Thursday, 30th November 2023

‘Nigeria spends $30,000 daily on offshore installation site security’ 

By Gloria Nwafor
31 August 2021   |   4:15 am
The Petroleum Industry Bill (PIB) that was before the National Assembly for so many years created a lot of confusion in the industry because nobody knew what the rule of engagement would be.


Festus Osifo is the president of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). Osifo, who recently marked his one year in office, spoke with GLORIA NWAFOR on security challenges in the oil and gas sector, benefits of the Petroleum Industry Act (PIA) and state of public refineries, among other issues.

What is your view on the PIA recently signed by President Muhammadu Buhari. How do you think it will encourage investment?
The Petroleum Industry Bill (PIB) that was before the National Assembly for so many years created a lot of confusion in the industry because nobody knew what the rule of engagement would be. Most of the international oil companies (IoCs) held back their investments. When it was now delayed over time, they moved their investments to other parts of Africa. Because of the uncertainty that played in the Nigerian environment, Nigeria was not attracting investments.

With the signing of the bill, the most fundamental advantage is that it has stopped the uncertainty in the industry. The uncertainty about if I invest a particular amount, how much am I going to get, how much am I going to pay as tax, as royalty, as capital gain tax? It reduced that uncertainty. That is a major win that the bill has been able to achieve.

There is a provision in the bill, which for us we think is novel. The provision like environmental remediation fund and environmental remediation plan. As you are getting your license for oil prospecting, you will submit to either the commission or authority your environmental remediation plan and you will also be setting funds aside yearly into the fund. Should there be a spill, this fund will now be used in fixing it unlike before, where there is no fund, when there is a spill there will now be a problem. To eliminate the issue and to ensure that the pollution that we have currently in the Niger Delta does not increase much more, that fund if set aside overtime will be used in doing some remediation work. It is a good provision.

Another good provision in the bill is also about the development of gas. Before now our old laws, the Petroleum Act of 1959 did not make any provision relating to gas. But in the current PIA, we have a provision, about 50 sessions of the PIA, now fully dedicated to gas. About how you develop gas, gas infrastructure, gas storage system and distribution, among others. This is because gas will remain for a very long time as oil does not remain the main thing. Over time, Nigeria as a country will move more into gas. Before now, what we only have about gas is the regulation and policies, but there is no concrete law that backs gas development. We have been able to address that now. One salient point that is good is the penalty on gas flaring will be paid by the company and used by the host community. The community will be the direct beneficiary of the fund if you flare gas in a community, which we also think is good. These are some of the benefits provided in the PIA.

Government is still spending on refineries despite agitations that they should be privatized. What’s the position of you association?
Before now, the unions, both PENGASSAN and NUPENG were not really at the centre stage on refinery rehabilitation. Despite funds put into turnaround maintenance, the refineries were still in a state of comatose. But today, when government started the rehab, the unions insisted that we want to be on the steering committee of the rehabilitation, which was granted. When we started the process, there were some moves that we made. For instance, for Port Harcourt, Nigeria is borrowing $1bn from Afreximbank. We advised that Nigeria should not collect this money and pay it into the Federation Account or the CBN so that the politicians will have access to the money. We advised that the best way to go was to open an escrow account, while the bank pays into the escrow account; the bank, NNPC and contractors will be a signatory. At the end of the day, you will release the money to the contractors per milestone.

With our advice, they created the escrow account with the signatories, while Afreximbank will release the trunk of it depending on the verifiable milestones. That is one of the things that we ensured was done.

On privatising the refineries, this is our take. Firstly, this is a national asset. Over the years, it has not worked because of lots of issues. One of them is the lack of will from the government. If the government decides to sell the refineries, Nigeria will be short-changed because many things have been damaged. It will not be in our national interest. We advocated that we should fix the refineries and that once they start working, government should divest.

They should give 51 per cent shares to private investors and retain 49 per cent just as it is with the NLNG. This will help because when the refineries are now working and we are now trying to privatise, Nigeria will make excess money from it. Then the amount of money spent for turnaround maintenance is the amount on the scope of work. The scope of work is massive. We don’t think that the amount being put into it is wasted with the scope of work, more so because the money will not be made available to the politicians.

What level of repairs have been carried out so far?
For the Port Harcourt refinery sanctioned in May, presently, the contractors are mobilising to the site and carrying out 3D lacer scanning around the facility. That is the first thing in the scope of work before you commence the rehabilitation process. Activities are going on there. For the Kaduna and Warri refineries sanctioned some weeks ago, paper works are going on. Phase five on the older refinery will come on stream less than two years from when the contract was signed. We are expecting phase five to come on stream by 2023.

What is the position of the union on security of your members? Currently, insecurity in Nigeria is a huge challenge and it is doing a lot of harm to the economy. We are advocating and urging the government to up the game. Today, in an average offshore installation site, we have between five to 10 security vessels manning the installation round the clock, with 100 to 200 personnel working there. The cost of manning each security vessel is not less than $5,000 per day. With about five security vessels, we have $25,000 daily. There also, we’ll pay the naval officers, buy AGO and by the time you add all these costs, it could be $30,000 per day. That adds to your cost of operation.

As an investor, you’ll prefer to go to neighbouring countries that are relatively secure instead of investing in Nigeria. We advocated for the government to look at the peculiarities. If you want to increase royalties like other countries, you must create an enabling environment to attract investment. We have challenges securing the pipelines, securing the offshore and onshore installations. If you go to an offshore installation, it is like you have a battalion of army that guides most of the installations, which ought not to be. That is why the National Executive Council of PENGASSAN recently resolved that beyond mere words, we did a security awareness campaign across all our zones to advocate and also reward some exemplary police officers. We distributed N2 million with about N250,000 each to eight police officers across the zones to encourage and identify with them. We did an open letter to President Buhari for us to draw his attention to the fact that we are facing challenges in the oil and gas industry regarding security. The security awareness campaign will be constant. Most of our members are being kidnapped. One of our members spent about 44 days in captivity and just got released recently. We are exposed to insecurity. However, as a union, we are trying to partner with security agencies and give them all the maximum support they require.

What have been your major achievements in the past year?
By the grace of God, we have achieved a lot. When we came on board, one of the issues we had was Integrated Personnel and Payroll Information System (IPPIS), which had lingered for over four years. But we have been able to put it to rest by finding solutions, where the peculiarities of our members were captured.
One of the things we tried to do when we came on board was to pay special focus and attention to industrial relations issues. We came during the pandemic, so there were myriads of industrial relations issues that we tried to champion, but we have been able to resolve them.

On harmonisation in the oil industry, CBA, severance packages and some oil firms that terminated the employment of our members, all these were fully resolved. Those that were sacked, we ensured they got their full benefits. We have been able to accommodate more branches into PENGASSAN since we came on board; we assisted some government agencies that have not had a salary increase for over five years from negotiations. We ensured that their welfare was enhanced.

In terms of redundancy, we have tried to manage it as best we can. On casualisation, that is one fundamental thing we have been trying to push. Both PENGASSAN and our sister union, NUPENG wrote a letter to the Minister of Petroleum that both unions must be represented in the transition committee of the PIA. The reason is that if we are not represented there, we felt that our members would be shortchanged so that our workers will not be laid off unjustly. If we are not there, they may tend to smuggle some things, which may further casualise the industry. The number of casual workers we have today is pathetic; a lot of companies are latching on the fact that we don’t have a strong government institution to enforce our laws. Most of our employers today are breaching the outsourcing law. We are putting things in place to tackle it. We are partnering with our branches to get the full details of what is happening in their respective branches and we are ready to confront the challenges head-on.