Osifo characterized the dispute as a “royal rumble” that has significant implications for Nigeria’s energy sector and economic landscape. He highlighted the competitive dynamics between the two entities, both of which play crucial roles in the country’s oil and gas industry. Osifo emphasized the potential repercussions for consumers and the broader economy, underscoring the importance of understanding the stakes involved.
Comrade Bolum Nwachukwu, the Delta State Chairman of the TUC. echoed Osifo’s sentiments, aiming to shed light on a topic that may seem opaque to many.
The briefing, transcribed by Nwachukwu, serves as an important resource for those seeking to grasp the complexities of Nigeria’s evolving energy landscape. It underscores the role of trade unions in advocating for transparency and accountability within the sector, ensuring that the voices of workers and consumers are heard amid corporate rivalries.
Osifo provides invaluable in navigating the implications for both the industry and the Nigerian populace at large, is edited for clarity:
Excerpts
Osifo: Regarding Dangote granting an interview, saying that there is a cartel in the oil and gas industry yeah first we must understand where Dangote is coming from, Dangote didn’t invest 20 billion dollars in the refinery to placate Nigerians, Dangote didn’t invest such amount of money, you know in the refinery because it is a charity organization, I can tell you that the 20 billion dollars Dangote invested in that most of the funds will be loans right? What that means is that he will paying interest in that fund right? That is what is applicable and we have a very big insight into what is happening today, into the price war that is going on between the Dangote Refinery as well as government, represented by NNPCL in this case. And maybe I can share very few of them with us.
What actually happened is that Dangote built his refinery they started discussing crude supply, the first thing is that in the oil and gas industry, it is a bit, it is a highly regulated industry. Today when you hear that Nigeria is producing 1.6 billion or sorry 1.6 million barrels of crude per day, some people will take their calculator and begin to calculate how much that will translate to. It is not literally like that, if you produce1.6 million barrels of crude per day, who is producing this crude? You have all the IOCs pertaining to production right? You have Chevron, you have the Exxon Mobile, you have NAOC then or ENI, part of it owned by OANDO, you have TotalEnergies, you have … lots of them in this business.
So this crude that they produce in JV (Joint Venture) Federal government has at best 60% of this crude from JV. While the IOCs have 40% at best. So that means in that production you remove the one that comes from JV, you will do it you will dis-aggregate it. And once you do that, you will see the portion that belongs to the federal government, then that means those IOCs they put money in producing this crude, they are at liberty to sell the crude to whom? The highest bidder! They invested in it, I can tell you that one of the platforms all by Total PSO it costs 16 billion dollars to build it, Egina FPSO, 16 billion.
Remember Dangote spent 20 billion dollars in building his refinery. In one of the fields owned by TotalEnergies, they spend $16b dollars in building it. That means these IOCs have also invested. Right? That is the production sharing contract, I have talked about JV. In production sharing contracts the IOCs will inject all the money, 100%. Then they will now recover from oil production. While in the JV it is a joint venture, so you contribute to cost and you also share in the production, but in the PLC, the IOCs invest all the money, so that Egina the entire cost was invested by Total Energies, same thing in Agbami FPSO the entire cost invested by Chevron, same sat Exxon Mobile, same say Bonga of Shell. So that means these companies, they are also here to do business. And remember, if you strangulate them in Nigeria, oil literally now is found everywhere in the world, they are harvesting right? We are even holding them not to go because they want to sell, make their money and invest elsewhere. So what that means is that, is that these companies are TotalEnergies, Chevron, Exxon Mobile they have their trading companies, so that trading companies lock in contracts for years. What that means is this; so in 2020 for example, Exxon Mobile may have locked down all their production in Nigeria, they may have had off-takers since 2020, they may have had off-takers for five years. In 2022, Chevron may have had off-takers for 5 years that would take all their crude production in Nigeria. So they may have signed contracts with those people. So the government literally today cannot come and say, “Oh! You must take this crude and give it to Dangote, it is a bit tricky and a bit difficult because if they also fail in meeting the obligations of their contractors, it will become a problem.
