We’re managing Rivers’ oil & gas resources most effectively for overall benefit of the state

Peter Medee was a lecturer in economics at the University of Port Harcourt before his appointment as Commissioner for Energy & Natural Resources, Rivers State. Business A.M.’s BEN EGUZOZIE sat with him at his 13th floor office on Point Block, the imposing 18-storey building housing the state secretariat, where he unveiled the ministry’s activities in drawing up a development model for the state’s huge oil and gas resources, including the ongoing multi-milliondollar Rivers State Gas Master Plan, the upcoming 200,000 bpd Rivers State Oil Refinery, the mega distribution. Plus, the state government’s incoming model in handling the controversial OML 11 oil block. Excerpts:

What have been the activities of the ministry of Energy & Natural Resources with respect to managing Rivers State’s oil and gas sector in recent time?

THE RIVERS STATE MINISTRY OF ENERGY and Natural Resources functions as an intermediary, maybe I will call it a go-between the Federal Government and Rivers people, because most of what we do in this ministry are within the exclusive legislative list of government. So, this ministry interfaces between the Federal Government and Rivers people to deliver the energy need of the state. That is basically the goal of the ministry. In that respect, the ministry is structured into four major operational departments: we have the Department of Petroleum, we have the Department of Gas, we have the Department of Natural Resources, and we have the Department of Safety and Conflict Resolution. A lot of what we do in our interface with the stakeholders that operate in the state – based on the legislative activities of government, which are in the exclusive list – happen to be in the area of conflicts and resolution of conflicts, to provide that enabling environment for them to be able to do their businesses in Rivers State. That is key. We provide that option to be able to interface between them and Rivers people for the delivery of the energy needs of Rivers people within the geographical territory of Rivers State. Beyond the conflicts resolution activities, we do between the key stakeholders, we also do activities in the petroleum sector where most of the companies that operate in the petroleum sector can be able to do their businesses in Rivers State without hindrances. You know there have been a lot of incidences of oil theft; which have been on the increase in recent years. Because of this, the ministry interfaces in terms of playing a role to minimise that – we do this directly – and we’re also expected to play the role, with some technical activities, which are in the area of taskforce. These taskforce activities are direct – we go for confrontation – that is to say: ‘look you have to stop this.’ We have people who are expected to go and support the security agencies to make sure that we minimize oil theft as well as artisanal refining, which is the order of the day here. We are also now bringing an intellectual angle to our activities, where for us as a ministry, we feel that ‘it is not just confrontation that will make us achieve a reduction in oil theft – because in terms of confrontation, we discovered there are a lot of compromises and collusion that are enhancing it. For us, the intellectual angle we’re bringing to it is that, we want to see how we can use other means to reduce oil theft without being confrontational. Rather than confront the oil thieves, we want to compete with them. This new strategy is that, whereas we’ve been working with security agencies to confront the oil thieves, their activities have not been lessening – we’re not getting results. That’s why you can see the environment of Rivers State completely devastated by pollution from oil theft and artisanal refining activities. And it is resulting in the soot menace. The only new thing about the soot in Rivers State today is the artisanal refining. So, for me, the idea to conduct a research on the cause(s) of the soot is no longer necessary, because every other industrial activity was here before, and there was no soot. The only new activity is artisanal refining, and we have soot. For me, if we can be able to fight artisanal refining, we can be able to fight oil theft. Today, this ministry is on an inter-ministerial committee headed by the Deputy Governor. She is driving how we can put our people into cooperative bodies, to see how we can get licences for modular refineries. Through this, we can provide them with alternative business and means of livelihoods. We say to them, look: this thing you’re doing illegally, you can also do it legally. We provide that option for them as a state. This ministry is working in the inter-ministerial committee with the ministries of Environment, Youth, Chieftaincy Affairs, and Energy & Natural Resources. We’re collaborating under the able leadership of the deputy governor, to provide alternative sources of livelihood for the artisanal refinery operators. We’re brainstorming to come out with a new business model that would compete with artisanal refining people. The model is to come out with our own petroleum retail oil outlets that would dispense good quality products at relatively lower prices that would, in turn, take away the market from the artisanal people. The retail stations would be scattered in parts of the state, providing products, readily available, in right quantities and in right quality. This would make residents of Rivers to see far better product alternatives. Over a short time, they would switch their patronage away from artisanal products dealers to our retail stations. When we take away the market from them, it would now be costlier for them to take the risk of going into the creeks to steal crude, cook it, only not to find buyers. With this, it would dissuade them from going into artisanal refining, which has greatly polluted our environment. We reduce their activities by frequency, volume, and gradually reduce it by turnover, then the business is off. They would be out of it. This is the business model planned by the inter-ministerial committee. But we can’t just take off with this immediately. We need to seek approvals – from the State Executive Council, and from the DPR. It’ll be quite easy to get the state’s approval because His Excellency, Governor