Follow Us on Google
ONE of the problems besetting the Nigerian oil sector is the refining of petroleum products by International Oil Companies (IOCs) operating in the country without investing the money into developing the sector. But, the Federal Government has warned the oil majors to stop such practice which it says amounts to treating Nigeria like a “trading colony”.
Government is right and we support every measure that will make oil companies to invest their resources in the sector and refine locally if they still want to retain access to government patronage. Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu gave the warning in an interview with Financial Times of London.
According to him, some of the world’s biggest independent oil traders had benefited for years from exporting Nigeria’s crude and selling to the country refined products without ploughing back money into developing the sector.
Undoubtedly, international oil companies are sabotaging Nigeria’s oil sector, and government’s warning reflects the frustration of stakeholders in the oil industry. It is a legitimate concern.
One of such damaging effects of not refining petroleum products locally is the present dysfunctional state of our refineries that has made Nigeria wholly dependent on big, independent oil firms.
Government’s warning has become even more relevant in view of the continuing fall in oil prices in the international market, with Nigeria’s economy severely under threat. It is saddening that for many years now, Nigeria has relied heavily on a few international trading oil firms for refined fuel imports.
Although some of them claim they have invested in infrastructure in the oil sector, they have also complained about the difficulties of doing business in Nigeria, as well as being owed billions of dollars in arrears for Joint Ventures with government. As a result, many of them are shifting their focus offshore, citing security concerns and payment problems.
Besides, indigenous oil companies complain that foreign oil companies are stifling attempts by indigenous service firms to take full advantage of the Local Content Law that was enacted by the National Assembly in 2010. Though the law made it mandatory for the use of competent indigenous oil firms and personnel in all projects executed in the oil sector in a bid to halt capital flight, boost indigenous manpower and capability of local firms, the IOCs have hampered the realization of this lofty objectives.
While government’s warning to the oil majors is timely, mere expression of frustration is not enough.
Let this provide a fresh opportunity for government to package a comprehensive policy that will make it mandatory for international oil firms to invest more in refineries and pipelines. Nigeria should also seek crude-for-loan deals to monetize its untapped oil resources.
We agree that refining locally is one of the key measures to develop and sustain the oil sector, just as bringing in foreign investors is critical. All the same, the attitude of oil majors should serve as a wake-up call in the efforts to rehabilitate our processing plants.
A ‘carrot-and-stick’ policy may work in the short-term in dealing with the IOCs. However, the truth is that government cannot force a company to invest. The right thing is to persuade them to see the benefit of investing in the energy sector. But creating conducive environment for investment is crucial. And we urge government to do so without further delay.
This is the time for the National Assembly to swiftly pass the Petroleum Industry Bill (PIB) that has been with it for years. Overall, government should take a detailed look into the challenges that have limited the growth of the oil industry. These include operational costs, security, poor policy implementation, professional knowledge gap, contracting process, low capacity building, among others.
We, therefore, call on all stakeholders in the oil and gas sector to concertedly tackle the challenges facing the sector, particularly the issue of local crude refining.
