Resolving Niger Delta militancy will enable Oil and Gas industry thrive – Fawibe
The energy industry has been hard hit by the crash in the global oil price and the militancy in the Niger Delta. The Chairman/CEO of International Energy Services Limited, Dr. Diran Fawibe, in this interview with Simon Ugwu, proffers solution to the problems.
The Federal government targeted 7,000 megawatts of electricity generation by end of this year. The year remains two weeks to go and generation averages only 3,000 megawatts. Will this target be achievable?
What do you think the government and other stakeholders should do to improve power supply on sustainable basis?
Well, the issue here is not about installed capacity. That is, if gas is available to supply to power plants or if there is enough rainfall for the hydro dams, but if these are not available it cannot be achieved. So, government’s projection is based on optimism that, all things being equal, the gas and enough rainfall to power the hydro dams will be available. But if gas is not available there is no way you can achieve the projected megawatts of electricity supply. If there is enough gas for the power plants, meeting 7,000 megawatts will not be an issue. But availability of gas has been a major problem. The Generating Companies (Gencos) and the Distribution Companies (Discos) have been sensitized to generate and distribute power supply. So also it is not that there is no gas in the country but the militants in the Niger Delta in recent times have been vandalizing the gas pipelines and when it is fixed they vandalize it again and again. This is a major setback to power generation in Nigeria. I have not seen this type of sabotage of the economic system in any other country except Nigeria. So it is worrisome. When you look at this issue you find out that the fundamental elements to make these things work are not there. The government has to dialogue with the militants to stop bombing of the gas pipelines so that the oil companies will continue their operations in the oil fields. Once this is settled, there will be no problem of gas and meeting 7,000 megawatts target won’t be an issue.
Electricity generation and distribution companies say debts amounting to about N1 trillion militate against their anticipated performance and the chunk of this debt is owed by government ministries, departments and agencies, what is your take on this?
It is very interesting that the government has decided to pay N100 billion out of what the government ministries, department and agencies owe. This has been announced and if the government backs up the announcement with action, the Gencos and Discos will be able to plough back this money into further development and the economy will be better for it. It is not just about paying this; government must be able to set up a mechanism to pay for electricity consumption by these government ministries, agencies and departments on a continuous basis. It is not after paying this you go into another round of owing the Discos. It will not work.
Vandalism of power equipment and energy theft through bypass of meters and illegal connections has become a challenge. What is the way out?
The Gencos, Discos and the stakeholders in the power sector don’t have the authority to enforce the law. The government has given the authority to the law enforcement agents to take punitive measures against those who have violated the law in terms of theft and vandalism. The law enforcement agencies must do their work. But Nigerians should think twice. Why engaging in self destruction? There should be a change of attitude but in any society you always have a case of people who are deviants. So, this is where the role of law enforcement agents comes to play; not only the police but the law courts. If anybody is arrested for vandalism and is charged to court, the court should adjudicate the case speedily. So that justice takes its course to serve as a deterrent to others.
Oil production stands at 1.6 million barrels per day while targeted production is 3 million barrels. What can the government do to optimize production?
Nigeria is currently producing average of 1.6 million barrels a day not because we don’t have the capacity to produce more but simply because of the restiveness of the militants in the Niger Delta. So the militants should be engaged in dialogue to stop the vandalism in the Niger Delta. It is heartwarming that Nigeria has been exempted from production cut down by the Organization of Petroleum Exporting Countries (OPEC), which is the consideration of the serious economic challenges being experienced by Nigeria. Last week, the government also took another step by exiting the cash calls obligation. So, oil producing companies will no longer have any constraint in carrying out oil production as long as the market can absorb it. In the past, because government cannot cope in its own share of the cost of production, it affected the operations of the oil companies. All things being equal, we will be producing more than 2.2 million barrels projected per day in 2017. The production capacity will increase substantially as there will be resources to operate seamlessly by the companies. All these revolve around peace in the Niger Delta. So hopefully, next year will be a better year.
When there is fall in the oil price as being experienced now, Nigeria is hard hit. How can the government overcome this challenge in the future?
We should learn a big lesson from what happened last year and this year, we had the problem of eating with our whole fingers in the mouth. We were not making provision for the rainy day. The state governors were agitating to share from the excess crude account and also from the federation account. Though, they were warned. They turned deaf ears to the warnings by former Finance Minister, Dr. Ngozi Okonjo-Iweala. It was a tug-of-war to establish the Sovereign Wealth Fund.
While some other countries have up to $700 billion in their Sovereign Wealth Fund, Nigeria could only boast of a little over $1 billion. So we have to save for the rainy day. We have to be judicious in managing the resources. So, apart from stopping the stealing, we should also stop reckless spending of our resources that should be invested in strategic projects that will enable the economy to be self-sufficient. We should pursue aggressively, the non-oil sector development so that some of the things we were spending our foreign exchange to buy will be produced locally. For instance, if we achieve self sufficiency in food production, we will save the foreign exchange spent on importation of food. We should internalize in our people that we should produce what we need and that will have the multiplier effect on the economy. So, that is the only way we can develop. The crash in the global oil price we have been experiencing since 2014 is a cycle. One cannot say it will not happen again. Unfortunately, this time around, the crash in the global oil price is a prolonged one. One may not see the global oil price rising above $100 per barrel for some time. The question is, have we learnt enough lessons from the recession? This is the time to prepare for the next recession because it will certainly happen again.
The Federal government through the Nigerian National Petroleum Corporation (NNPC) still subsidizes petrol. Do you subscribe to full deregulation of the downstream sector?
If the government wants the downstream sector to be efficient and to run its affairs positively, it must be deregulated. It seems to be on the path now. But the fear is that we may go back to regulate the sector. But if the government is disciplined enough to say backward never, forward ever, it won’t go back to regulate the downstream sector. The challenge may be high but in the long run, we shall be better for it.
Can you talk about or assess gas development and utilization and gas-to-power?
Gas to power is one of the objectives of the federal government. We have enough gas endowment if all the problems militating against the production are taken care off. We have associated gas which comes with oil and non-associated gas that can be produced. Government has been planning that there will gas bidding round. This means that deliberate effort will be made to explore for gas. The production of gas must be ongoing because it is sustainable. If there is peace in the gas-producing areas, it is a success factor that will enable the generation of gas for power. We have to achieve that before anything else. Once we are able to achieve that, we will be able to provide enough gas for Nigerians.
