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‘Why it’s difficult to operate local refineries in Nigeria’

What was your experience following the licence you had 17 years ago to refine petroleum products in the country? In 1995 General Sani Abacha granted…

What was your experience following the licence you had 17 years ago to refine petroleum products in the country?

In 1995 General Sani Abacha granted the first private refinery license. The company was known as Brass Refinery Ltd at Okpoma, Bayelsa State.  The three conditions were that we were going to source crude at the international market rate. There was no guarantee of any crude from government. Secondly, certain percentages of the refined products were to be consumed locally, but the refinery was supposed to be export-oriented. There was nothing like subsidy in the agreement.  We were to sell at prevailing local price. Thirdly, as at that time, there was no tax concession. We were supposed to pay tax to government.   We received over 37 applications for financial and technical  partnerships. These were from known companies based in America. We also got proposals from Europe and Asia. What we said at that time was that if government said they were going to source for crude at international price and there was no guarantee for crude by the government, they should allow them sell at 100 percent of whatever product that is being produced at international market. And if government for whatever reason, have a shortfall at the local refineries, government should purchase the product from them at equally international price. So, there was a stalemate and no investor was ready to invest.

How do other refining companies operate in other parts of the globe? Were the conditions that Sani Abacha gave different from what operates in other oil producing countries such as Iran and Iraq?

From the information we gathered, some of the refineries in other countries were licensed for the exploration of crude. Similarly, the management of these private companies requested General Abacha to grant them a production licence. The government of which Chief Dan Etete was the petroleum minister said no, that the exploration licence would not be granted. And the cost of building a new refinery, a green field refinery which we  gathered at that time was in the region of 2 to 2.5 billion for one to produce 100 000 barrels per day. The chairman of the board of directors then was late Chief Benami Abah. Mind you, Abacha insisted then that the promoters must cut across all ethnic regions in Nigeria. Ali Munguno, the first oil minister of Nigeria, was a promoter of that refinery. The promoters had a reflection of who was who in Nigeria as at that time. But the refinery didn’t work. Nobody was ready to put his money in a regulated sector


But if you had the liberty of producing, why couldn’t you have done that and sold outside the country?

The Port Harcourt Refinery as at that time was equally a 100, 000-capacity refinery, mind you. That refinery was built by Shell in the 1950s. It was under the sharing agreement of some oil majors and Nigeria Oil Corporation which gave birth to NNPC. The refinery was handed over to the government of Nigeria in 1972. One of the key managers working in Shell at the Port Harcourt Refinery that time was the pioneer manager of the refinery. He was supposed to be the pioneer manager of the proposed refinery. At that time in 1995, the capacities of Nigerian refineries were going down. Abacha was left with no option but to regulate. He knew the fuel subsidy was bound to cause problems. Apart from that he had cabals to fight. So he thought of granting licences for private investors to build refineries.


How do you explain this question of ‘cabal’ and the inability of successive governments to face it?

Let me tell you something most Nigerians do not understand. In 1920, there was a conference. At that conference certain things were articulated by the league of oil producing countries. Until the 1930s and the 1940s, oil exploration had started going on in the Middle East. And Western economies, in fact all the economies, were now relying on oil from the Middle East. Already, Western powers were considerably weakened by the powers of other nations. So, the present state of Israel was as a result of 20 per cent of what was agreed at the conference. Why was that so? Oil. The issue of oil always has international dimensions no matter how you look at it. Go to Columbia or Mexico; you will find out this is true.


If countries like Iran, Saudi Arabia, Kuwait and Qatar can manage it, why is it difficult for Nigeria to do so?

Let me give you a simple example. The state of Israel is as a result of 20 per cent of what was agreed at that conference. This is because oil has played a part in changing the minds of Western powers. Now, when you talk about the management of oil resources, even George Bush (President of United States between 2001 & 2009) acknowledged that the war in Iraq was all about oil. The economy of the world is being chiefly driven by oil. Now, when you talk about the management of the so-called cabal in the oil sector, it is not as simple as most people think. If you know about industrial psychology and a little about multinational politics, you will know that it is very intricate. These multinational cabals can bring down a government any point in time. In Nigeria, there are lots of forces at play. We have the local players as well as the international ones. Of course, the local players are causing infinitesimal problems through the bogus problem called over invoicing. You will find out that about 50 percent to 60 of the illegal profits is what goes to the international cabal. The people who refine the oil are the same people who ensure that the refinery of their country cannot work. The downstream sector of the oil industry provides about 90 percent of the work force. The upstream sector is more technical. These are the same people who perpetually ensure that your refineries do not work.


What about the problem of inadequate manpower in the upstream sector? Does that account for why the refineries are not working?

That is not the real reason. A lot of money is paid for refined oil. When you refine a barrel of crude and sell of course you get about ten times the value of the cost of production. In terms of employment, it gives direct and indirect employment. Of course, the local and international cabals do not work in isolation. They work with some arms of government. They have links in governments, both the politicians and senior public servants. Apart from a lot of money, other interests are involved. If they see you as an obstacle to their peculiar interests, you are cut down.


Must government surrender to this cabal?

All of us know what is happening in countries like Mexico and Columbia. It is not a problem of government surrendering to the cabal. Part of the security agencies are equally in the cabal. It is like a government divided against itself. It is not peculiar to Nigeria. The government security agencies as well as the public servants are part of the cabal. If they see you as an obstacle you will be shown the way out. It is a gradual process.


What is the solution to the problem?

Nigerians are suffering. There are two types of pains: that of discipline and that of regret. Every year we have graduates, even those that could not proceed from secondary school and these are increasing by the day and are being introduced into the already over-bloated labour market. It is something all of us have to join hands to address by making sacrifices. For example, if I am used to driving two cars, I now cut it down to one. One important issue is don’t give me a fish. Teach me how to fish, so that the rich, the poor, the young and our children and our children’s children will have jobs. And our country will be better for it. There is no time to withdraw the subsidy other than now. It is only about having courage to do the right thing.


Why take a decision when you are still negotiating with labour?

There was communication gap between the government and labour. What has happened these past few days shows that the president still has a whole lot of job to do. The minsters and handlers of the president did not do a good job. The handlers of the president, including his ministers, should have gone all out to explain to the masses, especially the lower class in a language that they would understand. The other day the president came out to deny that he had travelled to South Africa amidst the crisis rocking the country. Was it his job to debunk such allegation? On the part of people such as the petroleum minister, the CBN governor, the finance minister, there is much to do. It is a good policy not being adequately explained. But it is not to say that we will now throw away the baby with the bath water.


What should the country do about the general insecurity in the land?

When people make inflammatory statements it becomes a challenge. It is time for Nigerians to come together at this point especially people who have not been talking to start to do so. The point boils down to dialogue across board irrespective of which divide you belong. This nonsense has to stop. Where do you expect someone who has been in Kano all his life to go to? We have to live together no matter what. The intelligence outfits are doing a fantastic job no doubt. The security community is equally doing a good job. The budget for security is justifiable if you ask me. The issue we are having are entirely new as far as security is concerned. When you talk about terrorism it is a different ball game. These are people you cannot see. For you to turn a bad guy into a good guy you have a lot of work to do. You have to be attentive. You have to work on his heart and mind. Those are issues part of the security budget is meant to address. You have to go to their communities and talk to them. For some religious leaders to say defend yourself, how do you do that? I want to believe that with time Nigeria will get over its security challenges.

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