The Federal Government restated that it is not going back on its plans for illegal crude oil refiners in the Niger Delta, to be absorbed in the proposed modular refineries stating that it is working hard to ensure that the initiative come to fruition.
Speaking at the Nigerian Association for Energy Economics/International Association for Energy Economics’ (NAEE/IAEE) 10th Annual International Conference in Abuja, Minister for State for Petroleum Resources, Mr. Ibe Kachikwu said that the Federal Government is committed to the initiative it is pursuing to incorporate the illegal refiners into the new modular refineries scheme.
Kachikwu, who was represented by the Executive Secretary of the Petroleum Technology Development Fund, PTDF, Mr. Bello Gusau, said that the Federal Government in the past few weeks, had a constructive discussions with some of these illegal refiners.
“The government is assiduously working to ensure that this initiative is carefully implemented without any hindrance,” Kachikwu noted.
Also speaking, President of NAEE, Mr. Wumi Iledare, lamented that the unparalleled volatility in the foreign exchange market in the country, the collapse of crude oil prices, and insecurity of assets in the Niger Delta continue to pose a challenge to managing the cost of petroleum operations in Nigeria.
He disclosed that the low oil prices would have offered a comparative advantage to Nigeria’s economy, if the country had harnessed the inherent economic potentials in the entire petroleum industry value chain long time ago, before now.
However, he noted that the potential to grow the economy using oil and gas is still there to grab, adding that the Federal Government only needs to spread its net wider for competent technocrats with good grasp of the challenges and opportunities to pilot the economy accordingly using the oil and gas industry as an intermediate sector.
In addition, Iledare commended the Federal Government for the cash-call-exit-agreement, stating that it is a positive development as the provisions for the Joint venture (JV) cash call has been an Achilles Heel in the Federal budget process and performance over the years.
He advised that the new attempt to fund JV cash call should be reviewed periodically within the context of the overall goal.
He said, “Perhaps a pseudo-Production Sharing Contract (PSC) or at best a form of overriding royalty-funding arrangement is worthy of consideration in order to retain a participatory interest in the JV agreement without the obligation of cash call for energy security reason.
“What this means for the economic metrics and government take requires a review of the fiscal terms such as royalty rate and capital cost recovery mechanism. Unfortunately, the terms are not made public yet for proper economic analysis in terms of the implications on industry performance and outlook within the context of Pareto Optimality condition required for the maximization of society wellbeing using petroleum resource development.
“To a large extent, some would argue that the new deal, if it is as portrayed in the papers, may be preferred to the carry or modify carry agreement of years past. But time will tell.”
He disclosed that had the Federal Government vigorously pursued the industry reform over the years, the need to cut the cash-call exit deal to ameliorate the cash-call toxin in the Nigerian economy and oil and gas industry performance over the years would have been circumvented.
“Thus, the need to pass the Petroleum Governance Bill cannot be overemphasized. It is the key, in my opinion, to addressing the apparent lapses and weaknesses of the Nigeria oil and gas industry governance within the context of global best practices,” he said.
