Focus on NLNG, Not Dangote Refinery

By Ifeanyi Igwebike Mbanefo/

On 17 September 2016, I was scrolling through Cable online news when I saw Mayowa Tijani’s report that Aliko Dangote, Africa’s richest man, had urged the government to sell Nigeria LNG Limited.

“My own suggestion before was that they should even sell 100 percent of NLNG. I don’t think government should be in any business of investing in sectors of LNG.

“A company like that, with earnings of $1.5 billion on the average, they should get anywhere between $12 billion and $15 billion,” Dangote said.

I had completed my tour of duty as NLNG’s spokesman, so it was not in my place to respond to Dangote.

However, the national uproar that greeted his recommendation is the frame by which I still remember that tragic day. It was proof that the country was in no mood for impetuous games.

Dangote’s experience is an example of an all-too-common problem: unwittingly making a bad first impression.

He later tried to wiggle out of that statement, but coming across as greedy and mean-spirited can cause big problems in personal and professional life.

More often than not, bad first impressions stem from in-built biases in how people perceive us. Research shows a weak correlations between what others think of us and how we see ourselves. Especially where there are general albeit, uncrystallized, feelings that our dealings may not kosher.

The way people see us can be irrational, incomplete, and inflexible—and largely (but not entirely) automatic.

There were already rumors that Aliko Dangote has monopolized the salt industry, flour business (Dora Akunyili ordered the closure of his flour mill in Kano, for non-fortification of Danvita with Vitamin A despite the fact that the bag for its packaging carries the eye logo and a big ‘A’ sign, an inscription indicating that it is fortified, an act, which Akunyili described as fraudulent and deceptive as well as a serious sabotage to public health.), sugar and cement where he allegedly kept BUA and Ibeto — serious competitors — locked down using levers of government.

At some point, he was the only one allowed to carry on his business when the federal government closed the borders.

In countries with weak institutions and law enforcement, State capture starts with stigmatizing the regulator.

Predatory businessmen play what’s often called the regulatory arbitrage game, working the different levels and levers of regulation to their benefit. If they get what they want, they stay with the regulator, where they don’t, they go above his head, even to the highest reaches of government.

In the short run, they benefit from the stigmatizing of regulation and  take advantage of regulatory loopholes or non-enforcement of regulations.

However, the paradox is that businesses as a whole would have been better served by good regulation. Lack of regulation leaves most of the players — except the well-connected — as losers.

The good practice is if regulations are on the books, enforce them. If you think regulations are anti-business, repeal them. It is vital to enforce existing laws.

Not enforcing the regulations, as we have in many situations, creates the worst possible situation: people think they’re protected, but are in fact, exposed and not looked after, at all.

A regulator is only able to command respect if it has a reputation for rigor and toughness.  Only the military sometimes achieve a semblance of this in Nigeria…others na wash. Or cash and carry. 

After the NAFDAC saga. After getting the government to make concessions to him. After getting the CBN to lend him money and give him preferential dollar rates, Dangote is up against yet another regulator. This time, he should do what the regulator asks. What the law requires.

Government should not give Dangote what it cannot give other players! Level the playing fields. Giving him 650, 000 bpd would mean handing over all the country’s oil assets after discounting for production sharing contracts obligations, foreign sales for revenue and forex, and cash for crude oil loans.

Truth is, Dangote will still not have enough if you reckon that Nigeria share from production contract is less than 900 barrels before deductions.

NNPC and the government have been stigmatized. Let’s face it, Nigerians have been relying on the government, Dangote, and NNPC to do the right thing. It is time to ask them to do the smart thing instead

We can all laugh at the old joke that has a drunk crawling around under a streetlight looking for his keys simply because that’s where the light is. But all too many of us, all too much of the time, look for reality only under the light of our preconceived understandings, notions, and commitments

We must guard against dogmatism that takes the form of ‘blind certainty’, a closed-mindedness that amounts to an imprisonment, so total that the prisoner doesn’t even know he’s locked up.

Like implementing classical economics principles without applying common sense. Accepting advice from IMF, an institution without any track record of successfully turning around any country; or having a full grasp of the issues; or allowing commerce without conscience … a cardinal sin… because we are told that that is the way of capitalism.

The current quagmire presents us an opportunity, a second chance to resolve a lingering problem. How do we create a viable economy that serves the people rather than some persons?

For Dangote, I recommend the biblical injunction: “For by the grace given me I say to every one of you: Do not think of yourself more highly than you ought, but rather think of yourself with sober judgment, in accordance with the faith God has distributed to each of you,” Romans 12 vs 3.

When government and business leaders confront complex problems, there’s an impulse to dive right into solution mode — gather a team and then identify potential solutions. Like selling crude to Dangote in naira!

It is fine for challenges we’ve faced before or where proven methods yield good results. But what happens when a new type of problem arises or aspects of a familiar one shift substantially? Or if you’re not exactly sure what the problem is?

Take for instance, the current crisis rocking the petroleum industry. The regulator seems to have been caught up in an uncertain or uncharted territory.

The government enters cash-for-crude deals at whim. It borrows for yachts, for luxury aircraft, for presidential mansions, for travels, for pilgrimage and for sports jamborees.

But unlike borrowing from the Central Bank which was pegged at five percent, but operated in breach until only recently raised by parliament, there’s no cap or limit to government’s forward sale of crude oil. And no quantity set aside for local consumption by law, so the regulator generally muddles through with no clear boundaries, or forward planning.