So what most of this companies now said is that said: “it’s okay – in those their contracts they looked at it, that there’s always a premium that they could play with because they are investors, they are also looking for profit – so now if you want us to supply you immediately, you pay some premium.” So that issue of premium was what led to initial conversation around the Dangote Refinery, around they are not supplying me crude, they are supplying me crude; because, most of these companies were asking for premium.
Then coming to the part of NNPC – I want you to get this clearly – they also have their own crude. Some years ago, the Buhari Government went to Afreximbank to borrowed money and this money that was borrowed, some of this crude was tied to paying back this money.
So literally, what Dangote should have done is that he should have started discussing crude supply 5 years ago, you don’t start discussing crude supply, six months into production. You started it five years ago, you signed contracts five years ago, you know that, okay this is the direction we want to go. This is the honest truth.
But people may not come to the public to tell you all this, so that opportunity initially was missed. And as Nigeria, some of this crude were already tied to paying back some of the loans. So they will tell you that a 100,000 barrels, for example, they may go to Afreximbank and collect 3 billion dollars, this 3 billion dollars maybe tied to 100,000 barrels production of crude per day that will be supplied. So some of them have been tied…. these were done between 2015. And today, I can tell you, we have stocks of all the loans that were taken and the crude that will go into it. So let’s leave that.
Now coming back today, Dangote as a company doesn’t owe grudges. Dangote wants to make profit from his business and he invested money. He’s not a charity organization as we have opined earlier. So now, when Dangote now finished his product.. emm emm, when they now started, relatively, the issue of crude, he now went into PMS. He now went into the issue of pricing.
So clearly, what happened was this. Today, NNPC is buying PMS, importing PMS from abroad, and importing PMS at a certain price. So Dangote said, “NNPC, you give me that PMS that you are importing, pay me the same price that you are paying to Rotterdam, pay me the same price that you are paying to Malta.” But NNPC on their own, now said, “no, because from Malta and all that, there is a high premium that we are paying. But you, you are a Nigerian company. As a Nigerian company, we can’t pay you the same amount we are using to import.”
So it became a problem. That is the reality. Forget those plenty of letters going on in the press. But what was actually happening was that Dangote has the right to ask for it. Don’t misquote wrong in what I’m saying. He has the right because he’s a business person. He wants to make a profit. He wants to pay back his loans.
So he was asking, “pay me that same amount.” But NNPCL said, “no, we can’t pay you that amount. Let’s calculate it, you know, with local conversions.” Those in the energy sector may know what you call PLAT. So plat is an international price that you use in calculating PMS prices. So it’s literally fixed, depending on mainly the crude oil price. So every week you have the cost, the plat cost, you have it.
So that flat cost, some people buy from refineries at flat without a premium. But at a particular time – I just wanted to manage what I could review – that plat, NNPCL was bringing it in with plat plus premium. So, Dangote as well now said, “you have to pay that premium on top of that plat”. But NNPCL now said that, “you want me to pay a premium on top of a plat but the crude that I’m giving to you, you don’t want to pay a premium. So if you want me to pay a premium on the plat, you also pay a premium on the crude, because at the end, it’s the crude that we are going to do net-off. So it became another challenge.
But as of today! What they have agreed on as at today, is that, Dangote is given PMS at plat plus 42. So if you look at the release done by NNPC the last one, you’ll see where they wrote the plat price, it is the first on that table. When you come under, you’ll now see a premium of 42 Naira. So that premium initially, what was being asked for was much more than 42, which Dangote has the right to ask. So it was just a contractual issue. It was issues between them, with Dangote wanting to make profit because he has his right to make profit, but with NNPC on the other hand, say, “no, we can’t pay as high as that.” I don’t know if you understand? So that is actually what has been going on between them. But thank God they found a way to resolve it as of today. And that is why in that same table, if you look at the calculation, you have the plat price that was converted to Naira. You also have the premium there. You now have those agency costs, NIMASA, NMDPRA cost and others. That now brings you to where it is today.
