• Sunday, February 25, 2024
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BusinessDay

Dangling on the whims of oil unions

NNPC-tower

Rightly or wrongly, Nigerians and Nigeria’s economy are at mercy of unions in the oil and gas sector.

Recently, there was a mild reminder of this with workers of Nigerian National Petroleum Corporation (NNPC) embarking on strike. Other subsidiaries which include the Petroleum Products Marketing Company (PPMC), Kaduna Refining and Petro-chemical Company (KRPC), Port Harcourt Refining Company (PHRC), Warri Refining and Petrochemical Company (WRPC), Nigeria Gas Company (NGC), Hyson, Nigerian Petroleum Development Company (NPDC), National Petroleum Investment Management Services (NAPIMS), Integrated Data Services Limited (IDSL) and Department of Petroleum Resources (DPR) also joined in the action.

The workers were, among other issues, requesting the management to broker an agreement with them on how it intended to adequately fund the in-house pension fund operated by the corporation. The development followed the withdrawal of the licence to operate the said in-house pension fund by the National Pension Commission (Pencom). As at December 2012, the deficit in the pension scheme was N133.56 billion.

Counting the losses

While the dispute lasted, parts of the country especially Abuja witnessed fuel scarcity and long queues at the retail outlets. As usual, black marketers made brisk business by taking the advantage of the scarcity to sell fuel at a very exorbitant price.

Had the dispute lasted a little longer, it would have affected the export terminals with resultant loss of revenue from non-export of crude oil.

The dispute also led to shortage of gas supply to the power generating firms. Just weeks after hitting over 4,000MW, Nigeria’s overall electricity generation profile dropped to about 3,000MW owing to the dispute. Chinedu Nebo, Minister of Power confirmed that the industrial action affected gas supply to key thermal generation plants in the country, hence, the drop in power supply.

Dispute triggers power crisis in Ghana

The dispute also affected the supply of gas to Ghana. Usually when gas supply is halted in Nigeria, it takes two days for the residue carried in Ghana’s pipelines to be completely exhausted. But while the agitations lasted, the residue ran out.

The situation affected the Asogli Power Plant, which provides 180 megawatts of power, dormant as it depends mostly on gas putting more pressure on generating plants that do not use gas as fuel.

Ghana relies on an energy mix of hydro, thermal and gas, with hydro being the largest source of generation. But two of the main dams, Akosombo and Bui, are operating at critical levels as water in the dams are now rising slowly following rains in the catchment areas of northern Ghana and Burkina Faso mainly.

Gas supplies from Nigeria to Ghana were restored only recently after an eight-month break, caused by the destruction of gas pipelines in Togo by a ship.

Blackmail or pragmatism?

There have been situations when leadership of oil unions was indistinguishable from the political class going by the issues they take on.

In 2007, the sale of the refineries were reversed due to pressure by the oil unions. Yet in 2011 alone, Nigeria reportedly spent $760 million on refinery maintenance without any impact on the output and capacity of the refineries. Meanwhile, Nigeria continues to import about 80 percent of its refined petroleum products requirement. In five years since that reversal, Nigeria has spent over US$30 billion in oil subsidies.

In 2008, Nigeria lost 886,000 barrels of oil per day to an industrial dispute by an international oil company who were protesting for the recall of some of their staff. That disputed lasted for one week with an estimated loss of about 6 million barrels of oil or about $720 million going by $120 per barrel crude oil was trading at the international market then.

In January 2014, the oil unions threatened a nationwide indefinite strike over the plan by the government to privatize refineries following the recommendation of a presidential audit of the plants, citing inadequate state funding and what it described as “sub-optimal performance.”

Nigeria’s four oil refineries, with a combined refining capacity of over 445,000 barrels of oil per day should easily meet the current domestic demand in refined products of about 270,000 barrels of oil per day according to Energy Information Administration (EIA).

FRANK UZUEGBUNAM