Oil Freeze: Nigeria Seeks Consensus Among OPEC Members
The Minister of State for Petroleum, Dr. Ibe Kachikwu, has said that International Oil Companies operating in Nigeria must stop treating the country like a “trading colony” and instead invest in the energy sector if they want to retain access to the nation’s resources.
Such investment, according to him, includes crude refining locally.
Some of the world’s biggest independent oil traders, the minister said, had benefited for years from exporting Nigeria’s crude and selling to the country refined petroleum products, without putting money into developing the sector.
“We have to get selfish on this,” he told the Financial Times in an interview. “If you have been selling to me (refined) products for six years and you can’t put a foothold in the country, then I shouldn’t be buying products from you.”
Kachikwu’s comments come as Nigeria faces an economic crisis, with the halving in oil prices since 2014 and renewed militancy in the Niger Delta pushing the country into its first recession in more than 20 years.
Until recently the Organisation of Oil Exporting Countries’ member was Africa’s largest crude producer. But dysfunctional refineries have left its 180 million population reliant on trading houses such as Vitol, Trafigura and Mercuria for refined fuel imports.
“Nigeria cannot become a trading colony. I’m saying to them, ‘If you want to trade, put your base here, do the refining here,’” Kachikwu said.
Oil price fall is the main reason for tough times in Nigeria, with the country’s status as Africa’s largest economy under threat
Some trading houses have already invested in infrastructure in Nigeria, while others have complained about the difficulty of doing business in the country.
Vitol has built an import terminal for liquefied petroleum gas and invested in Oando, the country’s largest independent oil conglomerate.
Industry sources say a refinery tender this year for rehabilitating the country’s processing plants, which had interest from foreign companies, was suspended because of the political sensitivity around the prospect of even a part-privatisation of state-owned assets.
Separately, some of the biggest energy producers operating in Nigeria are owed billions of dollars in arrears for joint ventures with the government. Many are shifting their focus offshore as security concerns and payment issues mount.
“You cannot coerce a company to invest. There needs to be a well thought out policy in place to attract such investment,” said one oil industry veteran.
Last month ExxonMobil agreed to sell its majority stake in its Nigerian marketing and retail arm to a local company, Nipco Plc.
But Kachikwu said he needed companies to invest in more infrastructure such as refineries and pipelines, while the country was also seeking crude-for-loans deals to monetise its untapped oil resources.
“The petroleum industry got us here. It has got to get us out of here too. It (high oil prices) spoilt everybody and we messed it all up,” he added.
The former ExxonMobil executive said Nigeria was also in talks with governments and could sign a preliminary $15bn five-year forward sales agreement with India by the end of the year.
“You have to be careful as to how many (forward sales deals) you take. You have to tie that to your capability to produce and your ability to grow production,” he explained.
Drawing in foreign investors is particularly critical as the government struggles to borrow from international sources of funding. Investors and lenders, including the World Bank, have raised concerns about the government’s management of the economic crisis, and plans for a Eurobond and foreign borrowing have so far not come through.
In the latest blow this week, the Senate rejected President Muhammadu Buhari’s plan to borrow $30bn from abroad for infrastructure projects and budget support.
Foreign and domestic industry executives are also less sanguine. They say the investment climate under the President Muhammadu Buhari administration has so far been characterised by policy uncertainties and a sense of hostility towards the private sector.