Nyesom Wike, is very much interested in seeing what we’re coming out with in that direction to solve this soot problem. For the DPR’s approval, we don’t know when it can come through. Our inter-ministerial committee plans to set up our own products service stations – and take the market away bitby-bit from the artisanal dealers. However, we’re aware of the notion that government is a poor business player to the extent of weak supervision, poor management. Based on this, we’re working out a PPP arrangement where we have private sector players to build the stations; the state government through the Ministry of Energy & Natural Resources provides supervision; there is a bank that provides the instrument of purchase; there is a partner that provides the crude; there are management teams for each of the service stations. Each partner (including the ministry) gets a certain percentage of the sales income. With this, it means the more they get higher turnover, the more their incomes. Also, to avoid corrupt practices, we will make the service stations to run on purchase cards with which customers make purchases. With all this, buyers will see products available 24/7. We also intend to sell the products at reduced prices, because as a state government, our intention is not particularly for profit motive, but welfare. We would not source our crude from the artisanal people. We would rather source from the right channel with right quality. Our dispensing meters would also be properly adjusted. In another vein, the ministry monitors the various petroleum products supply and availability in the state. That’s why we’ve had relative stability in products availability all these years. We will also collaborate with the various petroleum sector unions. However, it wasn’t easy achieving all this. We’ve had issues between the unions versus themselves, the unions with the military, the unions with the respective host communities. But we were able to manage these crises well. Today, we have the petroleum sector working quite well in Rivers State. Under the Natural Resources department of the ministry, our duty has been to look at other natural resources that Rivers State can boast of beyond oil and gas. We’ve been interacting with professionals and industry players. For instance, we’re interfacing with the Mining Association of Nigeria (MAN) to undertake a geological survey of the state, to soon come out with findings of availability of clay, silica, marble, etc. Where are they? In Eleme, Andoni, Ikwerre, Omoku, etc. At the end of the survey, we would open the state to investors in these mineral resource areas. The committee set up to work this out just turned in their report. At the end, we would give them the right of refusal in exploiting these minerals. Through this, we can fully succeed in effective diversification of the state’s economy away from oil dependency, even if oil is the mainstay. Then, in the gas sector, we have discussions in operating the industrial gas sector and the LPG. Under the industrial gas sector, we have the Rivers State Gas Master Plan (RSGMP). A lot of people are not aware that this exists. Its operation is divided into two franchise areas: Shell Nigeria Gas (SNG) and Central Horizon Gas Company. The two companies are operating the two Rivers State Gas Master Plan concession areas – sort of special purpose vehicle (SPV). For instance, Shell transports gas to off-takers in its franchise area including Onne, Eleme Petrochemicals towards to Choba. The Central Horizon Gas Company has developed and is operating a 17-km gas distribution network with a throughput of 50 million standard cubic feet of gas per day (mscf/d). This network runs gas pipeline from the Trans-Amadi Industrial layout up to the Nigerian Ports Authority (NPA) area. It is grossly underutilized. We’re therefore soliciting new companies in the productive sector to come and invest in Rivers State; while those operating in the state should hook onto the Rivers Gas Master Plan project. Gas, you know, is a reliable, cheaper alternative source of power for industries. We hope that as more companies get on the RSGMP, it will increase the GDP of the state, which will help to drive down their production costs, and bring down their products prices at the end of the day. With all this, we will experience a raised employment level, thereby reducing the misery index of the state. The governor has since given his approval for the operation of the RSGMP. Today, we have gas off-takers like BUA, Nigerian Bottling Company, Crown Flour Mill, etc. Also, Central Horizon Gas Company is discussing with our Ministry (Energy & Natural Resources) to extend its gas pipeline network from BUA up through NPA premises to the Port Harcourt Reclamation area. This will increase its network to 100-km gas pipeline. They are also planning to extend into Choba, Greater Port Harcourt City. What we’re yet to develop under the RSGMP, is taking the gas master plan beyond Port Harcourt. The RSGMP extends up to Mbiama, Ahoada, Bori, Bonny, up to Degema. We’re believing that as industries open up in these areas, these franchisees would extend gas to them either via vehicular transportation or pipeline. But we know that piping gas is capitalintensive. And where there are no big off-takers, it becomes uneconomical to engage in such venture. In LPG, the state is presently doing compliance monitoring of LPG outlets which are littered, especially in the state capital. Since we cannot do anything in terms of licencing LPG distribution, we’re insisting on siting of the outlets away from strictly residential areas. This is to avoid gas explosion incidences. Of late you’ve heard of gas explosions in parts of the country: Lagos, Kaduna, others; with disastrous consequences. We don’t want this in River State. His Excellency has seen ahead; and has empowered the ministry to set up a gas outlet compliance committee. The monitoring team goes out to check gas plants – to see if they’re operating with DPR safety and other guidelines; to which gas outlets they sell to; whether or not these gas outlets are licenced; when the gas plants were built – before or after residential buildings came up; sales to outlets that discount gas from one cylinder to another – whether the outlets were licenced to discount gas. All these the monitoring team reports back to the Ministry.

