Tuesday, May 20, 2008

OPEC recently revealed that Angola surpassed Nigeria to become Africa's largest producer of crude oil. For 50 years, Nigeria was the largest producer of crude oil, but production is now down by approximately 25-40%. Despite the growing global demand for crude oil, Nigeria's output continues to fall mainly due to frequently violent attacks on oil interests by militant groups like MEND who have 'advised' oil companies to "not waste their time repairing any lines, as [they] will continue to sabotage them".

image Source: Business Day

Angola out-produced Nigeria by only 50,000 barrels per day (bpd) and financial analysts appear to be optimistic and predict that Nigeria will retake the top spot. However, I worry that continuing threats from MEND towards oil production installations and Angola's aggressive plans to increase their output puts the future of Nigeria's reign as Africa's 'King of Crude' in doubt. Only today, MEND announced that it will attack oil pipelines in Bayelsa State and encouraged companies like Daewoo Nigeria Ltd to leave.

The Federal Government is about to commence a probe of the nation's oil sector. If it turns out to be anything like the ongoing power sector probe, it could be explosive and reveal even more weaknesses in that sector. Adding to the wahala (problems) in the oil sector is the fact that the U.S. government announced that the Nigerian National Petroleum Corporation (NNPC) and an unnamed political party are guilty of receiving $6.3 million in bribes from an American company, Wilbros Group. The rot in Nigeria's oil sector is about to unveiled for the world to see and, it most likely will not be pretty.

By the time the probes begin, heads will hopefully be rolling, but will that solve the Niger Delta crisis which is the main reason why Nigeria's output has fallen and oil companies are cutting back production and jobs? Militants in the region continue to fan the flames of violence and insecurity. A Chevron vessel was recently hijacked by an 'unknown' group of armed militants and MEND has disavowed any knowledge of the act. As I mentioned recently, the federal government plans a Niger Delta Summit Steering Committee to discuss the means by which the crisis will be resolved. It was in June 2007 when Yar'Adua asked UN Secretary General Ban Ki Moon for United Nation's assistance in finding a remedy. Now the nation is waiting for Nigerian born Ibrahim Gambari to be reassigned form other UN assignments to head the Steering Committee.

But, I cannot help but think that the nation already knows what is needed to gain some headway in the Delta. Have we not held summits like this before? As one whose mother is from that region, I can say with confidence that the Niger Delta needs more schools, more hospitals, more roads, electricity, an end to the gas flaring that companies like Shell have been allowed by law to do. Peaceful mediation with armed groups, such as MEND, is needed. Such mediation must result in agreements that will require them to give up their weapons and turn their 'skills' towards protecting the people from armed individuals whose sole goal is to rob and steal from the populace, among other things. Nevertheless, I encourage continued communication between the federal government and the various interests/parties in the Delta.

The plans to build refineries in the Delta and Lagos State with the help of Romanian, Indian and Chinese companies will be a start in getting Nigeria back on track but no concrete progress will be made if we don't 'take care of home' first. Oil is the lifeblood of Nigeria upon which almost everything else depends and until the nation does what is right to empower, protect and care for the people of the Delta, and punish those that have looted the land at the expense of the people, we will continue to witness a reduction in oil revenue, jobs and our status as the King of African Crude.

UPDATE (05/22): It appears that Yar'Adua is not happy with the news that Angola has surpassed Nigeria to become the largest African producer of crude. According to Leadership newspaper, a senior official in the executive branch is quoted as stating,

"it is unfortunate that Angola a new entrant into the Organisation of Petroleum Exporting Countries (OPEC) has over taken the country in crude oil production as a result of avoidable circumstances".
Yes, we all know that the reasons for Nigeria's decline are due to "avoidable circumstances" and as many of you have read from the insightful comments generated by this post, it is clear that the solutions to this development, though obviously complex, must be implemented immediately. Hopefully, Nigerians will discover more about our government's plans to not only effectively produce crude, but use the earnings from crude to diversify the economy and bring an end to the Niger Delta crisis. If you are yet to do so, please take a look at the comments and join in on the enlightening conversation about this matter.

Further reading:
- Nigeria's Oil Expiration Date Draws Near
- Power Blackouts Loom Across Nigeria
- Nigerian Power Scandal: Authority Stealing
- Solar Energy Plans
- Could Coal Be A Power Solution For Nigeria?
- Who Will Develop Nigeria?
- Who Will Develop Nigeria Pt. 2

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Atutupoyoyo said...

