We Are Turning Nigeria Into A Hub For Petroleum Products Refining–Sylva

Chief Timipre Sylva, the Minister of State for Petroleum Resources, spoke on the steps being taken to reposition Nigeria’s oil and gas industry among other issues in the sector.

Sylva, a former Governor of Bayelsa State, was appointed by President Muhammadu Buhari on in August 21, 2019, as the Minister of State for Petroleum Resources. He is also the Chairman of the Board of the Nigerian National Petroleum Corporation.
He cut his teeth in the oil and gas sector when he was appointed as the Special Assistant to the Minister of State for Petroleum in 2004 under the auspices of Dr. Edmund Dakouru. He continued in that position until he resigned to contest the 2007 Bayelsa State gubernatorial election which he won and was sworn in as governor of the state.

Under his supervision, the Ministry of Petroleum Resources have recorded some key achievements which include the signing of the Final Investment Decision for NLNG Train 7 project, the commencement of the AKK pipeline project championed by the Nigerian National Petroleum Corporation and implementation of the deregulation of the downstream sector of the petroleum industry among others.
Other notable accomplishments include the completion and commissioning of the 17-storey headquarters building of the Nigerian Content Development and Monitoring Board (NCDMB) and commissioning of the Waltersmith modular refinery.

Excerpt:

When you assumed office as minister, you listed your top priorities to include implementation of the reduction of FG’s equity stakes in Joint Venture (JV) participation to 40%, curbing petroleum products Cross border leakages, increasing crude oil production to 3 million barrels per day among others. How far have you gone in realizing these priorities

I would say that what we met on the ground was quite daunting. Most of it is already well known. For example, everybody in Nigeria knows that the refineries were not quite working. Everybody in Nigeria at that time knew that the passage of the PIB was still a challenge. I was also very aware that our operating cost was too high, for our industry to be sustainable. The security issues also were quite well known, so I must say that I didn’t really have any surprises that we were quite ready to tackle these issues.

That is why I was quite happy when the President gave me the opportunity to come to this ministry and I thought I had what it took to manage the issues that I met and to the glory of God I have been able to tick all the boxes as I always like to say.

What were some of the steps you took to realise these priorities?

My first priority was to chart a road map for the industry. It was very clear to me that we are on the last mile of oil production and the global community was beginning to think about moving to renewables. So I felt that we should try and chat a course, a new course for the industry and that new course I thought should be gas, because I felt also that we are very well endowed in gas and for some reason we have not really focused on that area.

So, when I came, I ensured that we moved to the direction of the industry towards gas and so far we have achieved quite a lot in that direction. That was why the first thing I championed was to ensure that we were able to take FID on Train 7 which has been in the doldrum and of course things were not moving as quickly as we wanted things to move in that direction, so I had to tackle it head on and ensure that we were able to tackle and we took the FID.
The other issue that I thought really should be tackled was the issue of operating cost which was high and we needed to see how we can bring it down and chief of the problems in this area was the security problem.

Because of security which was now built into the operational cost, it really drove up our cost of production. So, when I heard for example that there were some productions that were doing over $40 per barrel production cost, then I thought, why are we even producing those kinds of assets, because we will be producing at a loss. But of course, I and the NNPC GMD discussed and we had common ground, we understood each other and we agreed that we were going to see how we can push down the production cost and the target was to reduce it by five per cent at least. But today we have been able to achieve more than five per cent and we are quite happy and we still feel that it is still work in progress. We will still drive the cost of production down to a minimum that will be very sustainable.

And then of course the issue of the refineries was the crying baby in the house. The refineries have not worked for so many years and a lot of people were also saying why are the refineries not working and then why are you carrying on with paying salaries of people who are working in refineries that are not working?

So the challenge was that we have to get these refineries working and today, we have Port Harcourt refinery rehabilitation. It has started already and Kaduna and Warri refinery will be going to Federal Executive Council in the next few days. So, we are quite happy also with what we are achieving.

As I said before, PIB was also there. For over 20 years we have been trying to pass this piece of law and we have not been able to succeed as a country. It was becoming a shame to this country and because we have not been able to pass the law, a lot of investment that were supposed to come were not coming because people were on a wait-and- see mode because if your fiscal environment is not clear, people will tend to wait and see if you can clarify that so that they know they have a line of sight to what the laws are in Nigeria.

If you are in the process of passing those laws as long as you are in that process, people normally will just watch you so that they can at least see the actual complexion of the investment environment before they come in. And unfortunately, we have kept this country, our country in that doldrum for this long while trying to pass the bill for 20 years.