Your new approach of competing with artisanal refiners appears a ‘carrot’ approach from your earlier ‘stick’ approach which you conceded failed to yield dividends. Are there timelines in coming up with your products retail outlets project? When should we be expecting the competing fuel stations?

We cannot as a state sit and give you timelines now. What we’re doing as a state is that we’ve started. We’re on stakeholders’ engagement. We’ve been able to have meetings with the community development committees (CDCs) and community leadership of all the communities in Rivers State. The idea is that they know the artisanal refiners in their various communities. We’ve met with them, and asked them to submit the names of these artisanal refiners. If we go straight to meet them, they’ll be scared that we’ve come to arrest them. This one, we don’t want to arrest. We want to dialogue with them. We’ve had successful meetings with the communities’ leaderships. We did these in series. Now that we’re identifying the artisanal refiners, we want to talk with them, with a view to putting them into cooperatives. While we’re doing this, we’re also interfacing with the federal government to secure licences for modular refineries. How soon we can get that, we’re not in control. What we’re in control of is the stakeholders’ engagement. And that we’ve done. With this, I won’t be able to give a definite timeline. But I’m sure that soon we might achieve this.

You talked about petroleum retail outlets. Do you have your designs, location maps and capacities?

These ones, we’re yet to get approvals. That was why I told you that we’ve only engaged in intellectual programme. We’re thinking around our model. We’re considering its cost-benefit analyses; to see if or not it is worth doing. But presently, we’ve divided the state into sixteen (16) areas. In Port Harcourt central business district, we’re thinking that we can do six retail outlets, then we can do four in outer Port Harcourt. These will give us 10, then we can do two in each of the three senatorial zones. We’re actually looking at between 16 and 20 retail outlets. As soon as we’re sure of the viability of this business model, we will go for the DPR approval.

Rivers State still flares so much amount of gas. When would the state be able to achieve zero flare?

This again, I won’t be able to tell you when. The reason being that the issue of gas regulation is in the exclusive legislative list of the federal government. There’s little Rivers State can do on gas flare out. You’re aware that the federal government has given a deadline to the oil companies to stop gas flaring. How effective in enforcing that would determine how serious and how committed the oil companies would be in ensuring they stop gas flaring. The much they are able to go away from flaring gas would give us the easier impetus in attracting the unflared gas into our Gas Master Plan. The more gas we have in our RSGMP, and more investors come in, people would begin to look at Port Harcourt as another gas-propelled industrial destination outside Lagos.

