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The 1,000 Kilometre Crude Pipeline Agadam, Niger Republic To Kaduna Refinery – Cost, Politics And Bankruptcy Of Ideas



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On Friday, 25th November 2016, the Managing Director of Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru announced to an incredulous world that the Federal Government of Nigeria intends to build over 1,000 kilometres pipelines between Agadam in Niger Republic and Kaduna as an alternative source of crude to Kaduna refinery so as to obviate disruptions in crude supply from within Nigeria and reduce downtime of the refinery due to  vandalization and the age of crude pipelines from the Niger-Delta.
 Niger-Delta Crisis and Rising Militancy
To petroleum industry analysts, that appears to be a very simplistic and temperamental solution to the crisis in the Niger-Delta area of Nigeria which houses most of the estimated 22 to 35.3 billion barrels of Nigeria’s proven reserves of crude petroleum. Nigeria ranks as the world’s 10th most petroleum-rich nation. The crisis in the Niger-Delta is due to a most unfair treatment of the owners of the land and shores in which Nigerian petroleum wealth reside. In most democracies where petroleum is found, the owners of the land control whatever is derived and pay taxes to their central governments. This is contrary to the practice in the Middle-East where the monarchies own both every land plus more. Nigeria, although touting democracy, seems to have adopted the Middle-East version of ownership and management of all petroleum resources. From 1970, the oil resources in the Niger-Delta have been completely appropriated by the Federal Government of Nigeria, dominated by northern Nigeria Army Generals, conceding little or nothing to the owners of the land. 
The story of resource control in Nigeria is a roller coaster amply summarized in the United Nations Development (UNDP), 2006 Report, p.150, Table 1: State and Federal shares of petroleum proceeds 1953-present (The Politics of Resource Control in Nigeria: Example of Niger Delta Region, 1990s-2010 – Arabian Group of Journals – www.arabianjbmr.com>pdfs>1.pdf). The table shows that in 1953-1960, the producing State collected 100% of government revenue deriving from petroleum; in 1960-69 the state collection dropped to 50%; but in1969-1971 Nigeria’s military government further drove down the Region’s share to 45%. In 1971-75 it remained at 45% but off-shore proceeds became excluded. Between 1975 and 1979, the military further dropped proceeds to producing region to 20%, without offshore proceeds; and in 1979-1981 President Shehu Shagari’s civilian government abolished derivation completely. In 1982, probably responding to protests, the state’s share of proceeds was restored to a miserable1.5%; and this was sustained by the military government which overthrew Shagari in December 1983, until1992 when it was increased to 3%. 3% was sustained till General Obasanjo came back in 1999 as civilian President and implemented a 13% minimum derivation provided in the 1999 Constitution. He further restored off-shore proceeds to the states.
Derivation has up to date, remained in that minimal Constitutional provision of 13%. A finding by Niger-Deltans that over 80% of oil block allocations were owned by Northern Generals, traditional rulers and prominent politicians, sparked off an increased agitation for resource control. People, who got oil block allocations in Nigeria, could transform overnight from zero bank balance to US Dollar billionaires from sale of such blocks to established foreign oil companies. Furthermore, most of the oil-related services like crude sales, refineries’ supplies and maintenance, bunkering and transportation were distributed virtually in that same order. Top level hiring in the NNPC also follow that same order. Niger-Deltans, justifiably began to protest vehemently against the exploitation and exclusion. The 10th November 1995 judicial murder of 54-yearold Dr. Ken Saro-Wiwa, for apparently leading a re-invigorated campaign for equity for the oil bearing region, seemed to have been the last straw. The resistance fueled militancy and spiraled into blowing up of oil and gas pipelines and other installations; and kidnapping of oil workers.
Presidential Meetings with Pan-Niger Delta Forum (PANDEF)
The Chief Edwin Clark-led Pan-Niger Delta Forum (PANDEF) meeting with President Buhari on November 1, 2016 and what appears to be consequent clarification made by the King Alfred Diette-Spiff’s Niger Delta People’s Congress’s (NDPC) meeting of 15th November 2016 with Vice President Yemi Osibanjo, appear to have summarized the cause and cure of the Niger-Delta violent agitation under three broad headings –  resource control, restructuring of the Federation into six zones with true federalism and equitable re-distribution of indigenous ownership of the oil wells. The Presidency was not known to have made any commitment to any positive reaction except to advise the leaders to compel the militants to stop blowing pipelines as a sign of commitment to peaceful resolution of the conflict. Those who know the mindset of the oligarchy are aware that the three critical request of PANDEF are the oligarchy’s no-go areas; and that granting those requests, in the perception of the oligarchy, would amount to reversing the conquest and dominion earned over Nigeria from the civil war. But for the insistence of the foreign interests which own most of the oil assets in the Niger-Delta, the zone would have been probably bombarded and reduced to rubbles and hundreds, if not thousands of the militants killed, in an effort to extinguish resource control agitation. 