This has been coming for a while as evidenced by the insurgence of the Angolan nouveau riche. My understanding is that whils our reservoir volumes outstrip theirs, they have far more effficient operations and less waste.

What are our nation's plans beyond the oil expiration date?

Anonymous said...

I'd dare to say, the goal of being the biggest producer is not a smart policy objective for a country like Nigeria.

Anonymous said...

"Oil is the lifeblood of Nigeria upon which almost everything else depends and until the nation" realises that Nigeria cannot keep depending solely on oil and starts working towards active diversification we will not be out of the Niger Delta problem.


@ Atutu: I am completely in the dark about the nation's plans post the expiration date. I can only hope that Nigeria would have taken its oil revenue and developed roads, agriculture and education. As of right now, I know that the current administration is putting money into agriculture and that various states are pushing tourism as a lucrative economic tool. What Nigeria really needs is serious R & D funding to really ensure that our future is what we want it to be.
Thanks for the question.

@ Oz: I have to say I like where you might be going with this, but I implore you to expand upon the thought. I will admit that I freaked out when I learned that Nigeria was no longer King of Crude. But, I personally believe in the oil curse and so could understand that the change in ranking might actually prove to be a good thing. Anyway, could you expand upon your point, please?

@ loomnie: I can't agree with you more. I wish I had access to a more concrete plan specifying the future diversification of the economy. I see promises of such diversification in varying news reports.

Nevertheless, in the short term, Nigeria needs to solve the Delta crisis because its ramifications are felt all over the country and frankly all over the world. Thanks for stopping by, its been a while since I've seen you around these parts...

guerreiranigeriana said...

when we had affirmative action as the rule of thumb in cali, people barely talked about the problems and were less likely to try and address them...when they took affirmative action away, suddenly, people saw the importance of identifyng problems and solving them...the same with this whole oil issue in naija...we should take this as a sign to start diversifying before we are really humiliated...and clearly i am oversimplifying...

TheAfroBeat said...

Yay for Angola, their government's head is somewhere near the vicinity of the right place. President dos Santos and his Futungo inner circle know that they're going to be around for a long time, so they're trying to maximize their proceeds from oil by assigning oil contracts diligently, and not just to anyone who's a relative of those in power. I only hope that the Angolan people start to feel the trickle down effects.

As for us, i'm hoping this ND summit steering committee comes to fruition, i remember OBJ making similar promises of "talks" regarding the issue.
Thanks for sharing!

Anonymous said...

Some interesting reforms seem to be in horizon for the oil sector -

There is a plan to privatize the NNPC and revise Land Use Act.

There now a fine for gas flaring, and a pan to ensure domestic usage of natural gas is increased. Also it appears the feds are also considering royalties and tightening its regulation of the oil companies.

These will steps if well executed will help mitigate the crisis in the Niger.

Tairebabs said...

The government better come up with something better than a probe. How on earth do they intend to resolve the crisis in the region? probbing those in the oilsector? I find it sad that that's the approach we are undertaking. You think the militants in that region are interested in the so called probe. Abeg!

Nice post.

NneomaMD said...

Angola surpasses Nigeria...hmmm, and I doubt that becoming Africa's largest exporter of oil will do the Angolans any good either. But I think this bolsters the need for Nigeria to take a lead on the African continent towards turning to alternative sources of energy. MEND may inadvertently be doing some good in the world by reinforcing the fact that oil is an unstable resource and other avenues for energy should be pursued.

“Peaceful mediation with armed groups, such as MEND, is needed.” What SSD, you want to talk to the opposition, you want to have talks with the enemy? Oh my....(note sarcasm)...I guess you won't be running for any presidential office anytime in the near future. How come this approach make so much sense, but yet remains a concept elusive to the powers that be?

By the way, I have been out of the loop lately, but what has our friend Goodluck Jonathan have to say about all this....I though that was the reason he was given the VP post?

Beauty said...

After 15 years of going side ways, the price of oil shut straight up and the FGN did not do a lot about it hence the current MEND mess. Being king of oil in Africa is not a given right but the good news is simply that the price will go higher and you do not have to be top producer to reap the rewards.