What is the quantity of gas in Rivers State?

In other words, how much gas does Rivers State have, especially going by DPR state-by-state surveys? For now, I cannot tell you offhand. But all I can say is there is huge gas deposits in Rivers State. And exploring and exploiting it is key. And we also need more investors in this area.

But an average investor would like to know your state’s gas quantity – whether or not it is commercially viable?

Yes, I agree with you that investors would like to know the quantity of our deposits. Just like I told you about Central Horizon Gas Company’s 50mscf/d gas in a pipeline running over a 17-km radius. It is still grossly underutilized, and waiting for more off-takers. That one alone, let the investors come and exhaust it first. It has been made ready for production.

Rivers has four gas-fired electricity plants – at Omoku, Trans-Amadi (Port Harcourt), Eleme and Oyigbo with capacity to produce nearly 500MW. The former administration (of Rotimi Amaechi) privatized the plants. This administration (of Nyesom Wike) repealed the privatization. Reports we did on Rivers’ dormant economic projects said the power plants do not bring any revenues to the state. What is the state of these plants?

That may not be correct. Today, the Afam Power station is generating electricity. What I won’t want to go into is whether the power plants were privatized or not, because that is not directly under my ministry’s purview. It is under the Ministry of Power. Once we’ve constructed the plants and they’re working, they are transferred to Ministry of Power. So, the Ministry of Power should be able to give the exact status of these electricity plants. But I must tell you that they are not dormant. If you go to Oyigbo, the plant there is working. Go to Omoku, it is generating electricity. So too Eleme and Trans-Amadi. The ownership structure of the power plants has never affected their operations.

Regarding OML 11, which Rivers State won its ownership from Shell at the Federal High Court recently, what would Rivers do with OML 11?

OML 11 is one very good intention of the Rivers State Government. Rivers State Government has very good intentions for the OML 11. That’s why it went ahead to acquire the asset. Though it is still under litigation, as we have just been informed that it has been appealed by the other party. But all that would come and go, and Rivers State would unveil its ownership structure for the oil block. We’re mindful that there are legacy issues that would be dealt with. As a ministry, I can assure you that we would support the state government to settle these legacy issues amicably. Mind you, Rivers State government would not just acquire the oil asset for the fun of it. Its intention to acquire the oil block is for the betterment of the state. Part of the legacy issues is that the OML 11 is not just Ogoni oil block. People see it as Ogoni oil block – it’s not so – it spans from Bonny, Bodo West, Andoni, Ogoni, Oyigbo, Afam, Etche, Ikwerre, and then to Imo State. So, it’s beyond that. But we’re aware that the Ogoni problem stemmed from their unhappiness with the way the former operator was handling the oil block in their area. And those things that the Ogonis were asking the former operator to do, which they were not willing to do, those are things that River State government intends to put on the table – that is return the oil block to the host communities, who own it. The state government is saying that those communities that own the oil block should be made to share in its operation, to the communities’ own benefit, and to the benefit of the operator as well. For us, that would be a better deal, than what we saw in the legacy issues. We’re not there now. We will get there, and deliver ownership and value to Rivers people. That’s the intention of Rivers State government on OML 11. His Excellency, Governor Nyesom Ezenwo Wike means well for Rivers people. We cannot have such huge asset, and we don’t know how it is being operated. Our interest is to own it, operate it, and give ownership to the host communities.

We hear that Rivers is planning to build an oil refinery. Tell us about that. How feasible is it?

Rivers intends to build a regular oil refinery. It is a 200,000 barrels per day refinery. Its licence was obtained from the DPR some years ago, though it has expired but we intend to renew it, and invest in it. This is one of the functions of this ministry. As I speak, we already have the land allocated with the C of O in Omoku area of the state. However, we intend to partner with a core investor. Rivers State government would not go singularly into building the refinery.