FG re-ignites politics of oil in North close to another election

With 95 days to the 2023 general elections, President Muhammadu Buhari, who doubles as the Minister of Petroleum Resources, is today returning with key members of his cabinet to Gongola Basin, bordering Bauchi and Gombe states to search for crude oil in a development that pits the politics of oil against the economics of hydrocarbon. He had done a similar thing close to the 2019 general elections.

Industry watchers believe that the development, if pegged on timing, transparency, accountability and global practices, show that President Buhari and the Nigerian National Petroleum Company (NNPC) Limited will need to come clean, as most explorationists and geologists insist the development is buried in secrecy and against global practices.

Stakeholders who spoke to The Guardian noted that diversifying the country’s hydrocarbon sources, increasing existing reserves and boosting daily production remain sacrosanct even as the future of hydrocarbons faces pressure from climate change with a fast depleting funding options.

Coming as confusion persists over a one billion barrel crude oil initially said to be discovered in Kolmani well, some experts specifically noted that the return of President Buhari to the location was unnecessary, adding that a ground-breaking of a drilling activity, which would mark the second in the location should not require the presence of the President and his cabinet members.

This discovery and exploration of crude oil up North will be the first after an attempt in the Lake Chad, Borno region was aborted by insecurity.

Recall that in 2016, NNPC launched a search for oil in some Northern states. The search led to the discovery of oil in commercial quantities in Bauchi, Gombe, Borno and Niger states.

In February 2019, President Buhari, flanked by the former and late Group Managing Director of NNPC, Maikanti Baru, flagged off the Spud-In of Kolmani River 11 Well, where it was later announced about a year after that one billion barrels of crude oil was discovered.

Today’s return would mark the official groundbreaking ceremony of the Kolmani Oil Prospecting Licenses (OPLs) 809 and 810 at the Kolmani field site. The oil field is to be developed by an Indian oil firm, Sterling Global Oil, New Nigeria Development Company (NNDC), which belongs to the 19 Northern states and NNPC.

While oil majors had ventured into the basins without success, activities came on stream across basins in the Northeast, especially Lake Chad and Gongola basin as soon as President Buhari returned for a second term in office but met with criticisms by stakeholders and civil society organisations.

The criticisms were not primarily against prospecting for crude oil but timing, political undertones, secrecy and the general handling of the plan.

Divergent opinions have trailed the search for hydrocarbon in the inland basins, with one of the primary worry being that, the Buhari-led administration is only focusing on exploring the basins, which are within Northern corridor as efforts have been within Chad basin and Gongola basin despite the insecurity at the detriment of others like Anambra basin and Benue Trough (which is segmented into Upper, Middle and Lower parts).

Another concern was that the process is clouded in secrecy under an NNPC, which had pledged to be transparent and accountable, and currently partnering the Extractive Industries Transparency Initiative (EITI) to publish its spending on such activities.

Also, for most explorationists, the practices ought to be science-based, where results of findings are open and tested for global acceptability and further research, but NNPC’s Frontier Exploration Services (FES) have not been able to explain to geologists and researchers the breakthrough that led to its one billion crude oil discovery.

“Can someone discover a cure for HIV and hide the discovery? The person will be everywhere talking to researchers in the medical field. FES has not been able to explain to all of us who have been practicing in the industry for decades,” a source, who pleaded to remain anonymous, told The Guardian.

The source noted that while exploring for oil should be encouraged across all the inland basins, the current development has been politicised and compromised.

“What does the ground-breaking ceremony mean? What exactly is the activity going on there? Why does it require a whole President to do that? They have already told us that they have over a billion barrels discovered, which means they have appraised. Now they want to develop wells to bring it out.

“I do not think the President must be there since he had done the same ground-breaking of the first well in 2019. What should possibly take a whole President there again is when they want to build a refinery, gas processing plant or plant for oil and gas they discovered. This is political and possibly because of the election” the source said.

Respected energy expert, Henry Adigun noted that he had seen documents that supported that oil and gas exists in the basin but he was unsure of the commercial viability of the oil find.

Adigun noted however that a discovery of one billion barrels in the Gongola basin is more political than real, adding that he did not believe such volume of oil discovery in the region.

Insisting that the exploration may not be coming at the right time given the state of the oil market, Adigun stated that NNPC may need to become more transparent around the activities in the inland basins.

“There is oil there, that is what I can tell you. It may not be in commercial quantity but there is oil there. But looking at the oil market now, is it the best for us, may be no. The key thing is that the survey shows potential.

“Again, there must be clarity. There must be transparency on the why and what is going on there because now, NNPC is using government funds, which belong to the Nigerian state,” Adigun said.

Energy finance expert, Dan Kunle, noted that the move remained a good and long overdue development for the country, especially in strategically diversifying hydrocarbon base.

He noted that the inland basins should be explored for commercial reservoirs that would enable the country to not only have sweet crude but other blend of crude.

“We need strategic balance. The sweet crude has spoiled. If we find enough commercial oil and gas, we will plan what to do with it,” Kunle said.

According to him, the political decision being taken if it eventually leads to commercial discovery would be backed by calculated economic decisions.

Energy lawyer and former management staff at Shell, Ameh Madaki, said the secrecy surrounding the exploration and discovery of crude oil is something to worry about.

According to him, the development further heightens the concerns about opaqueness of the operations of NNPC.

“No serious minded oil and gas industry player believes in the viability of OPL 809 and 810, and in a post-Petroleum Industry Act (PIA) era, it is disheartening that the first commercial find by NNPC is a “quota system” discovery, to justify the frittering of NNPC profits on unviable frontier fields.

“It is obvious that it will take a long time for NNPC and the Oil and Gas industry in Nigeria to be run on commercial terms. Geopolitics will continue to play a critical role, thereby making the passage of the PIA an exercise in futility,” Madaki stated.

Although the PIA created a fund where 30 per cent of NNPC profit is now going into frontier exploration, the over 40-year of spending, projected by some stakeholders to stand at above $3 billion has been kept away from the public.

Former President, Movement for the Survival of the Ogoni People (MOSOP), Ledum Mitee, said the so-called frontier oil funding negates all business and ethical principles.

“Spending in searching for oil should be a risk by the oil company and not the government. Why wouldn’t the government also spend money to search for gold, for instance, in the Niger Delta region? The opaque nature of the spending for oil and gas in the North over these years speaks to its corrupt foundation,” he stated.

Partner at Nextier Group, Dr Ndu Nwokolo, said although the PIA led to the unbundling of NNPC, the change remained in name and a little in strategy and implementation.

“First, most of the core personnel are still there, and as it is said old habits die hard. It would be extremely difficult for NNPC to overnight change from its usual nature of not being open and overnight transform into a business that makes all its dealings open.

“There is a political economic angle to it. Is the government really willing to have a business cooperation that it has little control over, that is devoid of prebendalism and patrimonialism? Is the state ready to have a corrupt free cooperation with sound Nigerians who are dedicated to building an oil cooperation similar to what we have in other oil producing countries like us,” he noted.

Managing Partner, The Chancery Associates, Emeka Okwuosa, said the country has nothing to show for the years of exploration activities in the north.

At a time that the country is heavily indebted and struggling to survive, he expressed worries over what he described as a waste of the country’s scarce resource.

“Honestly, we need to prioritise on servicing existing oil infrastructure and refineries and encouraging the coming on stream of new refineries. We should discourage wasteful expenditure on unsubstantiated oil exploration. We need to be more prudent and imbibe the twin pillars of transparency and accountability. It is not by force we must discover oil in the North,” Okwuosa said.