National Energy Council (NEC): Oil and Gas and Power Reform Committees – A Return to the Drawing Board?

By

Abubakar Atiku Nuhu-Koko

aanuhukoko@yahoo.com

Sunday, 09 September 2007

The setting up of new Oil and Gas and Power Sectors Reform Committees respectively, under the auspices of the National Energy Council (NEC) and the inauguration of their respective members by President Umaru Musa Yar Adua on Friday, August 7, 2007 are another set of major landmark policy actions from the President within the first 100 days of his administration. It would be recalled that also, within the spate of the first 100 days of his administration; President Yar Adua took some other very important landmark policy actions and made some remarkable pronouncements regarding the perilous state of Nigeria’s energy and power sectors respectively. For example, he:

a)  Reduced the price of petrol or Premium Motor Sprit – (PMS) from N75 to N70, reversed the increases in the price of kerosene and VAT rate from 10 per cent back to the original 5 per cent respectively - all announced by the outgoing administration of president Obasanjo announced on May 27, 2007 (two days to the handing over date of May 29, 2007);

b) Appointed of three Ministers of States for the Ministry of Energy and Power; one each respectively, for Petroleum, Gas and Power and with him as the Senior Minister in Charge of the Ministry itself;

c) Removed the Group Managing Director (GMD) of the behemoth Nigerian National Petroleum Corporation (NNPC), Mr Funsho Kupolukun;

d) Appointed an Acting Group Managing Director (GMD) for the Nigerian National Petroleum Corporation (NNPC), Alhaji Abubakar Lawal Yar Adua (no relation to the President);

e) Reversed the last minute fire sales of the Port Harcourt and Kaduna Refineries and Petrochemicals complexes to the Blue Star Consortium that were done by the outgoing administration of former president Obasanjo;

f) Unveiled the plan for restructuring of the NNPC into five separate entities on August 29, 2007;

g) Established a National Council on Energy (NEC) on 30 August 2007 and inaugurated its member on 6 September 2007;

h) Last but by no means the least, set up new Oil and Gas and Power Sector Reform Committees respectively on Friday, September 7, 2007 (see Tables 1 and 2 respectively).

Table 1: Oil and Gas Sectors Reform Committee Composition

Table 2: Power Sector Reform Committee

These are by no means, very spectacular developments in the brief period of 100 days of the life of the new administration. However, this latest policy initiative of setting up two new committees emanating from the Presidency concerning the oil and gas and power sectors reforms respectively, seems to indicate that the government has abandoned the existing reports,[1] that the present administration inherited from the previous administration of former president Obasanjo (1999-2007), which formed the initial basis and grounds, upon which the Federal Executive Council (FEC) anchored its August 29 2007 landmark policy pronouncement regarding implementation of the already recommended reforms for the oil and gas sectors. If this were the case, then, the President and the government deserve commendations for cleverly doing away with those inherited convoluted reports from the previous administration of former president Obasanjo. Least we forgot, even former president Obasanjo seemed to have abandoned and refused to implement those very reports his administration commissioned and approved during his time, probably for the same reason(s) the present administration has just suddenly decided to ditch them too.

There is every indication that President Yar Adua decided to ditch those reports and begins from a clean slate the whole process of energy (oil and gas) and power sectors reforms, once again. Otherwise, how could the administration explain and or rationalise the need for constituting these two new Oil and Gas and Power Reform Committees once again! After all, the NEC is suppose to be using the existing inherited Oil and Gas Sectors Reform Implementation Committee’s (OGIC) reports as its working documents in order to come up with a master plan/blueprint or roadmap that will herald the Presidential declaration of the much awaited national emergency on energy and power.

Furthermore, the truth again can be gleaned from the President’s statement while inaugurating the two new Committees when he stated that “The Oil and Gas Committee is charged with the responsibility of ensuring that the required legislative framework for oil and gas reform is undertaken ahead of the administration’s planned restructuring programme.” The President further stated that “The committee is also expected to advice on the take-off of new bodies, institutions, organisations and agencies that will constitute the institutional framework for the restructuring of the oil industry.” From these statements, there are no doubts left therefore, that President Yar Adua’s latest policy action in these sectors point to the direction of returning to the drawing board for fresh ideas as far as reforms in the oil and gas and power sectors are concerned under the present administration.

