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‘Nigeria needs a dynamic, effective and ethical oil and gas policy

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Wumi Iledare is the 2014 president of the International Association for Energy Economics (IAEE), a worldwide non‐profit professional organisation based in the United States with members in more than 100 nations. He is the first African to occupy the prestigious position. A professor of petroleum economics, he is the director of Emerald Energy Institute, University of Port Harcourt. He spoke with FEMI ASU at a recent conference in Abuja. Excerpts:

What would you say about the Nigerian oil and gas industry in the last 5 years?

Well, I think the Nigerian oil and gas sector over the past five years has had a lot of challenges. You have investment challenges, security challenges, oil theft challenges and then the non-passage of the modus operandi of the industry. The non-passage of the Petroleum Industry Bill (PIB) is actually creating more uncertainty in an industry that is already full of risks and uncertainty. So, the political uncertainty is adding additional dimension, the governance of the industry is also another challenge, and so without the PIB, nobody knows the direction that the Nigerian oil and gas industry is treading. And I say this with due appreciation to what the government is doing with respect to trying to reform the industry, but it has taken too long, 13 years in the making. That is very unpalatable to a dynamic industry like the oil and gas industry.

Pending when the PIB would be passed, because it appears it would not be passed anytime soon, what can be done to actually drive investment in the sector?

Honestly speaking, I wouldn’t want to give an impression that the oil and gas industry is still not trying to invest to develop the sector, but the interest of Nigeria to really come out quickly and define the guidelines that will guide the industry in future because it is no longer the same where only Nigeria is producing oil and gas in Africa. Now, we have Mozambique, Namibia competing with us to be viable LNG producers. So, it is something that we need to do quickly if we really want to continue to be a key player in the global oil and gas industry.

Some industry analysts have said that the price of oil is likely to go down because the volume of shale oil from the United States into the market will increase. What is your take on this?

It is a fallacy for anybody to predict the price of oil in the long run. Nobody has ever been able to accurately predict the price of oil, and I am glad they did not put a number and a time. They gave a general impression as to what could happen. That is the best you can do. Left to me, it is not about whether the price of oil is going to go down or go up, what you can see right now is that there is abundance of oil in the market and the producers of oil will not continue to flood the market with oil. They will actually look at what the market demand and that is what they are going to produce. Nobody just produce goods and services just to flood the market.

There is a particular optimal volume that can maximise your return on investment and that is the path you want to follow. Since 2008, the price of oil has not gone below $70 in real price. Even if the price of oil is going to slowdown in growth, you will observe that where we are getting this new oil into the market the marginal cost of producing them is getting higher and higher because the easy to find oil has been discovered, so new discovery requires higher cost of finding, development and production. So even if the price of oil is going to tread downward, it is not in a long-run version. What I can say is that the growth in the price of oil cannot be expected to be getting higher and higher but that it is going to just fall like that, I don’t see it coming.

Let’s look at the debate in the US over whether to remove the ban on crude oil export and relax that of natural gas. If this happens, will it have any impact on Nigeria?

Having lived in the US for nearly 30 years, and having followed political process in the US, nothing comes easy. It is one thing for the public to want something, it is another for Congress to pass it and it is another thing for the president to sign it into law. So, the process of removing export ban on natural gas and crude oil in the US is going to take a long process. But let’s even hypothetically say that it is granted and then that leads to export, I want to submit to you that Nigeria has a lot of outlets for its oil, if we just get our act together.

There are better ways to add value to our economy than just pursuing exports. We have done it for 50 years, but see where we are. Perhaps, this is the time for us to have a new petroleum policy that actually looks inward and not allow it to be driven by exports. I said it 31 years ago that using foreign exchange earnings as the driver of our energy policy is not good for our economy. Perhaps, we need to think in terms of how to convert natural resources to add more value to our economy. I foresee in not too distant future that our economy will grow so much that export of oil and gas will not be in our own interest.

