INTERVIEW WITH IBENECHE
plank is to separate the roles of government as a regulator from its role as an active participant in the industry by clarifying who the regulating agencies are and making sure that they are distinct from the commercial NNPC. If these are done properly, the PIB will have a huge and positive impact on the industry. If the negotiations with the current investors, IOCs, on the restructuring of the joint ventures and agreements on a balanced fiscal regime are done effectively, the industry will grow very smoothly. This, however, will require very strong and disciplined political will from government to allow NNPC to move away from routine control to playing its part as an investment and commercial entity like other national companies around the world. Some commentators suggest government’s gas policy shift from export gas to domestic supply has slowed down development in the sector. Assess this policy shift vis-à-vis what has been achieved so far? You are referring to all the work that is being done under the gas master plan. It is a great and valuable work. It is indeed correct that while this work is ongoing that gas development has slowed down a bit. I don’t think that is too much of a scrifice compared to the potential benefits. You cannot have a gas industry without a clear view of how it will benefit the economy. There has to be a clear articulation of how the gas industry will serve the economy. I think the government is taking the right step with the gas master plan. We cannot continue to export gas for liquid cash that slips away easily. What government is doing is connecting the gas to infrastructure and power generation and making the price of gas attractive so that people can come and invest in petrochemical industries. The key to success would be finding the balance between export and domestic supply. For instance, we in NLNG have made at least some 20 years commitment to LNG customers. You cannot reverse that and when Brass LNG comes on stream, they will have to make long term commitment too. The exports will have to live side by side with gas supply to the domestic sector. So what do you think government should do to balance this? Government has actually done most of what needs to be done. The whole point of the gas master plan and the emphasis in the last couple of years on re-balancing and making IOCs commit to domestic gas obligations is to state clearly that it wants to achieve a balance. I think that has really been accepted. By altering the pricing for gas (increasing it to about $2 per million btu to domestic buyers) and aiming to achieve market parity in the medium to long term demonstrates government’s intention to make domestic gas supply compete effectively with export gas. The government has expressed this in its policy and in the gas master plan but it has to implement it effectively because policies and strategies
can be good on paper, but they’re no good to anybody when they are not properly implemented. It is the implementation of the gas master plan and gas pricing policy that will actually strike the balance. I don’t see government authorising the construction of additional export plants without making sure that the reserves required to meet domestic demand is protected. What is your take on government’s plan to fix a special price for natural gas consumers like the Manufacturing Association of Nigeria and other industrial concerns? The prices stated in connection with the gas pricing policy and the gas master plan are reasonable and balanced. What will distort the market is granting special pricing to lobby groups. The tendency of this kind of deals is that you may risk subsidising inefficiency and incompetence. The whole idea of the gas pricing policy is to have a good gas price locally to encourage industrial investments in Nigeria. People who will invest upstream to bring the gas to the surface will expect to see a good return. And people who will have to use it have to use it in a business that will pay a return and still make profit. So if you subsidise any business that cannot on its own pay a commercial rate, you may be subsidising inefficiency and incompetence. That’s a risk but every country has a right to gauge the right price to encourage activities in its economy and that’s what the gas master plan is trying to do. If government wants to grant a special price for, say the manufacturers association, it should be time-bound and there should be an exit plan because unnecessary protection always leads to inefficiency. The best test of your ability in an economy is to be able to compete with others. So what would be ideal is to have a general pricing for domestic gas use. To give a specific price to a specific sector excludes others from competing with it. This means that you deny other parts of the economy that could put that gas to better use the opportunity to utilise it while people who are not able to use it effectively are protected.
by the oil and gas industry to develop the economy cannot be pinned down on the operators alone. So if you, for instance, manage to stop the oil exports, poverty will not disappear from Nigeria overnight. In that sense, lowering the focus on the industry has brought some improvements in productivity. But there is an urgent need to carry through with the logical intentions of the amnesty through massive infrastructural construction, job creation and to make sure that those things translate to cheaper availability of products in the economy. Part of the problem that brings agitation in the Niger Delta is lack of opportunities for employment and self improvement. It’s a very intractable problem because thousands of graduates are leaving schools without there being a commensurate growth of capacity to employ them. Where are these people going to find jobs? One can easily see that if the government’s electrical power programme works, it would make the creation of jobs more feasible because a lot of people who today would have created jobs just simply can’t because of the cost of power. That is something that needs to be coordinated and thought through. So, we have seen some improvements in the Niger Delta; we have seen some reduction in violence targeted at the industry but we see a general increase of violence across board on innocent people and we still see a continued persistence of unemployment. Nigeria LNG recently established another subsidiary, NLNG Ship Manning Limited, that will provide ship manning services and is currently on a ship knowledge transfer programme with fleet managers. What is your game plan in these? Nigeria LNG is following the eventual course
How would you rate government’s efforts in managing the Niger-Delta situation and how has it affected Nigeria LNG and indeed the industry at large? It is still a bit violent in Nigeria, but less so. We have seen two bomb blasts in recent months. The kidnappings and hijackings are still going on and I get worried when I hear the news. What has changed is that the violence doesn’t seem to be primarily targeted at the industry, which was the case three years ago. We now see this violence across the country. It looks to me that the shape of the problem has changed and that this change is significantly influenced by the amnesty that the government engineered. I think it is good that the shape of the problem has changed because ultimately it did not make sense to vilify the industry that was doing what it needed to do. The failure of Nigeria to utilise the resources created
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