Moreover, the inherited OGIC reports are visionless and lack foresight and clarity to say the least. Therefore, there is nothing wrong to worry about if they are discarded for new, visionary and fresh ideas, except for the valuable time wasted and huge sums of money spent in arriving at this point from year 2000. Nevertheless, what is worth doing is worth doing very well. How well these newly constituted Committees will perform depends on a number of factors, some of which are examined in this write-up. But before doing that, here are some quick observations regarding these two newly inaugurated Committees:

a)      The first observation is whether there is any need to set up these two Committees in the first place, given that, the NEC as presently constituted can achieve the same objectives for which these two Committees were set up to achieve. For example, without setting up these two Committees, but with a strong professionally staffed and well equipped Technical-cum-administrative Secretariat for the NEC, these same Nigerians (some of whom are already members of the NEC by virtue of their respective callings) who were made members of these Committees can be commissioned by the NEC to submit to it for consideration, specific tasks to aid its workings. In addition, the NEC Secretariat can also call for memoranda from the general public and strategic stakeholders in these sectors as inputs to the workings of the NEC. By doing these, a lot of cost savings can be made instead of the present arrangement that will consume a lot of money and logistics. Remember, the Bureau for Public Enterprises (BPE), the National Council on Privatisation (NCP), the National Economic Council (NEC) and the National Planning Commission (NPC) still exists and have statutory rights over some of the reform issues under consideration. The present arrangement is too top heavy; bloated with too many bureaucratic layers for a simple and straightforward national assignment.

b)      The use of Commissioned Papers that address specific issues and problem areas and calls for memoranda from the general public and strategic stakeholders in these identified issues and problem areas of the sectors will do a superior job than the present arrangement put in place. Least we forgot, there are also a number of existing very expensively produced and very important relevant public documents like the Vision 2010 Reports, the Nigerian Economic Summit Group (NESG) Reports, the Nigerian Economic Society (NES) Reports, etc that the Technical Secretariat of the NEC can draw from in order to add value in facilitating the workings of the NEC without the existence of these Committees.

c)      A close look at the membership composition of the two committees indicates that a number of the members are recycled individuals who participated in the previous national oil and gas and power reform committees and the processes that produced the now jettisoned OGIC final reports. Also, some of the members of the two committees are recycled individuals who were either Chief Executives or Senior-level officers in these sectors who, either voluntarily retired from service having attained the mandatory retirement age or length of public service years, and or were retired or dismissed from holding those positions for reasons of incompetence, corrupt practices etc in the previous years. Therefore, one wonders what these categories of individuals are bringing to the solutions of the problems which, in one way or another, were largely responsible in the first place.

d)      They played very significant roles in creating the existing problems in these sectors when they were at the helms of the management of the affairs of these very sectors. The critical questions to ask are: what value; innovations and foresight are they bringing now to make a difference? Are they the Messiahs and God-sent-born-again African Oracles? But it seems the government that is keen to solve the problems in these sectors looks like repeating some of the mistakes that created the lingering problems in the first place; by adopting the business as usual of recycling of political jobbers. I hasten to add that, I am not against recycling of capable and competent hands and brains irrespective of age, gender etc. What is paramount is capability, competence and the zeal to do the right things and putting national interest first, before any other parochial consideration.

e)      Another pertinent observation which I kept making is the absence of the nation’s apex energy policy making organisation - the Energy Commission of Nigeria (ECN) [www.energy.gov.ng] in the scheme of President Yar Adua’s reform efforts in the energy and power sectors. Least we forgot, the ECN also is the apex public agency responsible for public policy development and promotion of Research and Development (R&D) covering all forms of energy sources – conventional non-renewable and renewable sources; nuclear, solar photovoltaic, wind power, biomass, tidal, and agro/biofuels etc. The entire nation’s Energy Research Centres located in the various Nigerian Universities are under the direct supervision of the ECN. Therefore, its exclusion from the schemes of things in the energy and power sector reforms processes is like excluding the federal ministry of finance, the Central Bank of Nigeria (CBN) and the National Planning Commission (NPC) from the nation’s economic policy making process!

