The ongoing reforms in the oil and gas industry will require the full implementation of the Weights and Measures Act 2004 under the management of the Federal Ministry of Industry, Trade, and Investment. Globally, metering of production and exportation, although the act was introduced in the first quarter of 2015 but somehow the project could not see the light of the day. FESTUS OKOROMADU in the report reviews recent development around the issue.
n attempt to restore transparency to transaction in the Nigerian oil and gas industry, Nigeria Extractive Industries Transparency Initiative (NEITI) has continued to advocate for the use of metering as a means of curbing revenue loss.
According to the latest NEITI Independent Audit Reports, metering was identified as a major source of revenues loss to the country in the oil, gas and mining sectors.
Responding to an email on how much the country may have loss for the failure to deploy metering to oil well-heads, as well as point of exports as done in other oil producing countries, Director, Communications, NEITI, Dr. Orji Ogbonnaya Orji, wrote, “Our 2014 Audit Report disclosed that $4.3 billion worth of crude was lost. This is made up of $4.1 billion reported as loss by the companies, $100 million worth of crude reported lost by PPMC, $198.7M worth of crude lost to OPA/SWAP and another $2.5M exchange loss on gas.
Dr Orji further stated that, “This government has provided encouraging political will to support NEITI’s commitment to ensure that metering infrastructure is put in place in our oil and gas industry in line with international best practices.”
He added that, metering is a fundamental issue in fighting corruption in the sector. “It is also an issue for reforms,” he stated
According to him, the issue must be put on the front burner now because of the importance of having the accurate figures of the crude extraction being carried out. “This has become necessary in view of the huge revenue loss to the Federation as a result of the absence of metering infrastructure to measure accurately the quantity of crude that Nigeria produces,” he stated.
He noted that, “Until this is achieved, our country only relies on estimates and figures given to us by IOCs which is unacceptable to NEITI.”
Asked if the agency has a solution to the problem he said, “NEITI is yet to find a solution to the issue of metering. Although we have received requests for support and partnership from experts in the industry including the Nigeria Academy of Science, we are yet to formalize such support.”
Dr Orji is however stated that going forward, NEITI plans to commission and independent study on metering.
Meanwhile, efforts made by instructing the Department of Weights and Measures of the Ministry of Trade and Investment to commence the implementation of the Weight Measures (Legal Metrology) act of 2004 within Nigeria’s crude oil production and trading may have ran into crisis as the project has ceased to exist.
The situation is worrisome as after three years of an official pronouncement by the director of Weights and Measurements in the Federal Ministry of Trade and Investment affirmed that the full implementation of the Weight and Measures Act 2004 will commence in February 1, 2014.
It will be recalled that the December 2013, the Director Weights and Measures in the Federal Ministry of Industry, Trade and Investment, Oluyinka Joseph Sikuade in a press statement announced that, “the full implementation of the Weights and Measures Act on the measuring instruments utilized in the oil and gas sector of the economy will start on February 1, 2014.”
However, three full years after the announcement, the project which managed to record some level of acceptance by players in the oil sector in the first quarter of 2015 appear to have run into troubled water and become dead.
A source in the Weight and Measures Department of the Ministry of Industry Trade & Investment who spoke to our correspondent in confidence confirmed that the minister which engaged the service of Nigerco Nigeria Limited as a consultant to the project recorded some success in the first quarter of 2015 as oil companies started obtaining the licensed and certified meters.
He noted that the corporation by the oil companies may have been motivated by the fear that the then in-coming government of President Mohammadu Buhari will not tolerate any act of breaching the Nigerian constitution.
When confronted with the question of why the department should suspend the operation of a legal act that will help curb theft in the oil and gas sector at a time when the country is fighting corruption, our source simply said, “it is due to an order from above.”
According to him, the multinational oil companies in-collaboration with some persons in government do not want the project to work. He noted that since 2012 when the ministry tried engaging the multinationals in implementing the metering program they have always resisted it, he said.
Efforts to get the Minister of Industry, Trade and Investment, to speak provide abortive as our correspondent was told by his aids that the minister was not available on several occasion. At a point he was directed to the permanent secretary who was said to be on vacation at the time of our visit.
When contacted the Special Assistant Media to the Permanent Secretary, Iletegun Babajide, promised to get back to our correspondent but failed to do so as well as refuse to pick calls nor respond to short messages sent to his phone.
Similarly, the Director of Media, Ministry of Industry, Trade & Investment, Mr. Green ….told our correspondent that he was not authorised to speak on the issue.
On his part, the Chairman, Chief Executive, Nigerco Nigeria Limited, and consultant to Weights and Measures arm of the Ministry of Industry, Trade and Investment, Yussuf Sani, told Leadership that the project raked in over $8 million to the country as part payment for monitoring fees and licensing fees.
According to him, the scheme would not have only prevented the incident of crude oil theft in the country but equally serve as a means of measuring the true volume of our production as well as generate revenue for government as the oil companies where expected by the Weight and Measures Act 2004 to devote about 0.00025 per cent value of production to the project.