I don’t really see what the US is doing with their oil as anything that we should panic about, it should actually open our eyes to see how well we can use our natural resources to grow our economy. So I look for a debate on revamping of the Nigerian oil and gas policy towards sustainable economy growth and development within the context of Nigeria, within the context of West Africa and within the context of Africa. Go all over the world, Africa is not moving despite the abundance of natural resources we have. What export-oriented policy for natural resource development has done to Nigeria is to create an elitist society and there are very few and they don’t add as much economic power to the society. They just become politically strong because they have access to money due to the leakages in the economy because of an export-based oil and gas industry. If we change that, more people will be affected because there will be more employment and I am not going to worry about the US exporting their oil and worry more how to use our natural resources to develop the nation and that begins with a dynamic, effective, efficient and ethical oil and gas policy.

The power sector reforms have led to the privatisation of the PHCN successor companies, now we still have challenges. From your observation, what are the things that need to be fixed to ensure the reforms actually work?

In my opinion, I don’t think we want to base power generation just on natural gas. Nowhere in the world do you talk of electric power generation based on natural gas alone. Having said that, in the short-run because of the terrible situation we find ourselves with respect to power availability, affordability and sustainability, maybe we can use gas as a transition fuel even as we think of how to generate. We need close to 50,000mw of electricity to start with; 10,000mw will not even cut it. So, now we need to think in terms of electricity mix to generate power. We need to find a way to access our coal resources. We need to think in terms of even renewable like solar, wind; there is even nothing wrong in thinking about nuclear as power source.

We have about 170 million people in the country. So, we cannot just solely rely on natural gas. It is true that we have gas in abundant, but the midstream to process it is not fully developed. You cannot just drill and put the gas directly in turbines, you need to process it and transport it. And all those things are necessary before we just make investment into buying turbines. We need to think in terms of the gathering of the gas, the processing, the transporting and the development of the turbines in the proper place. You don’t just wake up and see oh I have gas. We are not even exploring for non-associated gas, which is a dry gas that we can use for power. This thing is complex and even the gas master plan needs review. I don’t even think there is any document anywhere that you can say this is the natural gas master plan. It is a bit here, a bit there. So this thing requires massive investment, and like I have often said, availability is the key, but it requires massive investment. But there is no way the government can do it alone. And of course, we need intellectual development. We need to engage the universities so as to be able to give the framework before we transfer them to policies. Policies that are based on consulting do not go through the test of time. It is only through academic rigour that you find a framework upon which you can base your policy development. Academic rigour will test, question and then give you a framework upon which you can develop your policy.

You happen to be the first African to be the president of the IAEE, what does this mean for Nigeria?

I have been with this association for over 29 years. I have served in different capacities. I was the USAEE president, vice president for finance acquisition for IAEE. I have been in the Council for nearly 10 years. I live in the US for 30 years. I am a Nigerian and very proud of that and you could see the impact on even NAEE, it is the only IAEE affiliate in Africa and it is as a result of the hard work that some of us have put in. So, my being IAEE president has been very useful in really propelling NAEE to a higher level. What I really want to do as president of African origin in the sense that I was born, raised and bred in Nigeria, is to see how we can expand IAEE to Ghana and other West African countries.

I desire to start what I call West Africa Association for Energy Economics, and also hope that we can even have what we call West Africa Energy Conference, just as we use to have North America Energy Conference. And now that I am even resident in Nigeria running IAEE from here indirectly, I hope I can give IAEE more prominence. My major concern is the younger energy professionals and the objective is to use this organisation; you could see the number of young people that gave presentations at the recent NAEE conference. What I can hope to do is to get our older energy professionals to endorse this organisation.

You can see that NERC has endorsed us. The Petroleum Technology Development Fund has endorsed us, PPPRA, CBN and NNPC, Energia, Total have endorsed us. That is what I have been able to bring to Nigeria as a result of my high-profile position as the international president. IAEE is a formidable organisation worldwide; we have the best energy journals. We have the best environmental policy journal and then we have international energy forum. We have membership in over 100 countries in the world and we have over 26 countries with affiliates. So, my involvement in IAEE has actually brought a new equation to the energy professionals in Nigeria. I am very delighted for the opportunity. It is a privilege, it is not a right.

Article Credit: Businessdayonline

Updated 5 Years ago

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