There lies the problem, like a coiled spring, a big pull back is also likely. When? That is the big Q. We only know that when the bubble of anything bursts, things fall apart. And like the disasters happening worldwide in Mexico, Myanmar and China. Is Nigeria prepared?

The Niger Delta crisis as it is labelled is in the interest of the people that benefit from $B oil deals. Why should anything change? It all comes back to bad education, tradition and corrupt practices. Change is long over due and that is our salvation. A little bit of ethics, morality and deep concern about order and relationships in a more productive and constructive way of life.

ablackjamesbond said...

I am not sure we should bother ourselves with whether we are the largest producer in Africa or not...a more important issue, in my opinion, is resolving the problems in the Niger Delta. I think one of the reasons there is so much unrest in the region is even tied to the fact that we are the one of the largest producers of oil in the World and the people of the region cannot feel the effect of that.

We need to take the issue of peace and prosperity in the Niger Delta region very seriously if we do not want to wake up one day and find ourselves not producing any oil at all

For the love of me said...

I think Nigeria should start with simple things first. Fix the Niger delta region. That's the backbone of Nigeria and it's been allowed to rot. Mend and other militant groups had been brewing for a while, someone should have seen it coming, and even if they succeed in breaking Mend's arms, other groups will spring up. It can't be that hard to provide, water, health, schools etc to the people who make it possible for there to be an Abuja.
I'm tired of probes and commitees. Yaradua should kindly get on with the job, OBJ is more in the news than he is. One starts to wonder who exactly is president.

Sherri said...

our enemies are at it again!

Anonymous said...

Thanks for stopping by my neck of the woods. With respect to the question. I have two points to make.
1. Ranking does not indicate a decline in production. More so in our world where demand 'seem' to be outstripping consumption, first or second is essentially meaningless. To push this a bit further after controlling for the Nigeria Delta unrest, our output is steadily growing. Here we have to be wary of infoporn. You may want to see this:
2. The curse side of the oil equation seem to have outweighed the gift side (at least for now). fiscal irresponsibility blah blah. It is hard to see how an increase in production will work in our favor. Really it probably makes more sense to conserve as much of the oil until Nigeria is responsible enough to use the wealth from oil optimally.
One may argue that Angola is set to take some shine off Nigeria. Hmmm. I believe that will be negligible, if it were like Ghana, I'd be more concerned.
So my suggestion will be; no need to panic.
Aside: what have we done with the 300% increase in revenue in the last 2 years?

Mamalicious said...

ahhh.... this is the serious blog?
where is the EXIT?

Anonymous said...

A great exposition you've done. Truly, it is time that Nigeria wakes up from slumber.
Oil is not meant to be our life blood. We have so many natural resources that can complement the income we get from crude oil.
Before crude oil was discovered in rich quantity, we were already a rich nation.
Laziness, greed, lack of accountability are the evils that is making us to rank among the poorest nations of the earth.
It is time the government and we citizens go back to the fundamentals.
It is time to go back and visit the groundnut pyramids, the palm oil plantations, the cocoa plantations.
Nigeria is capable of feeding not only itself (via massive crop production) but indeed the whole of West Africa.
Beside this, there are other natural resources like Coal, Tin etc, that have been neglected over the year because they require more effort than crude oil.
What about the colossal waste of our natural gas that is being flared.
We simply need to wake up to reality. I am personally happy that there is an expiry date for the crude oil. I pray that the knowledge of that will go a long way to make us sit-up and address the main issue that ought to have been addressed long ago, lack of accountability of public officer!
Thanks for sharing your thought on this issue.

Beauty said...

In response to @ Tony - Nigerian Entrepreneur

In 2007 at Ted, Ghanaian economist George Ayittey described a fight between Hippos, the complacent, greedy bureaucrats wallowing in the muck and Cheetahs, the fast-moving, entrepreneurial leaders in Africa. That torrent of controlled anger towards the hippos as lazy and greedy was justified after all.

Abubakar Atiku Nuhu-Koko wrote in the following “THE Under-Secretary General for Political Affairs at the United Nations (UN), Prof. Ibrahim Agboola Gambari, has urged the Federal Government to consider devoting an equivalent of 50 per cent of oil revenue for 30 days to the development of the Niger Delta region in order to address the most basic needs of the region.” (The Guardian Newspaper, Thursday, May 15, 2008).