When asked why the project could not continue, he said, only those in the ministry of Industry, Trade & Investment can explain. “As a consultant you can only work when you are called upon to do so.” According to him, the current administration appears not to have the political will to continue with the project.
He explained further that bearing in mind that the multinational oil companies engaged in crude extraction in the country are against the project he is not surprise that it has been stalled. He however wondered why a government that is focused on fighting corruption will fail to deploy metering to the core source of the nation’s revenue earnings.
According to him, he has written severally to the Ministry of Industry, Trade & Investment to remind them of the need to continue with the project by had not received any respond. Asked how the project was stop since it was in operation before this administration came into power, Engr. Sani said the oil companies simply stop cooperating by not allowing his staff to come into their premises to install meters.
Asked why the ministry which a beneficiary of the metering project could not enforce the law, Engr. Sani said he was told unofficially that there is an order from above for the stoppage of the program.
He therefore called on the President Buhari to re-introduce the metering project stressing that it is the only way, crude oil stealing could be minimize as well as get the accurate volume extracted, and exported from the country daily.
Global Institution’s View
According to the US Energy Information Administration (EIA), Country Analysis Brief on Nigeria publish May 2016 oil theft which is encouraged by the absence of metering runs on a complex that demand strong political will to conquer.
The report states; “Nigeria’s oil theft and trade business is based on a complex system of networks composed of domestic, regional, and international actors, involving various people—local youth and communities, professionals such as corrupt bank managers, and high-level elites such as government officials and security force personnel.”
“Oil is stolen at various stages of the production process from upstream to downstream operations—wellheads, manifolds, pipelines, and storage tanks at export terminals. Most oil theft operations typically involve tapping or siphoning oil from a pipeline by a hose and pumping the oil onto barges or small tankers”
The report further stated that, “Estimates of stolen crude oil vary and are as high as 400,000 b/d, but some believe that estimate is too high and may include the volume lost in oil spills. The volume of crude oil that is stolen is difficult to measure because metering systems are usually at export terminals and, therefore, oil stolen between the wellhead and pipelines is not easily detected.”
On the role of the multinationals operating in the sector, the report said, “The IOCs do not collectively report volumes stolen, so there is no authoritative source for total stolen volumes.”
Similarly, the US Deputy Ambassador to the UN, Michele Sison citing a Chatham House report said Nigeria loses over $1.5 billion monthly to damage from piracy, theft and fraud.
“By some estimates, Nigeria is losing about $1.5 billion a month due to piracy, armed robbery at sea, smuggling and fuel supply fraud,” Sison said.
Petroleum Ministry
Meanwhile sources at Petroleum Ministry have denial any interference with the metering project initiated by the Weight and Measures Department of the Ministry of Industry, Trades & Investment.
The source who spoke to Leadership on the condition of anonymity stated that the ministry is only a policy making organ stressing that the Department of Petroleum Resources (DPR) is saddled with the responsibility of regulating activities of players in the industry.
According to him, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu is very passionate about curbing corrupt practices in the industry. He noted that this is reflected in the Short and Medium Term Policy (2015 – 2019) document tagged “The 7Big Wins,” which states that transparency remains at the centre stage of the industry.
The Minister in the said document stated that, “Transparency in Nigeria’s Oil and gas industry has always been at the center stage of public discourse, given that oil and gas is the mainstay of our economy in terms of export and foreign exchange earnings.”
Dr. Kachikwu then submitted that “One of the key ongoing reforms for the industry is improvement in transparency and efficiency within the industry.”
Meanwhile efforts to get comments from DPR proved abortive as the Director of Press Dorothy Bassey did not respond to email sent to her either answer calls or SMS to her phone.
Civil Society Call for Metering
Members of Civil Society groups have added their voices to the call for the introduction of metering in the oil and gas sector stressing that it is the global practice.
Speaking with Leadership, Director, African Centre for Leadership Strategy & Development (Centre LSD) said the absences of metering in the oil sector is a recipe for crude oil theft. He stated that the civil society in the country has been clamouring for reforms that will allow for all Nigerians to enjoy the benefits of the natural resources but the government has continue to fail to act.
“Metering of crude production is a global practices why is it impossible to do same in Nigeria? It only a reflection of inability of government to tackle the real issues facing the sector,” he said.
On his part Dauda Garuba, Country Officer, Natural Resources Governance Institute (NRGI) blame the situation on the inability of government to gather the political will to do what is right.
“What is so difficult in implementing the Weights & Measures Act 2004 if those in position of leadership are serious about curbing oil theft in the country,” he asked.
While the debate as to whether this government is ready to apply the Weights & Measures Act 2004 in the oil and gas sector or not, one thing is certain, Nigerians will remain in the dark as to the volume of crude oil extracted or exported daily, as well as allow the stealing in the sector continues unabated.
Thus, the battle for the restoration of transparency in the oil and gas industry may continue to be an illusion as the political will required to transform the sector appears to be in doubt.