR as service charge. While the DPR also retains a refundable deposit of One Million Dollars (1,000,000 US dollars) for every 10,000bpsd capacity Refinery. By implication, if one seeks to establish a 10,000bpsd Refinery which cost about 35 Million US Dollars. An investor would require at least 40 Million US Dollars to gain acceptance into this highly exclusive business club. At the conversion rate of #370 to a Dollar. This translates to a staggering sum of #14.8 Billion as start-up capital.
From the foregoing analysis, it becomes crystal clear that the current policy is a huge disincentive. No investor whether foreign or local would dare to invest under such harsh and unrealistic condition. Perhaps this may be the reason why many local investors who had gained operational licenses in the last ten(10) years have yet to commence operation.
THE WAY FORWARD
It is in the light of the above that the import of a new investment policy tailored to drive the development and growth of the petroleum distillation enterprises dotting the Creeks and Plains of the Niger Delta cannot be over-emphasized. Below are the salient benefits it portends:
1) It will practically address the problem of pipeline vandalism.
2) It will allow for the availability of petroleum products for local consumption and even for export within the West African sub-region.
3) It will sound the death-knell for the undying regime of subsidy payment which is now known as ‘Price Modulation System’.
4) The bulk of foreign exchange frittered away on the importation of petroleum products will be reserved and partly channeled into the development of critical State infrastructure.
5) The Naira would considerably appreciate or gain value as a result of the expected increase in foreign reserve.
6) A swap deal with local refinery operators would necessitate a crash of the price of PMS in our local market. It can get as low as #30.00 per litre since the current refining cost of PMS per barrel of Crude is still below the 15 dollar mark.
It is pertinent to note that the current high cost Nigerians are paying for PMS is not the actual price of the commodity. Government mercenaries in their characteristic manner have held on to their pot-pourri of levies and sundry charges to continually rip-off the hapless and undiscerning populace. You will hear of administrative cost, bridging cost, petroleum equalization cost and even the cost of ferrying our own Crude to and from the refining port abroad.
7) In other developed climes, Crude oil is to local refinery operators at international rate. A swap deal is worked out such that the commodity is exchanged at a cost that would guarantee that the final products get to the citizens at the most affordable price. That is why a country like Lybia which is still at War can afford to provide this all-important commodity to her populace at a paltry #23.00 equivalent of the US dollar.
8) It will generate massive employment opportunities.
9) For a government that is in a hurry to diversify her economy. I think it stands to benefit more if the oil distillation enterprises in the Niger Delta and across other parts of the country are allowed to gain root and develop under strict government regulation and supervision.
10) It will provide a multiple stream of income to government and in the long run set the stage for foreign investors to come in and partner with successful local investors for further expansion and growth.
All of the above constitute the ten(10) outstanding benefits that can be gleaned from this practically home-grown initiative designed to halt the steady but gradual destruction of the Niger Delta nay the Nigerian State. We can achieve a lot more if we start small to grow big!