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State Actors in the Downstream Oil Sector

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Globalization, Democracy and Oil Sector Reform in Nigeria

Part of the book series: African Histories and Modernities ((AHAM))

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Abstract

In this chapter, I engage with the roles of state actors in oil industry reform policies. The analysis reveals how the public officials managing the oil industry engage in maladministration, inefficiency and corruption to appropriate the benefits of the Nigerian oil wealth for private use. The Nigerian bureaucracy has displayed a lack of capacity to effectively discharge the responsibilities and roles of oversight and monitoring of the oil sector. Oil marketers and MNCs continue to collude with bureaucrats and political office holders to engage in corrupt practices and manipulate data in support of excess subsidy payments. The complicity of both state and non-state actors explain the botched subsidy reform, inability to curb the incessant increase in fuel prices and failure to completely deregulate the downstream oil sector.

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Notes

  1. 1.

    The Ministry of Petroleum Resources was created by the Nigerian government to implement government policies in the entire oil and gas sector. The institution supervises the implementation of approved policies with a technical Department of Petroleum Resources, which undertakes the regulation of the oil and gas sector.

  2. 2.

    Allison Madueke was a former staff member of Shell Petroleum Development Company, where she had acted as Head of the Project Unit of the Estate Development Division in Lagos . She became the Minister for Transportation between 2007 and 2008, and Minister for Mines and Steel Development between 2008 and 2010. She was appointed Minister for Petroleum Resources by President Goodluck Jonathan in 2010 and held the position till 2015.

  3. 3.

    The committee, operating under the direct supervision of the Minister, is mandated to engage the parliament and executive towards removing every gridlock towards its passage and immediate implementation.

  4. 4.

    The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of petroleum-rich countries. It was created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The objectives of OPEC are to “co-ordinate and unify petroleum policies among member states. This is important for maintaining fair and stable prices for crude oil producers as well as a regular supply of petroleum products to consuming nations. Part of its objectives is to also guarantee a fair return on capital to investors in the industry”; see http://www.opec.org/opec_web/en/about_us/24.htm

  5. 5.

    Ibid.

  6. 6.

    See The Indigenization Decree of 1977.

  7. 7.

    Nigerian Agip Oil Company Limited, a foreign multinational corporation, engages in oil exploration and production in the upstream of the oil industry. The company was founded in 1962 and embarked on a joint venture with the government; see http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=33212870

  8. 8.

    The Agbami field—owned by Chevron, Star Deep, Famfa and Petrobas—is located 70 miles off the country’s coastline and about 5000 feet in depth.

  9. 9.

    This information is available on the website of NNPC ; see http://www.nnpcgroup.com/NNPCBusiness/DownStream/RetailServices.aspx

  10. 10.

    See http://www.referenceforbusiness.com/history/Mi-Nu/Nigerian-National-Petroleum-Corporation.html

  11. 11.

    The objective of the audit was to “review and reconcile all revenues collected by Government Agencies on behalf of the Federation and payments made by all the oil and gas companies operating in Nigeria, in line with the international standards and rules of the Extractive Industries Transparency Initiative (EITI)” (NEITI 2013).

  12. 12.

    Petrobras is a semi-public Brazilian oil giant, which has replaced Mexican Oil Company as the largest company in Latin America and the most profitable in the region; see http://www.latinbusinesschronicle.com/app/article.aspx?id=3440

  13. 13.

    SASOL, a South African company, was established in 1950 but started producing synthetic fuels and chemicals in 1955. For more information, see John Collings (nd) “The Sasol Story: A half-century of technological innovation”; available online at http://www.sasol.co.za/sites/default/files/content/files/mind_over_matter_07_1178173866476.pdf

  14. 14.

    These responsibilities are retrieved from the official website of DPR. See http://www.dprnigeria.com/dprroles.html

  15. 15.

    The committee was set up in 2000 to address the rot in the downstream oil sector. Most important was the issue of subsidy payments, fuel scarcity and poor performance of the refineries . The committee recommended the urgent need for deregulation and liberalisation of the downstream oil sector and the creation of PPPRA.

  16. 16.

    Its members comprise the Chairman, Executive Secretary, Presidency, Central Bank of Nigeria (CBN) , the NNPC , the Federal Office of Statistics, the Federal Ministry of Petroleum Resources , the Federal Ministry of Finance, the National Manpower Board, the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC), the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) , the National Union of Petroleum and National Gas Workers (NUPENG), the National Association of Road Transport Owners (NARTO), the National Union of Road Transport Workers (NURTW), the Nigerian Media, the National Association of Chambers of Commerce, Industry, the Mines and Agriculture (NACCIMA), the Major Oil Marketers (MOMAN ), the Depot and Petroleum Products Marketers Association of Nigeria DAPPMA, the Independent Petroleum Marketers Association of Nigeria (IPMAN), the Petroleum Equalization Fund (PEF), the Manufacturers Association of Nigeria, the Nigerian Employers Consultative Association, Federal Ministry of Employment, the Labour and Productivity, and Federal Ministry of Transport; see MOMAN (2012), PPPRA (2004), Petroleum Products Pricing Regulatory Agency (Establishment) Act 2003.

  17. 17.

    Mr. Victor Shidok is the current acting Executive Secretary of PPPRA.

