Nigeria’s current situation as a net importer of petroleum products has robbed it of gains from high oil prices which crossed $100 per barrel last week. But Timipre Sylva, minister of State, Petroleum Resources believes that the country could become a net exporter of these products by 2023, in view of structures being put in place by government and private investors. Sylva shared this optimism in an exclusive interview with a BusinessDay team, comprising JOHN OSADOLOR, ONYINYE NWACHUKWU, TONY AILEMEN, and CYNTHIA EGBOBOH in Abuja. He also spoke on other critical issues like the thorny fuel subsidy and proposed amendment of the Petroleum Industry Act. Excerpts:
We would like you to bring us to speed on the latest amendments to the Petroleum Industry Act
The Petroleum Industry Act (PIA) has been passed, and therefore totally out of my purview now. The drafting was within my purview but once it was moved to the National Assembly and assented to by Mr President, it is no longer in my purview.
We have proposed some amendments to the Act which has also gone back to the National Assembly, and now it is up to them to decide on it because separation of powers does not allow us interfere with that process, except invited.
I believe that the amendment is on course and it is up to the National Assembly when the amended Act will be passed. That said, there are a few amendments suggested.
First, the Nigerian National Petroleum Corporation (NNPC) is now a commercial entity registered under the Companies and Allied Matters Act (CAMA), so as much as possible, we are trying to back off as government.
One of the first things that happened, of course, I always say, I was the first casualty of the PIA, because I had to step down as the chairman of NNPC.
Government had to step back because the new law does not allow us to be part of the day to day running of the NNPC, so once the NNPC became a commercial entity with an independent board, I had to step down.
But the law also provides for the ministry to be represented on the board: should we still have those representations? That was where we said, if we are backing out, let’s back out, there will be no representation on the board of NNPC from the ministry, which is one of the amendments that we proposed.
Then of course, we now have the new issue of fuel subsidy and the time provision. The PIA provided for six months, within which we must achieve deregulation but that became unfeasible, therefore we decided to extend the time for that.
The rest of the world is moving to renewables, cleaner fuel and we must not lag behind, we will put every effort to move with the rest of the world
As far as the PIA is concerned, after February this year, there would be no more provision for fuel subsidy
These are just minor amendments that we proposed. The other amendment is also the national representation on the board of NNPC.
We already have a national representation, but the PIA did not provide for that kind of broad representation on the board of the upstream commission and the downstream commission.
That amendment was also proposed such that it will be reflective of the representation of all the geo-political zones on the board.
Will NNPC go public at some point?
Frankly speaking, that is a possibility, I have always said that after we ensure that the NNPC becomes a commercial entity under the CAMA and powered by the PIA, I have stepped back, it is up to NNPC and the government to decide what next to do.
Do we want to completely privatize the company, or partly privatize or even sell off the entire NNPC? That is part of the decision to be taken, but the first has been sorted. The management of the NNPC will now prepare it for the next step. But we can discuss that when it is on the horizon, but for this moment, I cannot say.
How does the new subsidy era and proposed PIA amendment affect NNPC’s status?
It does not change anything, and that is why the NNPC is still the flagship company for the government in the oil sector. It is a government owned company even up till now, although no longer under the direct management of the government.
The PIA also provides for NNPC to continue to be the supplier of last resort because product supply is very strategic for the country. If you do not have an NNPC to fill the gap, mischief makers can take up labour union, and go on strike and before you know it, there is no fuel anywhere and the country can go into flames.
You know that fuel is a strategic commodity that anyone can use to destabilize the country, so you do not expect that the country be left at the mercy of some people.
In the worst case scenario, the PIA already provides that if for any reason there is no product, NNPC remains the supplier of last resort, that in case of any emergency or disruption caused by anything foreseen or unforeseen, NNPC is the supplier of last resort.
That is provided for in the law. NNPC can always take up that role as provided for by the law, if there is any form of disruption. It does not change anything about the status of the law.
Do you share the fear that the proposed amendment could dampen the investment interest into the oil sector?
I don’t know how that will dampen interest. When I talk to marketers, retailers and stakeholders in the industry, I tell them, we need to have a country before you can have a business. If we do not have a country, then your business will be nowhere.
As far as I’m concerned, the most important thing for this government is to make sure that the country is calm for the business man to do business. The business man cannot stampede the government to do what will destabilize the country.