f)        It is unimaginable and ridiculous to see a mundane and laughable agency that the government should have by now scrapped, the PPPRA represented on these reform Committees and the ECN ridiculously completely left out! Other strategic public agencies in the energy and power sectors that ought to be on the membership list of these Committees or the NEC Technical Secretariat include the various statutory regulatory bodies such as: the Nigerian Electricity Regulatory Commission (NERC), the Nigerian Nuclear Regulatory Commission (NNRC), Nigerian Atomic Energy Commission (NAEC) and even, the oil and gas institutional and human resources capacity building agency – the Petroleum Technology Development Funds (PTDF) ought to be included. Another very important omission is the complete blackout of the place of the Chief Economic Adviser of the President in the scheme of the reform processes of the energy and power sectors. Again, this gross omission is like planning a major war without using a map! Wait a minute, is the academia stupid? What of the capable hands of the local and foreign energy and power companies and investors who may likely be invited to partner in implementing the minted master plans/blueprints soon? The attentions of Mr. President and the Secreatry to the Government of the Federataion (SGF) are drawn to these very serious lapses.

g)      The complete absence of mainstreaming of renewable energy and power sources create the impression that Nigeria is yet to comprehend the contemporary global energy and power equation and development. Almost all nations - developed and developing; oil importing and oil exporting alike, have been busy strategising on how to harness the bountiful inexhaustible renewable energy and power resources and or sources with the exception of Nigeria. For example, renewable energy and power resources and or sources such as: solar from the Sun, Wind and Hydro power, Biomass and Agro/Biofuels are receiving increasing global attention and attracting huge investment dollars worldwide.

h)      It is not out of national pride, ego and or attempting to copy the so-called elitist western environmental ethical living style that Nigeria should pay attention to these energy and power sources. But because the reality and truth are that, our failure to include them in our national energy and power mix will lead us to a one-way, single and narrow lane road, with a dead end; just as we are under the current arrangement and organisation of our energy and power sectors at present! This will not augur well for our collective national wellbeing. For example, in the first wave of the Presidential policy pronouncements and actions regarding the envisaged reforms in the energy and power sectors, the relative lack of importance attached to both the gas sector and the above listed renewables was glaringly conspicuous. However, by Friday September 7, 2007, miraculously, the gas sector received the attention it deserves in the scheme of things. But the other renewables and coal still remained out of the policy radar range.

i)        This should not be so; Nigeria must be a leading trail blazer in the renewables as they are also God-given to the nation. Moreover, renewable energy technologies are now readily available and becoming cheaper by the day. However, the missing links are: political foresight and will. Fortunately, President Yar Adua has them both, and the time to deploy them in these sectors is now. Therefore, the Power Sector Reform Committee needs to underscore the importance of both gas and the renewables in their recommendations to the NEC. For example, this Committee needs to design from ground zero, a framework for mainstreaming solar photovoltaic and wind power in Nigeria’s electricity power development and supply equation. The Committee is therefore at liberty, to have a look at what the Germans are doing in this respect. For example, Germany is now reckoned as the global leader in terms of mainstreaming of the renewables through its very successful Feed-in-Tariffs (FIT) mechanism or system. Through the FIT mechanism, Germany has 200 times in solar power capacity and 10 times the wind energy capacity of Britain, in spite of the British having more wind than the Germans (The Guardian Newspaper of London, Monday, September 3 2007, page 30).

j)        This development is taking place largely because the tremendous improvements in the renewable energy technologies over the years have similarly improved renewables economics. For example, wind power is the fast growing renewable energy source in the UK (Scotland and Wales in particular) largely as a result of generous government incentives under its Renewables Obligation (RO) and PPS22 provisions. Thus, indeed, solar and wind power sources deserve a hand from the Nigerian government like the Germans and other western governments have done, in order to get the people and private investors to benefit from these clean,  green and soon to be affordable power sources.

k)      The Power Sector Committee also needs to realise that it is the gas price that among others, sets the electricity price. Since the principal source of our gas in Nigeria is associated gas produced in the process of drilling for petroleum, there is the need for this Committee to work jointly with the Oil and Gas Sectors Reform Committee in order to establish an organic framework that links the oil and gas sectors with the power sector in an efficient, seamless and mutually beneficial commercial relationship. For example, shortage of gas supply continues to threat regular electricity supply in the country. The gas shortage is largely the result of supply insufficiency from production sites and deliberate sabotage of the gas supply and distribution pipelines by local insurgents in the oil and gas rich Niger Delta region. This further attest to the urgent need for the NEC to links its activities with the Niger Delta development Master Plan in order to avoid working at cross purposes and or duplicating efforts.