So, as at today, without those costs imputed, PMS would be around N950 per litre. That is what NNPC, both what they would pay to Dangote, what they would pay to NIMASA, what they would pay to NMDPROA and all that, NPA and all. It will amount to about N950 per litre.
But that product, NNPC takes it at N950 naira per litre, they will now offer it to marketers around N700 plus. Because if they offer it at N950, we will be buying PMS today, maybe up to N1,100, N1,200 officially, even across NNPC stations and all that. So what that means is that NNPC buy it at a cost, but they will go back and input some level of subsidy in it. That is why, that is the reason why other marketers cannot go to Dangote Refinery today to buy. It is not because NNPC is saying they shouldn’t come and buy. I want us to really get it clear. That is why I am spending a lot of time on this. Not that they are saying don’t go and buy. But, the truth is that if NNPC is buying at N950 from Dangote with all the costs imputed in it and they are now selling at 700 plus to marketers, ha! It means that there is a shortfall that NNPC is managing. But if you ask TotalEnergies, for example, downstream, to go and buy from Dangote, TotalEnergies will buy from Dangote at almost the same price but TotalEnergies will sell to marketers at maybe N1,000 plus. You see the difference? So if TotalEnergies sells to marketers at N1,000 plus, and NNPC is selling at N700 plus, which will be cheaper? The one NNPC is selling. And when that happens, nobody is going to buy from Total. So that is why all of them are staying away and allowing NNPC to buy. So it’s not that NNPC wants to be so monopoly. Over this period we’ve investigated all this, we’ve had interactions with all players across the board and we clearly understand what is happening. And this cannot be eliminated in a business environment, most especially in an environment where if there was 100% deregulation, for example, everybody could go and buy, like the AGO. So anybody buy AGO today and sell any amount that you please, nobody would query you. But because there is still some form of under-recovery, if you may say, a subsidy, that is why that disruption is somehow still there.
So why did the introduction of subsidy? As we rightly know, last year it was said that the subsidy was gone. Correct. As at June, July last year, the country was not paying any subsidies. And you press men, I think we should do a lot more of investigative journalism. I have been granted a lot of interviews. I have been in TVC, for example, in Channels and all that and I have opined: This one, you know, we kept saying the Governors are getting more money from fuel subsidy. Gentlemen of the press, from October, September-October last year government was paying for a subsidy, so if you are paying subsidy where would or how were the governors getting more money? It wasn’t from subsidy it was from devaluation, it was the proceeds of devaluation and not proceed from subsidy removal.
Why was it devaluation? As that May last year, the official exchange rate was N450. So what that means is that if TotalEnergies made a profit of, let’s say, or if they paid tax to the government, and that tax they paid to the government was $200 million, for example, you are going to convert that money with 450 naira, right? So if you convert N450, you will not see the amount that you are going to make. But later in the year, in the early part of this year, late last year, the exchange rate moved. So if TotalEnergies today makes a profit of $200 million, you are going to multiply by N1,600. So that is more naira.
In the port, they will tell you that if you import a car that it’s going to be 30% of the value of a car, right? So if you import a car of $100 million, for example. 30% of it is $30,000. Before now, you were converting that $30,000 with N450. So the money you would pay from your pocket to clear your car was $30,000 times N450. But today, the money you pay in clearing your car is 30,000 times 1,600 or there about. So you see that you are paying 4 times of what you used to pay. And that money you are using to clear your car, we go to customs, we go to FIRS, we go… At the end, that is why you see FIRS declaring that they have made trillions of naira within a little time. That is why you are seeing customs telling us that they are making more money. It is because of devaluation and exchange rate. And where does this money go? The majority of this money goes into the federation account that they are going to share in FAAC. That is why they have more naira to share. It is not because of the proceeds from subsidy. That narrative, almost all the press, whenever I listen to them, I say no, let’s do a little more digging. We shouldn’t just take narrative from the government and run away with it. And because we knew this, to also come to your point, because we knew this, what we did? From the TUCN, empowered by PENGASAN as at then, was that… when we saw the exchange rate was sliding, as of September or October last year, we ran to the stakeholders and we told them that please let us manage, give a special exchange rate to those distributors in the oil and gas sector, most especially the downstream. So that if that exchange rate was frozen at about N700, if you were using N700 in doing their calculations, there wouldn’t really be subsidy. But you would say you are subsidizing the naira end. So that was what we advocated. And this was what was applied from September last year to almost recently. But when we were doing this advocacy, we saw the danger that if you start using N1,600 that is going to be problematic. When we did the calculation that if they are using N1,600 in giving PMS product, that the subsidy on another basis will be over N12 trillion. So we knew that this is not sustainable. And that was why we were doing this advocacy over this period. But the more we shout, the more we keep trying to explain, but it seems Nigerians do not truly understand where the real problem was. In TUC, in February, later in April, we did a Word Press Conference where if you go and check that document, it’s about, I can’t remember the number of pages now, where we proffer solutions on what we think government should do in order to manage our exchange rate and in order to keep this in check because devaluation does not just affect petroleum products alone.
