In a recent exclusive interview, we had the opportunity to speak with Magnus Onyibe, who shed light on pivotal developments in Nigeria’s oil and gas industry. Tony Elumelu, chairman of Heirs Holdings, was among the first to raise alarms about pressing issues within this vital sector. Back in 2021, he made headlines when he invested over $1.1 billion to acquire a 45% stake in the OML 17 oil drilling asset, a deal that saw Shell, Total, and Eni exit, leaving the Nigerian National Petroleum Corporation Ltd (NNPCL) with a 55% stake representing the Nigerian people.
However, Elumelu’s initial optimism quickly turned to concern when, in 2022, he learned that only a fraction of the crude oil from his wells, which are connected to the Escravos pipeline, was actually reaching its intended destination. Most of it was being siphoned off by skilled oil thieves exploiting illegal access to the pipeline. “This is not a minor issue; this is oil theft,” he emphasized during a recent interview with the Financial Times of London. “The government should have a handle on this. In the U.S., authorities quickly identify criminals. Our security agencies need to be equally accountable in tracking down those who are stealing our oil. How can vessels operate in our waters without detection?”
Elumelu’s remarks prompted a swift response from Nigerian authorities. General Chris Musa, Chief of Defense Staff, established a special task force to address the oil theft epidemic. Their efforts appear to be paying off, with NNPCL projecting an increase in oil production from 1.3 million barrels to 2 million barrels per day by next year.
Another influential voice in Nigeria’s oil sector, Alhaji Aliko Dangote, has also voiced significant concerns regarding the downstream sector. After investing $19.5 billion in a state-of-the-art refinery with a capacity of 650,000 barrels per day, Dangote has faced substantial difficulties due to a lack of crude oil supply. Davakumar Edwin, Vice President of Dangote Refinery, criticized International Oil Companies (IOCs) for restricting crude oil supply to his facility, resulting in delays in petrol availability in Nigerian markets. “Aside from NNPC, we’ve only managed to procure crude from one other local producer; all others refer us to their international trading arms,” Edwin stated.
He further underscored the pricing issues associated with crude oil purchases, noting that contracts often come with inflated premiums that exceed market rates, prompting them to escalate the matter to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Despite these hurdles, Dangote acknowledged NNPC’s efforts, mentioning, “Some IOCs are struggling to provide us with the necessary crude. The existing framework has led many to prioritize exports over local supply.”
In light of these growing concerns, President Bola Tinubu has formed a committee led by Finance Minister Wale Edun to create a framework allowing local refineries to purchase crude oil in naira, with a particular focus on Dangote Refinery. The administration hopes to kickstart local petrol production, potentially alleviating the financial burden on Nigeria’s treasury and addressing the ongoing fuel scarcity affecting citizens.
While Elumelu underscores the urgent issue of oil theft, which jeopardizes both his financial interests and those of the nation, Dangote grapples with IOCs withholding crude supplies vital for Nigeria’s self-sufficiency in petrol production. Both entrepreneurs are tackling crucial challenges that, if addressed, could lead to significant socio-economic progress for Nigeria.
Their candid critiques are sparking much-needed reforms within an industry historically plagued by inefficiencies. With the Petroleum Industry Act (PIA) established in 2021 yet to be fully implemented, their involvement foreshadows a critical shift towards greater accountability in a sector long dominated by bureaucratic inertia.
As Nigeria navigates the intricate landscape of petroleum politics, the oil and gas industry remains the backbone of its economy. The removal of fuel subsidies last year has accentuated just how closely intertwined crude oil is with daily life in Nigeria, driving up living costs and underscoring the urgency for reform.
Questions linger about whether these challenges are merely new developments or part of a long-standing narrative. Indeed, issues like crude oil theft and the allocation of oil for local refining have beset the industry since oil was first discovered in 1957. However, the entry of private investors like Elumelu and Dangote, both dedicated to accountability, has brought these discussions to national prominence.
In the past, when the industry was largely confined to government and IOCs, there was little incentive for efficiency. Now, entrepreneurs like Elumelu and Dangote, each investing billions in their projects, are committed to safeguarding their investments and shaping the future of Nigeria’s oil sector.
Both investors are expressing mounting frustration as their plans face unexpected disruptions, starkly contrasting with the indifferent attitudes of public servants who have historically neglected Nigeria’s interests in joint ventures, leading to inadequate infrastructure for measuring crude oil flow.
Rather than viewing the agitation from Elumelu and Dangote as a problem, this situation should be seen as an opportunity for much-needed change. Their engagement signifies a significant transition toward a more accountable and efficient industry, prompting a reassessment of how private sector involvement can revive an ailing sector burdened by bureaucratic inefficiencies.
Alarmingly, the lack of an ownership mentality among officials managing national resources has contributed to the ongoing dysfunction of Nigeria’s government-owned refineries, which have been largely nonfunctional for nearly two decades. Despite investing around $25 billion in maintenance, these refineries have yet to produce a single liter of petrol, a troubling reality that reveals deeper systemic failures.
The problem is further compounded by the thriving oil theft epidemic, despite NNPCL’s claims of investing heavily to secure its assets. Millions of barrels continue to vanish while Nigeria struggles to meet OPEC production quotas.
These complexities are exacerbated by international influence and collusion with local officials, stifling progress. Former President Olusegun Obasanjo disclosed that IOCs, citing corruption within Nigeria’s sector, have declined offers to establish refineries in the country, preferring instead to extract resources and sell refined products back to Nigeria at inflated prices.
Amidst this backdrop, the shifting dynamics in the energy sector signal a critical moment for Nigeria. Both local and international stakeholders must navigate a landscape increasingly defined by the pursuit of autonomy and integrity in resource management. It’s essential for Nigeria to leverage these challenges to forge a path toward energy independence, vital for job creation and national economic revitalization.
As Dangote and others work to enhance local refining capacity, the establishment of potentially numerous refineries could transform Nigeria from a net exporter of crude oil into a nation capable of processing its own resources. Clearly, advancing toward local refining and halting crude oil exports are essential steps for boosting Nigeria’s economy and improving its global economic standing.
In examining the current landscape of Nigeria’s oil and gas sector, it’s evident that both challenges and opportunities abound. Aliko Dangote and Tony Elumelu embody a new wave of Nigerian entrepreneurship determined to reshape the country’s oil narrative. If they can navigate the barriers posed by systemic inefficiencies and external pressures, Nigeria stands on the verge of a substantial transformation in its energy industry.