So, no investment or the investments that were coming were quite minimal and so we had to focus on that, to ensure that we are going to pass them and today we are able to pass the PIB and this was the road map that we charted. I can assure you that we have been able to achieve quite a bit on the road that we decided to thread.

While unveiling the National Gas Expansion Programme and the National Auto-Gas rollout, President Muhammadu Buhari urges Nigerians to embrace the use of gas. What steps has your ministry taken to encourage Nigerians to move in this direction?

Everything that we have been doing is to try to encourage Nigerians to use gas. You know gas has various uses; first use of gas is to power; the second use is to use gas to power gas based industries, fertilizer plants, methanol plants and petrochemical plants. These are all gas based industries and then of course the last of it will be auto gas which is using gas to drive our cars and using household gas to cook in our houses.

We have tried to encourage all three. In terms of gas to power, a few days ago you must have heard that we reduced the price of gas to power from $2.50 to $2.18. Then in regards to use of gas for GBIs (Gas Based Industries), as we call them, you know we took FID on Train 7, we have also taken FID on the Brass Fertilizer Methanol Plant.

These are all Gas Based Industries that could be utilising our gas. Then in December last year, we did the auto gas roll out that means we are trying to encourage Nigerians to use auto gas to drive their cars.

That programme is already still on and then what we are also trying to do is to encourage and deepen gas penetration in terms of usage of gas in our homes. As it stands now, gas is mostly used in the urban areas in Nigeria to cook. In the rural areas, gas is completely absent. So, what we are trying to do is to move the gas to rural areas as well so that our people in rural areas will also use gas to cook. That we believe will also be saving their lives because it will be cleaner for them and also saving our environment. It will at least assist in reducing deforestation.

The problem is in the villages, people fell a lot of trees to make firewood to cook and that really has accounted for a lot of degree of deforestation in Nigeria. So we are hoping that we are going to move the gas and we have a programme of establishing what we call micro distribution centres across Nigeria even in the rural areas.

And now we also realise the issues that are making the rural people not able to use gas. First problem is cost and of course when it gets to the rural poor, it becomes difficult for them to afford gas to cook, because today, if you want to use gas, you will buy a cylinder of gas, you go home, cook with it. If that gas finishes, you have to go and buy a full cylinder and that full cylinder I don’t know how much it costs. It is about N6,000 they said depending on the size. The rural person may not have money to buy gas at the same time.

So, you find out that they prefer to rely on kerosene and firewood, because they can buy half a bottle if they don’t have money. They can buy a quarter bottle if they don’t have money and it will serve them at least to cook, but in this case you have to buy a full gas bottle. So, what we are trying to introduce now is to introduce fractional filling so that you can actually buy fractions of the bottle if you want to buy. With this, you don’t have to wait until you have all the money to buy the full cylinder of gas.

Then the next other impediment is the cost of the gas stove itself. The rural person, do they have the money to buy the gas stove? Because, most of the gas stoves are imported. So what we are now trying to do is to work with foundries in Nigeria to ensure that these gas stoves are produced in Nigeria cheaper.

Then the third problem is the gas stoves that are imported into Nigeria. Can they really handle the kind of cooking that Nigerians are used to? Because Nigerians are big cooks. We cook for big families, for big events and so on and some of the pots we use for those cooking are very huge. So now you have all these foreign made cooking gas that you buy, now they can’t take those big pots. We believe that when we work with the foundries, the foundries understand Nigerians. They understand the needs of Nigerians to be able to produce the right size of cookers to be able to be able to handle Nigerians cooking- the heavy duty cooking.

So, these are the things we are working with the Nigerian foundries to be able to produce the appropriate size of gas cookers. So we are actually in every way trying to see how we can encourage the use of gas in Nigeria at the household level, to the auto gas level to drive their cars to the GBI level and then of course the power level. The gas to power level.

To What extent is the Ministry taking advantage of the AfCFTA to transform the country into a petroleum producing refining hub for the African region?

We started by being our brothers’ keeper. A few months ago, I was criticized for saying that we are going to buy petroleum products from Niger. Of course, we are activating the Africa continental Free Trade Zone. So, I told Nigerians that we are trying to encourage intra-African trade and take advantage of our proximity as countries.

So, where we are going in terms of product, we want to become a hub for petroleum products. If you look at Dangote refinery, 650,000 barrels per day, then we put all our refineries together, Port Harcourt refinery, 210,000, barrels, Warri is over 100, 000, Kaduna is over a hundred thousand. So, when you put these refineries together, we are looking at at least 400,000 barrels. When we add these over 400,000 barrels to 650,000 barrels, we will be having over 1 million barrels without adding the small modular refineries.