Everything is done one day at a time! 

Allocating products to domestic refiners then becomes an unsolvable math problem. Nigeria produces 1.6 million litres of crude oil daily. And has a production sharing contract with International Oli Companies, which means the products are shared and Nigeria gets far less than its daily production figure.

Nigeria must sell oil because government and social services are run with oil revenue, and 90% of its forex come from the sale of crude.

Nigeria also has a local refining capacity that is sometimes bigger than its total production capacity.

Check out the numbers: Kaduna Refinery: 110,000 barrels per day (bpd), Old Port-Harcourt refinery: 210,000 barrels per day, Warri Refinery and Petrochemical Company (WRPC) 125,000 bpd, Waltersmith Refinery 50,000 bpd, Dangote Refinery: Dangote Petroleum Refinery 650,000 barrels per day (BPD), Azikel Refinery: The Azikel refinery 12,000 bpd, Ogbele Refinery 11,000 bpd, Edo Refinery 12,000 BPD, Duport refinery 2,500 bpd,  OPAC Refinery, 10,000-bpd, Niger Delta Petroleum Refinery 11,000 bpd,  Alexis refinery 10,000 bpd, Atlantic refinery 2,000bpd and BUA refinery 200,000 bpd.

This brings Nigeria’s total local capacity to 1.3million out of 1.6 million barrels a day production.

The question is, how do you equitably share Nigeria’s meagre oil output to over 11 local refiners requiring 1.3bpd of crude p/d?  Should you make a law empowering Dangote to take all, throwing other investors under the bus, and effectively handing him over the country’s oil assets? How would Niger Delta feel if Dangote gets more than the region that owns oil?

What quantity will you put into local production after discounting for cash-for-crude loans, and daily sales for forex and for running the country?

Why do we have more capacity than we need and still have empty pump stations and fuel scarcity?

Why is every refiner hustling for cheap domestic supply and export to neighbors?

Isn’t this why Domestic crude allocation rose from 10% of the country’s share from production sharing contracts with oil producers in 2011 to over 90% in 2023?

Why didn’t any of the refiners sign long-term crude supply contracts with NNPC and IOCs (oil producers) as is the case globally in the industry? Signing long term sales and purchase contracts is the only lawful way to sell crude to refineries!

The focus on Dangote refinery is a distraction. It is only half of Nigeria’s existing capacity. But why are the refineries not working, some of them owned by private investors? Where do those refineries sell their products?

Clue: they believe they will get by with politics. The same way Godfathers cornered the electricity industry, hanging on to government feeding bottles after privatisation; getting rich without power supply, and relying on government to increase prices in a deregulated market!

The oil and gas industry is opaque for a reason, don’t you think?

When confronted with seemingly intractable problems, we are encouraged to spend more time up front on problem-framing, a process for understanding and defining a problem.

Effective problem-framing is a comprehensive exploration of an issue and its nuances.

Looking deeply, we seem to be barking up the wrong tree. The phrase means to mistake one’s object, or to pursue the wrong course to obtain it. In plain language, we are all labouring under a misapprehension.

The current object of our national sympathy is Dangote refinery. It shouldn’t be. The concern  should rightfully be for Nigeria LNG Limited, a cash cow that has been on a downward spiral. This company has been gas stranded for over three years, hemorrhaging value because of its take or pay contracts with buyers. It means you either supply or pay the contractual value of missed cargos. That is your terrible fate when you are gas stranded or production challenged. Most LNG companies operate at 96-97% reliability and availability. NLNG was like that until 2017.

It is pathetic that the company that produced enough tax and dividends to bail out the nation in 2015, when Jonathan’s government left behind an empty treasury, lost 43 percent of its dividends in 2023 because it was gas stranded.

Qatar LNG made $86.8bn in 2022,  Algeria LNG $27.5bn and Angola LNG $6.47bn.

Operating at less than 40 percent of its name plate capacity, it paid the government N46.2 billion in dividends this year, a huge drop from $1.10billion last year. The situation is still deteriorating such that there’s no certainly on the source of gas for the new train under construction, especially it is struggling to keep its gas stranded trains humming… not to go idle.

Focus on Nigeria LNG Limited will mean ramping up gas production and consequentially crude oil production — gas in Nigeria is still a byproduct of crude oil production —  to keep the only viable government investment going, increase oil export, and domestic oil and gas supplies to enable Nigeria meet its OPEC quota.

And it can be done, without budget, without lavish junkets, by providing incentives to attract massive investment in oil and gas sector. And making laws to guarantee investment, promote transparency and provide everyone a level playing field whilst getting the courts to enforce contracts.

President Bola Tinubu recently stated that the government attracted $500million (half a billion dollars) investment to the oil industry. He forgot to mention that Total took $6bn investment from Nigeria to Angola which has a more conducive investment climate.

Increasing gas supply will provide several billions of dollars from gas and oil sector, and increase domestic supplies, and stabilize forex supplies.

All these have been lost in communication, as an evidently talent challenged NLNG External Relations team yields its company’s privileged spot as ‘the MVP of Nigeria’s oil and sector and a national treasure’ to Aliko Dangote the adopted, but entitled love child of Obasanjo and Buhari administrations.

All join, as Warri Street would say, when it demands an all inclusive deal or fair solution to all players.

Ifeanyi Mbanefo was formerly the spokesman for NLNG.

0