If for example, our exchange rate was at N415 to a dollar. PMS will be selling for around 320, 350. So the main issue wasn’t really the removal of subsidy. The main issue was that devaluation. If Naira was N450 to a dollar, PMS would have been less than N400. So you see where the real problem is. The real problem is that devaluation, and we believe. We are still pushing and we are still advocating that the government cannot float its currency a hundred percent. No government in the world does that. Maybe the, US because of their standard reference. But every other country, go and check the history of China, check the history of Japan, check that of Russia, they manage their currency one way or the other. And it is also difficult in totally floating a currency where you don’t control the supply per se. Because when there’s a shortage in supply and constant demand, the price is going to move. And that is the conundrum that we are today. I think I have dwelt on this, and I think I have touched on one or two other subjects.
So you talked about the working of the refinery. You know most of those refineries, they are actually brownfields. I mean most of them, they are relatively old and they were left untouched for a very long time. Today, we have our PENGASSAN members working across the refineries, Port Harcourt, Kaduna and Warri. Our members are all there, they are working, but they’ve drawn down the numbers. Actually, maybe as of today, we just have about 2 or 3 percent of the membership strength that ought to be in that refinery. What that means, when the refinery was fully operational, the membership strength would be maybe somewhere around 500 to 800. But today, the people working there, are less than 50 because they are giving support to those carrying out the maintenance.
From our last count – because once in a while we have interactions with our members there and we also have a PENGASAN Chairman there, so we have interactions with them to know where we are. We know we can ascertain that yes job is currently going on across all the refineries. In fact if you visit Ports Harcourt Refinery, you are going to see over 2000 workers from the contracted company working there, but what I will not be able to attest to is when those refineries we come to work. Even the GCO will not be able to tell you categorically today that you come to work tomorrow or not, but all we could attest to is that yes, work is going on. Against what has happened in the past, where we have been told that they were turn around maintenance, when truly they were not. But if you visit all the refineries today, you will attest to yourself that work is going on. But when it comes up, we cannot say.
You heard the case of Eroton. Eroton today was forcefully taken over by NNPC. Eroton bought some of the Shell assets those days. So these are companies, these are practical cases of local companies that bought over some of the fields, hitherto to be managed by the IOCs. But they couldn’t really operate because all they were just doing was to extract oil till the well gets dried.
Now the challenge is this. You know oil and gas business is not cheap. The oil and gas business is a petrol dollar business and is highly capital intensive. I have told you that Total Egina, one field alone, cost 16 billion dollars. So how many banks in Nigeria will be able to fund a project of that magnitude? If you join all the banks’ capital bases together. I’m not sure they can fund a 16 billion dollar project. That shows you how capital intensive the projects are.
So what that means is that most of these IOCs, they have strong technical and financial partners all over the world. So an ExxonMobil can come and bring a business of 20 billion dollars and put in Nigeria and they will get partners because ExxonMobil is, I mean if you go to New York Stock Exchange, London Stock Exchange, they can easily attract funding because over the years they have developed that partnership, they have developed their credit worthiness. But a company like Eroton, it will be difficult for Eroton to go to PNB Paribas, or to Bank of America, or go to Bank of China to attract funding. So that is the conundrum because it’s capital intensive.