l)        Also, just as it is very important and paramount that the Power Sector Reform Committee mainstreams renewables like solar and wind power, the Oil and Gas Sectors Reform Committee similarly, needs to mainstream alternative liquid energy sources such as agro/biofuels (i.e., bioethanol and biodiesel) in our national energy mix. This is in order to reduce our over reliance and overdependence on non-renewable fossil fuels. For example, this Committee needs to design from ground zero, a framework for mainstreaming these agro/biofuels in Nigeria’s liquid energy development and supply equation. The Committee is therefore at liberty, to have a look at what the Brazilians and the Americans are doing in this respect. For example, Brazil and the United States are now reckoned as the global leaders in terms of mainstreaming of the renewable agro/biofuels through their very successful respective packages of incentive mechanisms to farmers and investors in the development of these liquid energy fuels.

m)    The British have joined this evolutionary and revolutionary trend. For example, according to the Petroleum Review (August 2007, page 8), “there are currently some 1,400 producers of biofuels in the UK, a large proportion of whom produce for their own personal use.” This was possible as result of a change in regulation in the UK by Her Majesty’s Revenue and Customs, which took effect from 30 June 2007. The change allows everyone to have the opportunity to produce enough biofuel (up to a threshold of 2,500 litres/year) for their own personal consumption, duty free. Also, as recently reported by the Petroleum Review (August 2007, page 9), BP and DI Oils are forming a joint venture to develop feedstock for biofuels using Jatropha curcas – a drought resistant, inedible oilseed bearing tree that does not compete with food crops for good agricultural land or adversely impact the rainforest – in order to make more sustainable biodiesel feedstock available on a large scale. “It is anticipated that some 1million hectares will be planted over the next four years, with an estimated 300,000 hectares per year thereafter in India, south-east Asia, southern Africa, central and South America – the joint venture is expected to become the world’s largest commercial producer of Jatroha feedstock, producing up to 2 million tonnes per year.”

n)      Therefore since there is insatiable demand of bioethanol and biodiesel from the developed world, Nigeria can do the same with its abundant Neem tree plants found all over the northern landscapes of Nigeria and crude palm oil (CPO), found all over the southern Nigerian lands, given the right enabling environment. It is against this backdrop that the Oil and Gas Sectors Reform Committee needs to underscore the importance of development of both bioethanol and biodiesel renewables in their recommendations to the NEC.

o)      The sudden rise in the cost of wheat and price of bread that triggered serious concerns about possible global food crisis are partially linked to the recent upsurge in the conversion of corn (maize crop) for the production of agro/biofuels mainly in the USA (see for example, The Economist Magazine, September 8^th-14^th 2007, page 91). For instance, the recent bread bakers strike in Nigeria is a good example of this backlash. However, the fear of the agro/biofuels backlash on food production is rapidly allayed with the development of varieties of inedible alternatives and substitutes of corn and sugar cane for the production of these alternative liquid fuels. As mentioned above, already drought resistant, inedible oilseed bearing tree such as Jatropha curcas that does not compete with food crops for good agricultural land or adversely impact the rainforest is used as feedstock for biofuels.

In conclusion, the messages that need to go out to the NEC and its various working committees are that: Nigerians are expecting the basic necessities of energy and power products and services within the shortest possible time frame and at affordable prices and equally, on sustainable basis. However, the fear and concern are that, it may take another X number of years to see the lights at the end of the tunnel if and only if, the present arrangement put in place by the government is the only way to go about achieving the reform objectives in these sectors. Therefore, the conclusion is: there is the need to scale down drastically, the bureaucratic layers, top-down and “pork barrel” approaches in the present institutional arrangements and organisation of the implementation of the Presidential energy and power sectors reforms agendas. After all, it is all about meeting the basic needs of the Nigerian citizens under the broader sustainable socio-economic development framework; energy security, employment, and poverty alleviation etc.