The oil and gas industry remains the mainstay of the economy. This is why issues around it have effects – negative or positive – on the nation. A knotty issue that has always generated controversy in the sector is the allocation of oil blocks and the renewal of licences. In this encounter with reporters in Abuja, the former Minister of State, Petroleum, Dr. Emmanuel Kachikwu, revealed that the need to clear the Augean stable in the sector was a major factor for the President Muhammadu Buhari administration’s non-allocation of oil blocks. He spoke on this and other issues. MUYIWA LUCAS was there.
WHAT hope for the oil and gas industry in the coming years?
The industry’s future lies in private sector refining and this is why the Federal Government is creating an enabling environment to support investment. As a government, we are working hard outside the public sector to support private initiatives and investments like the Dangote Refinery project. We have also tried to use the modular refinery- a concept we used to push for peace in the Niger Delta; we are happy that it is currently working successfully. Three of these are nearing production point; about seven others are nearing FID (Final Investment Decision). So, if those 10 refineries come on board in the next two to five years, that’s another 250,000 bpd refining capacity to be added to what Dangote refinery will produce.
These modular refineries, when completed, will be big assets to the country. How do we make them sustainable?
I look at refineries from volume capacity, not physical assets. On a longer time basis, the refinery is also an export earner; we need to be able to supply products to the rest of West Africa, East Africa and Southern Africa; when we achieve this, they generate revenue and become sustainable. We are almost at the threshold of signing a Memorandum of Understanding (MOU) with South Africa which will not just cover refineries but also cover pipelines and liquefied natural gas (LNG); these are huge investment.
Oil block allocation seems to have been stalled in the administration. Why has there not been any allocation in the last four years?
Yes, it is true that no oil block has been given out in the last four years; we did not even do marginal fields. The President’s belief was that we should first clean up the sector. Giving oil blocks to Nigerians is not a bad thing. Who else should get it? Oil blocks obviously take some level of connection to get, no doubt about it. It also requires some level of funding, that is, money to develop the blocks. You need some level of connection to be able to reach out to Joint Venture partners who will bring in the technical expertise. All over the world, those sorts of opportunities are given to people who have come into the upper echelon of society. If you do not have these qualities, you will likely not be able to meet up with the requirements that the Department of Petroleum Society (DPR) sets. So, I do not think it is a bad thing, but what we need to do is to make sure that those who do get it will actually work the field. They will have to pay the right royalties and taxes. The opportunity should be open to all Nigerians; some of the people who own working oil blocks today were not there 15 years ago. One of the things we have done with marginal fields is to develop guidelines on the basis of technical skill, financial capability, work programme that is monitored and efficient. And if somebody has done well in his own marginal fields, he qualifies to be given more considerations to get more.
There were instances where licences for oil blocks were revoked even before their expiration.Was this not an anomaly?
If you fail in what was given to you, then it is time to retrieve it because that is an asset that nobody is doing anything with. Some Nigerians get oil blocks and treat them like a family picture that they just hang in the house. It does not do anything. They begin to run all over the place to get a buyer for the licence. They can go on with this till eternity. There was a time I issued a warning that unless those concerned went back to their blocks and began to work it we were going to take back those blocks. Some of them harp on the time frame of their licences and say they still have a long time to begin work on the block; this is right in a sense because you cannot breach contracts. However, for such people, when it comes to the time for licence renewal, if you are not meeting your work obligation on the block, we will take it off you and give it to individuals who would work the field. The government is losing money for every idle oil block.
How many oil blocks are due for renewal?
I do not have the numbers off hand. You know we had an early renewal programme to raise N1.80 billion for the government and most of those have been renewed. The ones that are within the frame of 2020-2021 have already been captured by the early renewal. The ones that are after that we have not dealt with. We did close to about 40 renewals under the early renewal programme. The essence of the early renewal was to get money upfront for government to meet its financial obligations.
What is your take on the Petroleum Industry Bill (PIB)?
The Bill will limit the size of acreages for splitting, which will allow more investors to come in. It also protects the rights of those who have been given licences because if we don’t have a safe business environment we can’t raise money, but ultimately a law is as good as its enforcement. As Nigerians, we ought to be willing to make our country grow which will never happen if we are always looking at the short-time growth.
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