How Nigeria Can Own Its Oil, By Simon Ateba

Most foreigners who land at the Murtala Muhammed International Airport in Lagos for the first time often silently ask the hardest question to themselves: how can Africa’s biggest oil producer be without electricity even at its largest airport?

Most foreigners who land at the Murtala Muhammed International Airport in Lagos for the first time often silently ask themselves the hardest question: how can Africa’s biggest oil producer be without electricity even at its largest airport?

With billions of dollars every year from black gold since 1958 when Nigerian oil was sold for the first time, how come Nigerians continue to live in abject poverty and are surrounded by dilapidated schools, road network and health centres?

How come 100 million Nigerians out of a population of about 170 million continue to rely on less or about a dollar a day to survive when God in His Infinite Mercies had blessed their land with natural resources not found in many countries around the world?

Or how can Nigeria be producing oil but not have functional refineries to refine its own oil?

The answers are often the same: Gargantuan corruption, mismanagement of resources, outright theft and nepotism all caused by a complete collapse of value systems.

But one area that often angers me is the argument by many officials that Nigeria needs to diversify its economy away from oil. That there has been so much reliance on oil that money should now be invested in other areas such as agriculture to lead Nigeria to growth and prosperity.

At every gathering in Nigeria, especially where government officials are found, diversification is always touted as the country’s solution to development.

It often sounds as if officials are saying Nigeria needs to focus less on oil and more on other sectors to develop.

“The solution is diversification,” President Muhammadu Buhari has stated countless times since he was sworn into office last year.

But it appears to me that Nigeria needs to invest more in oil to develop other sectors of the economy. It seems to me that Nigeria needs to become more serious when it comes to its oil and focus more on that sector to successfully develop other sectors.

In his 2017 budget presentation on December 14, President Buhari announced that the Federal Government would no longer make provision for Joint Venture cash-call from January 2017.

“Going forward, all Joint Venture operations shall be subjected to a new funding mechanism, which will allow for Cost Recovery,” Buhari told a joint session of the National Assembly last week Wednesday.

A cash call in the oil and gas industry is money Nigeria agrees to pay when it goes into joint venture operations with international oil companies.

But for many years, the Federal Government of Nigeria through its national oil company, the Nigerian National Petroleum Corporation, NNPC, has been notorious in failing to meet its cash call obligations. That chronic failure has often delayed many projects, led to arbitral disputes and cancellation of some projects.

By that announcement, it appears to me that the Federal Government is simply withdrawing and would now be investing less instead of more into the critical sector.

To really understand how little Nigeria has invested in the sector, the figures below would explain better.

In Nigeria, there are six petroleum exportation terminals. Shell owns two, while Mobil, Chevron, Texaco, and Agip own one each.

Shell also owns the Forcados Terminal, which is capable of storing 13 million barrels  of crude oil in conjunction with the nearby Bonny Terminal.

Mobil operates primarily out of the Qua Iboe Terminal in Akwa Ibom State, while Chevron owns the Escravos Terminal located in Delta State and has a storage capacity of 3.6 million barrels.

Agip operates the Brass Terminal in Brass, a town 113 kilometres southwest of Port Harcourt and has a storage capacity of 3,558,000 barrels. Texaco operates the Pennington Terminal. The bottom line is all these terminals are owned and operated by international oil companies.

What Nigeria owns are its four refineries, but most of them are not operating at full capacity and even if they were, Nigeria would need more refineries to stop refining its oil abroad and losing the byproducts and millions of dollars in transportation and marketing costs.

In other words, almost all the oil from Nigeria is drilled by international oil companies that also own the infrastructure, including the six petroleum exportation terminals.

To say it candidly, although oil is located in Nigeria, Nigeria does not drill its oil, does not refine its oil and does not invest in prospecting for oil. Nigeria also cannot secure its pipelines.

Now, Nigeria does not even want to pay its cash-call obligations. As a result, oil companies may carry out the entire operations and all Nigeria would be getting is money that may also be stolen.

Things cannot continue this way. Nigeria needs to take charge of its oil and plan for a long term solution.

But all hope is not lost. Nigeria’s proven oil reserves are estimated by the United States Energy Information Administration (EIA) at between 16 and 22 billion barrels. Other sources claim there could be as much as 35.3 billion barrels. Those reserves make Nigeria the tenth most petroleum-rich nation in the world, and by the far the most affluent in Africa.

The Nigerian government would have to decide whether to keep doing nothing or take control of its oil to have enough money to invest in other sectors of the economy. In any case, oil might finish in the next 40 to 50 years, and it would be sad if Nigeria has nothing to show for it.

Simon Ateba is the publisher of TheSimonAtebaNews He can be contacted on [email protected]://www.https://www.todaynewsafrica.com

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TODAY NEWS AFRICA
TODAY NEWS AFRICA
Today News Africa is a widely read and respected U.S.-based publication that addresses the continent of Africa in news to provide relevant information for people and business from around the world.

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