  18. 18.

    The PSF is a pool of funds drawn from the national budget for the stabilization of the domestic prices of petroleum products to avoid the translation of volatility in international crude and products prices into instability of pump price of oil in the domestic market. To achieve this, the PPPRA Board established a pricing template to determine on a daily basis the landed price of regulated products. This formed the basis of subsidy claims made by oil marketers participating in the scheme.

  19. 19.

    There are documents to support the authentication of the marketers’ claim of loading a specified volume of fuel from the oil depot or storage facility. The DPR license showed government’s approval to lift and distribute fuel. The Bill of Lading certifies the authenticity of fuel imports or loading from a depot, while Shore Tank Certificates revealed the volume of fuel in a storage facility.

  20. 20.

    The Lloyd’s List Intelligence remains the best vessel tracking and deepest source of shipping intelligence database designed to monitor the shipping world; see http://info.lloydslistintelligence.com/our-channels/lloyds-list-intelligence/

  21. 21.

    MOMAN is the umbrella association of major oil marketers in Nigeria. Their members are Con oil, Forte Oil, Mobil, MRS, Oando and Total, which are MNCs operating in the Nigerian oil industry.

  22. 22.

    IPMAN, established in 1972, is an umbrella association for all registered independent petroleum product marketing companies in the country. It was established to provide opportunities for Nigerians to actively participate in the downstream oil sector and sees to the welfare of members.

  23. 23.

    Despite the assurance by the government that there would be an uninterrupted fuel supply during the January 2012 deregulation feud, there have been many cases of fuel scarcities in the country.

  24. 24.

    http://www.nnpcgroup.com/NNPCBusiness/Subsidiaries/PPMC.aspx

  25. 25.

    See http://www.nnpcgroup.com/PublicRelations/NNPCinthenews/tabid/92/articleType/ArticleView/articleId/450/Press-Release--Drop-Your-Appetite-for-Stolen-Nigerian-Crude-FG-Tells-International-Community.aspx

  26. 26.

    Bunkering is a common term in the Nigerian oil industry and refers to oil theft through the siphoning of crude and petroleum products from pipelines to makeshift vessels of trucks.

  27. 27.

    For full information of their activities, see http://sweetcrudereports.com/2016/09/01/jtf-busts-illegal-oil-bunkering-syndicate-seizes-fuel-products-estimated-at-over-n52m-in-delta/

  28. 28.

    The Petroleum (Special) Trust Fund (Amendment) Decree No. 1 of 1995, and Petroleum (Special) Trust Fund Decree No. 25 of 1994.

  29. 29.

    Dr. Christopher Kolade, was honoured by the federal government with its prestigious award, Commander of the Order of the Niger (CON), serves as Director General of the Nigerian Broadcasting Corporation, as well as the Chairman and Chief Executive Officer of Cadbury Nigeria Plc. He was also a former Nigerian High Commissioner to the United Kingdom and a well accomplished broadcaster. He later resigned from the position.

  30. 30.

    Information is available online at http://worldpopulationreview.com/countries/nigeria-population/

  31. 31.

    The Petroleum Equalization Fund (Management Board) Act of 1975; see http://www.abfrco.com/1.htm

  32. 32.

    Bridging is the movement of petroleum products for distances beyond 450 km within the country. The cost of transporting the products, from the supply to the retail points is the bridging costs.

  33. 33.

    http://systemspecs.com.ng/documents/Remita%20Case%20Study.pdf

  34. 34.

    Transportation cost is related in distance traveled between the points of lifting the products (Depots) and the points of sale (filling stations).

  35. 35.

    Bridging is the movement of petroleum products by long distance road haulage (i.e. above 450 km) from a depot/refinery to another depot experiencing scarcity. Bridging is resorted to only when there is a pipelines break or where the refinery feeding the depot(s) experiencing products scarcity is shut for Turn Around Maintenance (TAM).

  36. 36.

    This is a Petroleum Electronic Truck Loading initiative introduced by PEF(M)B to improve operations in the downstream sector. This project ensures effective monitoring and data accuracy as well as a strategic way of loading and delivering petroleum products across Nigeria.

  37. 37.

    The ‘cabal’ has also been labelled as those responsible for the inability of the government to fix railway transportation system.

  38. 38.

    More information and complexities about the kerosene fraud is robustly discussed in the subsequent chapter.

  39. 39.

    See Section 6 sub-section 1 of the Act.

  40. 40.

    The probe panel held public hearings from January 16, 2012 to February 9, 2012. Within that period, they gathered sworn testimonies from 130 witnesses and got more than 3000 volumes of documents as evidence (House of Representatives 2012, p. 4).

  41. 41.

    For more information on the findings of the probe panel , see House of Representatives (2012).

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  1. Department of Public Administration, University of Zululand, KwaDlangezwa, Kwazulu-Natal, South Africa

    Adeoye O. Akinola

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Akinola, A.O. (2018). State Actors in the Downstream Oil Sector. In: Globalization, Democracy and Oil Sector Reform in Nigeria. African Histories and Modernities. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-70184-4_6

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  • DOI: https://doi.org/10.1007/978-3-319-70184-4_6

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-70183-7

  • Online ISBN: 978-3-319-70184-4

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