We are looking at stabilizing the country for the people to do their business, but they have to allow us to do our job to make sure that the country is stable.
That is where we are, it is not a long time, let’s put certain things in place and ensure that what we do does not put so much disequilibrium in the system. But if you say because of the amendment you will not invest, then you are not even serious.
Should government be concerned that Nigeria is not part of this year’s spending plan by oil majors, considering investments needed in the oil sector?
No, it is not really a concern. I have been engaging the IOCs and we knew from the beginning that this has been their operational model.
They come into a territory and invest, and when they see that the territory has matured and people there have gathered enough experience, they tend to divest and leave the business to the people.
They did that also in Scotland, they were there producing and after a while, they divested to the local people who took over the business.
Normally, they look for frontier places, offshore where there is not enough competence and they go there.
What they are saying is that, the onshore in Nigeria is mature, there is nothing new that they can do, therefore, they needed to divest. But we are working with them to see how the divestment will take place so that our people can get more involved.
For us as government we have only two concerns, which are ensuring that the people who take over from Shell have the right competence to run the asset.
The second is to ensure that the new investor does not compromise government’s stake, by ensuring that government continues to get value from the resource, and also to ensure that our commitments to the LNG are intact.
Most of the gas supplied to the NLNG for energy production is from these assets and LNG is one of our major investments.
We want to be sure that the people who take over Shell are able to supply and meet up our commitments to NLNG.
Those are the things we are discussing, we do not have anything against them, in fact, we are quite happy with them.
Fuel Subsidy has been a thorny issue. Why is it difficult to get rid of?
Frankly speaking, I have made the case so much for subsidy and I think everybody knows my position. However, I’m also the first to agree that it is going to have a lot of negative impact especially on the poorest and most vulnerable Nigerians.
My President’s mandate to me is very clear; make sure that the negative impact it will have on poorest Nigerians is mitigated.
Now what makes it difficult is to say, let’s try and put things in place to stem the possible impact on our people.
Announcing that fuel subsidy has been removed is the easiest thing to do but what will be the effect?
Since the president has given me the mandate to ensure that Nigerians are protected, that is what we are trying to take time to do.
Let’s take time to ensure that these building blocks are in place, and then let Nigerians also see that there are efforts being made to put up these structures. I believe we can get to a point where Nigerians can say, take subsidy off because it’s no more making sense.
For example, if we are able to convert most commercial vehicles to gas and ensure they are running on gas, what will removal of fuel subsidy do to transportation? It will not have any impact, except for some unscrupulous drivers and traders who look for opportunity to take advantage of situations to increase the price of goods and services.
Even at that, I’m worried that when all commercial vehicles are converted to gas, somebody will still complain about fuel price. However, I trust that Nigerians are awake and active, and we will be able to arrest this situation where people take undue advantage inordinately of situations.
I believe we will get there, we will get to a point where Nigerians will see that the building blocks have been put in place and it becomes easy for us to then take out subsidy.
You acknowledged that the CNG project is critical to ending this fuel subsidy regime, why is it then taking so long to commence?
I agree, but look at the conditions under which we operate. The president announced the roll out in December 2020. Having done that, we need to put a lot of things together. We decided to first convert 100 commercial vehicles and give to labour and that process started immediately.
Again we said, let us get a local car manufacturer to produce, and the contract was given to Innoson motors. The delay is not from us, as far as the production of those cars is concerned.
Again at this moment we have already put a lot of things together, because it requires a lot of investment outlay, we were able to get international companies who are willing to come half way with us.
From the experience we had with the CNG investment in Benin, Lagos and some few places, the infrastructure did not exist, the investors were saddled with a lot of additional responsibilities of building pipelines and so on.
These made the business less attractive for them, because they are putting in a lot more than they should, and of course amortizing it very slowly because of the capital outlay. But with the government’s interest now, the infrastructure will be built and we needed funding.
We were able to get companies from some countries that we have been talking to and they have agreed to meet us 50 percent of the way. And of course, we will provide 50 percent, and that process has started.
You know we already have a N250 billion gas fund with the central bank, all that will start going out within the next one or two months.
And once that starts going into the hands of investors, you will see all the investments and the conversion and of course things will start moving.