So part of what NUPRC is doing that we like, that made us to adopt their six pillar, six cardinal framework is because before they allow you to come into it, they will check your finances. They will check, will you be able to fund these projects? Will you be able to develop this field? Will you be able to manage, because the crude oil field, once you finish drilling, you start production. After a few years, a field that was producing, let’s assume 100,000 barrels per day, if you don’t do the right maintenance, without the right investment and carrying out well cleanup, carrying out well stimulation, well performance enhancement, those fields that usually was producing 100,000 barrels will not be able to produce up to 20,000 barrels. You understand where the challenges are? So you must invest in it. So most of these local players, some of the sources are there, first A and P, doing very well, SEPLAT doing very well, but there are very few. A lot of them have not done well, so that is why we are really skeptical. And also what concerns us again, because why do we want them to do well. When they do well, they will employ more members. They will employ more people, who will be our members. When they do well, PENGASAN will also flourish. But when they don’t do well, a few years down the line, they will tell us that they want to do redundancy. So that is why we are interested in who buys that field. That is why we are interested in how they regulate the divestment processes to ensure that it’s sold to people that are capable, not just political cronies or political friends.
Then on the 45%. So now, if you own 45% stake, you know, the refineries today, the government owns 100%. But we are saying that the government should reduce its stake to 49 and give up 51. Why today in NLNG, the government owns 49%. But it’s working. It’s working because you need 51% to make a decision. You don’t need the other 49. You are a minority. You can shout. But the decision is taken by the majority shareholding. So that is why we are advocating. We are not saying the government should own 51%. That will become problematic. But only 45%, what that means is also giving us energy, security and assurance. Because if you owe 45%, you can say, okay, if tomorrow the price is not right, and Dangote says, so this is the reason behind it, if the price is not right, as of today, Dangote can say, I want to take my 100% product and ship to different parts of the world. The fertilizer produced today, most of them go abroad. So if you don’t have shareholders in there, they can say, we take everything out. But if you have like 45%, you can say, okay, you take your 55% out, give us 45%. So it will kind of shore up our energy and security, but it will not make the government to make decisions. You can’t make decisions with 45% shareholding. So decisions are made when you have 50.1% shareholding. So there is no problem regarding taking us to the past, not at all but is just to ensure there is energy security because as we said, Dangote is a businessman. if all these are over, if nothing is going well, he can import his crude from any part of the world, he can take his PMS product, AGO product, to any part of the world. Remember he operates in a free trade zone where he is not even governed by most of the laws in Nigeria. So he takes his products out and nothing is going to happen. So for us to have that energy assurance and accessibility to energy that is why we are doing that advocacy.
You know initially, NNPC wanted to buy 20%. But Dangote encouraged them to buy but NNPC backed out. So what that means is that Dangote is open to such conversations, and I know that he’s open to such conversations. So if he was ready to sell 20% earlier, and we were also pushing for the government through NNPC to buy that 20%. But unfortunately, they could only afford that 7% but they said because of business exegencies they didn’t continue. So we are encouraging them to go in that line. But anyhow, let them improve from that 7% that is currently, for us, we think that is too small because Dangote was willing to offer 20 and if the price is right, they could even offer more. But it is not up to where they could take controlling decisions.
Again, I’ve also touched a bit on the last increment, which necessitated it. Comrades and gentlemen of the press, if we don’t, like what we are advocating today, that we are having conversations with them to say that N1,600 – if you see that NNPC template, they use N1,600, it’s N1,637 if you remember, or there about, it was N1,600 plus they use in doing the conversion. So if you take that template today, and you apply N1,000, you will see where the PMS price is going to be. It will come down drastically. It will go down by maybe up to 40%.
So we see that the main devil in it is that exchange rate that was used. So over this period, we have been having conversations with them. And we should also get to a point, and I must say this, we should also get to a point that Nigerians, as PENGASAN, we are primarily responsible to our members. In TUC, we are primarily responsible to the workers under TUC. Nigerians, we must collectively take responsibility.