So if you add all these, it will amount to more than Nigeria’s total consumption, so the idea is to have Nigeria as a refining hub to be able to supply to the rest of Africa, thats how we are planning to take advantage of the AfCFTA. So we want to create Nigeria as a hub.

Just today, I had a meeting with the Minister of energy from Senegal, what we also are saying is that we want to also activate our position as the oldest and most experienced petroleum producer in Africa. Because we started producing oil in 1958, that means we have gotten quite a lot of experience more than the other countries in Africa.

We have newer countries coming up, so we want to use this as a springboard, let other countries learn from us so we can export human resources, export know-how, export some forms of manufacturing which we are trying to encourage.

The local content board is dealing with oil and gas parts, what we intend to do with these oil and gas parts is to encourage the manufacture of oil industry components. So, with the manufacturing of those components, we will be able to supply other countries coming into the family of oil producers.

So, in many ways, we are actually positioning ourselves to take advantage of the AfCFTA to become a hub for knowledge and also for products and that is how we are trying to position this country.

The PIB has just been passed with lot of resistance from producing states. Were you surprised about the resistance the PIB faced from the South-South?

The beauty of democracy is that everybody will have their say, but will they have their way? That is another question. Well everybody is expected to have their say, they are in the host communities and they want the best for themselves. But as I will always say, we are all in one country and we need this country to survive. If it does not survive then the communities too will not survive, so the first and most important thing is the country.

How does their aspiration align with the country’s aspirations? First, we must align these two and that is what the National Assembly has done, they aligned and said this is what is optimal for the communities and the producers. Because, what we must understand is that if three percent of the operational cost will go directly to the cost of production, and we are stressing the need to reduce operational cost.

These companies will not bring it from their profit, they will charge from the operational cost, and if they charge it from the operational cost, it will unnecessarily increase the operational cost which will make us less attractive. So you want to cut your nose to spite your face. You want three percent of something, not 20 percent of nothing. Because if we say 20 percent and investors discover they cannot handle 20 percent, they will not come, and the fewer investors that we have, that means the less money to share with the host communities.

So, is it not better to keep it optimal so that the three percent can go to the host communities and that way the country can still produce. So these are the things that I think made the National Assembly pass the three percent, to align the aspiration of the host communities with the aspiration of Nigeria as a country.

There has been recurring issue of abuse of the Local Content Policy. Do You think Nigeria is having a fair deal from the Local Content Policy?

I think so far, we are getting a fair deal, it is not something that you can wake up today and take to 100 percent, because you must also ensure that the oil industry survives during the process of transition.

We started from zero percent local content, then we came to 3 percent local content, and today we have 43 percent, and we are aspiring to 70 percent. So I think so far, we are progressing very nicely and quicker than I thought we would because we have really done quite well.

Today, 20 percent of oil production is done by local companies, which is quite a significant position in our production, coming from a point of zero. At least you must give kudos to Nigeria and to the government of President Muhammadu Buhari to have taken local production and local participation to this level and our aspiration is to take it to 70 percent in 2027 and the good thing about this is that the oil companies are aligning with us and we are happy.

As Minister of State for Petroleum Resources, we have not heard of any rancour between you and the GMD of NNPC as we have had in the past. What could be responsible for this?

We try to consult, the idea is to work together. We came here to serve the country and the President of Nigeria because the administration is his.

We came here to serve the country and not to fight, we walk together to progress the industry to meet the aspiration of the President and the national aspiration.
That is why we are here and we endeavour to work together, it’s not as if we do not have our differences sometimes but we try to ensure that we consult and engage ourselves to resolve areas where we differ.

So, we are happy with what we have achieved so far as managers of this industry. I am very happy with where we are today and where we are going.

What will you say about the commitment of the President to this vision you are pursuing?

Well, frankly, if you ask me, I will not wish for another President to work with. This is the best President that anybody will wish to work for.

First, he does not pressure you, he does not have a personal interest in any matter, which may not be the same for others. His interest in Nigeria and everything we have been able to achieve were achieved under his guidance, and the President is very experienced in this sector.

For me who was more of a neophyte when I came in, without the tutelage of the President as Minister of Petroleum, we would probably not have achieved most of the things we have been able to achieve.

We are very proud of him as a Minister of Petroleum and I’m very happy that he is the Minister of Petroleum and that I am working under President Buhari.

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