These are some of the things we want to put in place and I can tell you that we have not just been sleeping but working. I hope that in another 2 months, a lot of things will start happening.
In the 2022 budget, we were told that N450 billion was provided for subsidy payment till June. How did government then arrive at N2.55 trillion for the remaining six months of the year?
Frankly speaking, I will be very shocked if you say that there was provision made till June because as far as the PIA is concerned, after February this year, there would be no more provision for fuel subsidy. I do not know under which law they would have been able to make such provision until June.
We have six months window if we leave the PIA the way it is and the 2022 budget was passed under that law, so I’m wondering how the provision came about.
Having said that, I really do not know the details of the N3trillion for the whole year, it is under the purview of the minister of finance to come up with that sum, I really would not know how the figure was arrived at.
I know that the ministry of finance has the competence together with NNPC to put those numbers together, but I’ll be surprised that we are talking about a figure for six months – till June, I do not think so, under the law, February ought to end subsidy payment.
On the issue of energy transition, are you comfortable with the pace the developed countries are moving with it?
Anytime you do not move with the rest of the world, you are left in jeopardy. The world moved from feudal economy to industrial revolution and the countries that moved with it are among the richest countries today, and for those that refused to participate like us, you can see where we are.
Computer revolution came in the 1940s, the countries that moved with it like the Asian tigers, that wave took them to where they are and we still didn’t move with that revolution. Now another revolution is coming, which is energy transition, the global community is going to pump a lot of money into that area, we must be conscious and focus on how we can ride the waves.
However, we have made our position clear to the rest of the world, they should understand that we cannot possibly move at their pace considering where are, and I think they have also heard us and they are beginning to accommodate.
We said, we cannot move to renewables from where we are now, allow us to transit to renewables through utilizing our gas. And recently, the EU started considering classifying gas as clean fuel, which is also good for us.
But for me, while we are saying this, we must keep our eyes on the ball, the rest of the world is moving to renewables, cleaner fuel and we must not lag behind, we will put every effort to move with the rest of the world while advocating for them to allow us move at our pace, I think they have heard us, we are in good shape.
Where are we on decade of gas policy?
The decade of gas is fully on course, what we want to do now is to produce a roadmap, not just a slogan.
We have said decade of gas, what are the kind of things we need to put in place for it to come to reality and have a whole program, such that successive governments can see and be willing to continue with it?
This is the kind of long term planning that we want to do, and we are working with the operators in the industry, who are really supporting. We believe this is also one of the legacies that we will leave behind.
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What progress has government made with the rehabilitation of the refineries?
I will say that the rehabilitation of the refineries is on course. I will be visiting the Port Harcourt refinery, I have not visited since it commenced but from the reports that I have received, I think that the project is fully on course.
Of course we are working on Warri and Kaduna as well, I also will visit those and will be in a position to tell exactly where we are. But from all the reports I get, the rehabilitation is on course.
About modular refineries, these are key parts of the strategy of government to ensure that we are able to create a refining hub in Nigeria.
That means we are not necessarily trying to produce what we need as a country, but to produce in excess such that we become a net exporter of Petroleum products. A lot of people do not know that this country used to be a net exporter of petroleum products, during the time of Mr President as the Minister of Petroleum and as President.
We used to export petroleum products because we could produce enough to meet local demand and have excess as well to export. And we all agree that if we add value to our product, we get our crude here, refine and export, it will give us more foreign exchange, which is what we are trying to achieve.
Dangote refinery is already a 650,000 barrels refinery, if all the four refineries begin to function, we will have an additional 450,000 barrels, taking us to over one million barrels per day. And with all the modular refineries and other things that are coming on board, we probably may not need to export crude oil anymore at some point.
Of course BUA is also trying to build one for about 200,000 barrels per day in Akwa Ibom. By the time we build all these refineries, all the crude oil will be here and we just refine and at the end of the day, we begin to export refined products.
That can happen sooner than you think. Of course the Dangote refinery will come on stream by the end of this year, then the Port Harcourt refinery and other refineries may come up by latest 2023, and of course all the modular refineries are coming up, with the BUA refinery which will start construction as well.
I believe that very soon, there will be so much activity in the sector, which will then position us as a net exporter of Petroleum products. At least, we can add value to our products before export, that is where we are going to.