Elections are coming, let’s leave the presidency. Let’s leave the federal government. Let’s come to our local constituency – that you have a local government having three representations from one local government for example or two representations which mean that this person to represent that local government is within a sphere. We all know them. You see three, four people contesting an election or at best you see about twenty people contesting an election. You see a man, this man is in an XYZ party, that’s relatively unknown. But you know that this man is good in terms of character. You know that this man is good in terms of intelligence. You know that this man is good in terms of capacity. Maybe he’s a university lecturer, whose salary is N120,00. But you will abandon him. You will now run to the money bags. These are the people that will go to your local assembly, not the one going to Abuja.
They won’t go to your local assembly. We will now populate our local assemblies with people who don’t know anything -with yes sir, yes sir men, – with people that the governor will just lock in one room, they will be there for two years without even saying anything. Then policies are now made in the State with these guys that are rubber stamp. Then after all these, you will now say, where are the labour unions? No, sir. I don’t represent such labour unions. I will tell you the truth.
Go to America today. Do you even know the name of their labour center in America? You have political parties checkmating themselves. You have Democrats churning up policies. You have Republicans challenging them and telling them those policies are not right. We must develop those capacities in Nigeria. You see elections, you see hot debates, and you see people pursuing issues. People are voting based on the economy. When Biden was there, or when Trump was there, what was it costing me? Biden is there today, what is the cost? So you make decisions based on how you feel in your pocket, how it affects your family. But in Nigeria, we take the show based on N1,500 and N2,000. Then after you have taken all those decisions, you will now say, and they are not implementing things that you do not say labour. No, sir. I don’t represent such labour, I’m sorry.
So collectively, we must all take responsibility. Everybody, we must all take responsibility, come together and discuss the direction this country must go.
Then on evaluate … what happened, okay, in the last summit. Yes, so part of us, we’ve had some fallout. Okay, let me just take one because of the want of time, because we’ve said a lot. In the last summit, for example, if you remember, if at the first two summits, we talked about contract staffing and their condition and welfare in the oil and gas industry. So we talked about it. So as PENGASAN too, we took some of the recommendations that came out from that summit. So we now came together, we sat together. And so, okay, why do we work literally? It’s first to take care of our families, to take care of our basic needs. So what we’ve done is that we looked at the route, if we want to push, for example, to say TotalEnergies, convert all your contract staff, it’s going to take time, the energy will be much more. That is the desired destination and we will get to tomorrow, but what we have done in the last one year is that we have tried to put the condition of service in the oil and gas industry in the right state. And without mincing words, a lot of improvement has been done in terms of condition of service in the oil and gas industry, from the IOCs to government agencies to services to contracts. We paid specific attention… because of what we found out from that summit, specific attention. If you were there in Abuja summit last year, where I made a response on that contract staffing and we told the captains of industries right there that we were coming after them for them to do what was right. And today I can tell you that a lot of these companies, have gotten a 150% salary increment, you know, 100% plus salary increment and the people are relatively happy.
In fact, in some instances, with the right combinations, up to about 200%. So that was a fallout from the summit. We also advocated that, you remember, the October summit came after the issue of subsidy was gone. Last year’s summit was in October. So after the subsidy was gone, in May. So we started advocating.
It was also part of the comment that came from the summit that in oil and gas, the business is done in USD. That’s why when there is devaluation, it shouldn’t really affect oil and gas workers because if you are doing your budget in USD, then you should just take the same USD, you convert with N1,600 and get it paid to work out. So we marked it out from last year. It led to several industrial disputes, it led to several strikes. Some of the IOCs, we have to shut them down for two weeks. Some two weeks, an additional two weeks, one month, we shut them down. Some of them were producing 300,000 barrels of crude. We shut them down for close to one month for them to do what was right. And I’m glad to report that as a result of the coalition we had in that summit, we were able to come out strongly, we were able to push these IOCs to do what is right. And relatively, I can tell you that our members of PENGASAN are happy.
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