But the paradox is that Prof. Gambari’s prescription will be in direct contravention of the provisions of Section 162(1&3) of the 1999 Nigerian Constitution. For instance, Section 162 (1&3) of the 1999 Constitution

Therefore, diverting any of such revenues for whatever purpose without recourse to compliance with these constitutional provisions will amount to constitutional breach/violation by the government.

My point is simply that we all seemed to agree that there is so much work to do. What to do & How? Those are the real issues! And to those that are fed up with shouting about the Nigerian problems. Please note your legacy in 10-40 years from now. Gran, what exactly did you do to help Nigeria?

Anonymous said...

Black Gold as at today is $133/b.
Where are we?

Honestly, it is with mixed feelings:
On one hand, we need to leverage on this opportunity with increased output while it last; however on the other hand, we are better of missing the opportunity because it will be tantamount to putting more in the coffers of the looters.What have we done with the past earning as OZ asked (?)

Angola is not a threat as many have rightly observed in terms of output position but on the grounds of empowerment and development or benefits to Angolans; Angola for the information of those that do not know are doing better than good old Naija. Be not decieved.

I still think the feds are not being honest with the Niger Delta issues and the most unfortunate aspect is that the acclaimed leaders of the Niger Delta are the worst culprits.

In the midst of the dishonesty enters the MENDS and others; even these groups overtime have shown that they cannot be trusted. The people are left to their fate.

In all honesty, we owe it to our grands yet unborn as observed to be truthful in all matters concerning our nation; whether it be to our benefits or not. What goes round comes round.

This is not the forum to profer solutions but my take here and now is let us be honest to Nigeria and Nigerians in our individual and collective actions/dealing. It pays both now and later.

Stuck in my throat said...

as usual, thank u for educationg me and so many bloggers. What would we do with you??
Truth is, this is not about just Oil, it is time for us to stop fooling ourselves and face the reality of events that are unfolding.

Sam Oracle said...

This country's got so many problems that they don't know how to solve and now the oil is about to go.
Maybe Nigeria needs Spiritual insurance.

Bilyaminu Ibrahim Gusau said...

Everyone got a say in that, and has his/her on way of viewing it....this fight and struggle of MEND has been there for year's...we Nigerians aint that fullish enough not to really understand reality, it will only takes a few steps out of the nations boarder and you will see how badly messed up Nigeria is....For you to be within it the mess you see is a bound not visible enough to make you reallies how slowly your beloved nation is dying...Nigeria is dying, Its needs to be saved, call it God or what but we need to all as one stand for it survival...The so call leaders are fully, aware of what is happening and know exactly what a man or a woman in Niger delta needs and deserve and all around the nation....We see countries that gives free food and education to its citizens till they turn full teenegers and countries not as rich as we are...As a northerner I felt so much oblige to apologise for the mess our so call people of the North hiding under the cover as leaders did....but for now thats not it, if only we come together as one we will be able to revolutionise the nation even if it takes cleaning the mess within us...!! May He continue to Help us in the fight. Amin

Beauty said...

as a northerner I felt so much oblige to apologise for the mess our so call people of the North hiding under the cover as leaders did. @bilyaminu, the same was made a while back hence my comment to you directly. We are all connected to each other in this web called life and just because you are from the north does not mean those in the south do not feel the same way. There is nothing to apologise about to anyone. Brotherly/Sisterly love is simply that. Those that have done bad things are the ones that ought to apologise regardless of their origin.


@ bilyaminu: my broda, there is no need for you to apologize because you are a northerner. Northerners are not the source of Nigeria's problems. Nigerians, whatever their faith, religion, sex, are the source of Nigeria's problems. After all, a quick glance at this blog will show that those complicit in Nigeria's destruction come from all parts of the country. Besides, changing Nigeria for the better will take the cooperation of all of us.

Thank you so much, nonetheless, for taking the time to share your thoughts over here. I hope you will come back and engage us all in discussion and share your vision for Nigeria.

Oil careers said...

Nigerian's are the cause of their problems, and they can fix it by themselves, personally I believe that we probably would have been better had we not discovered oil and gas, it's not just that Angola have surpassed Nigeria, but they are also managing it well, It's like the father learning some bitter lessons from the kids, Nigeria have much to learn from countries like Angola

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