The Decision to Build 1,000 kilometre Crude Pipeline from Niger to Kaduna Refinery:
The decision to construct a 1,000-kilometres (621.371miles) pipe line from Agadam Oil wells in Niger Republic to Kaduna Refinery in Nigeria seems to be a reprisal to the Niger-Delta’s agitation, which seems in equity, justice and fair-play, either a joke carried too far; or perhaps, another unintended additional economic hara-kiri, that would drive Nigeria from recession to depression and perhaps eventual chronic and irresolvable crisis.
Political Gamble: The 2012 Census puts the total population of the Republic of Niger at 17.129 million. 56% Nigeriens are Hausas and 8.5% Fulanis. The two make up 64.5% of Nigerien population. The Hausa-Fulani therefore dominate the politics and economy of Niger, the same way they dominate the politics of Northern Nigeria; and have been battling since 1960 to keep the affairs of Nigeria under lock and key. 80% of Nigeriens are also Moslems whereas 20% are Christians and traditional worshippers.  Consequently, the ethnic composition of Niger Republic seems to give credence to the speculation that President Buhari, a Fulani, is pandering to ethnic and religious relations, against Nigeria’s best interest. The Oath of Office of the President of Nigeria, clearly spelt out in the Seventh Schedule of the 1999 Constitution, the limits of powers of the Nigerian President; and the Code of Conduct for Public Officers in Part I, Section 9 of the 5th Schedule, also sets limits to the use of presidential powers in such circumstances. 
It would appear that by building this Nigerien crude pipeline, the Federal Government would be raising very many conflict of interest issues questioning whether Nigerien or Nigerian best interest would be served by the project.
It does seem that the peace, security and well-being of the whole of a zone in Nigeria, and indeed the whole of Nigeria, would seem to have been compromised in constructing crude pipe lines and buying crude from Niger Republic whilst Nigeria desperately endeavours to replace USA, which dumped Nigeria as a major buyer of her crude. Niger is landlocked and ordinarily should pipe crude to countries that might wish to buy, but certainly not Nigeria, the 10th ranked oil rich country of the world!
Finally, the Republic of Niger is not insulated from militancy, the very reason for which the NNPC wishes to discard the use of Nigeria’s crude for Niger’s crude in the Kaduna refinery. As recently as 3rd June 2016, Boko Haram killed 30 Nigerien and 2 Nigerian soldiers in an attack on Niger’s border with Nigeria (Boko Haram attack in Niger ‘kills 32 soldiers’ – AJE News – Al Jazeera, June 4, 2016 www.AlJazeera>news>2016>book-hara…) Earlier, on 7th February 2015 New, York Post reported the killing of 109 Boko Haram fighters by Nigerien soldiers responding to attacks on two towns in Niger, near the border with Nigeria. Besides, Niger is permanently under threat of infiltration or invasion by the Islamic State (ISIS) and al-Qaeda in the Islamic Maghreb (AQIM). On May 30, 2016 the BBC reported that French intelligence specialists, assisted by drones, in Base 101 in Niger, are permanently on the look-out collecting information from the skies above the vast stretches of the Sahel for groups of foreign terrorist invaders belonging to ISIS and al-Qaeda. Using their sophisticated cameras and radars they look down on an area roughly the size of Europe (BBC News, Niamey: Niger Battles Terrorism threats on all Fronts, May 30, 2016 – www.bbc.com). 80% of Niger’s 1,267,000 kmland area (almost twice Nigeria’s 910770 km2) is covered by the Sahara desert. Consequently the chances of pipeline vandalization in Niger can be said to be as high, if not higher, than in Nigeria.
Economic Suicide: According to a Nigerian friend of mine (a petroleum engineer) resident in Houston who has built over 65 crude oil refineries across the globe and laid over 170,000 miles of crude, refined products and gas pipelines in various countries of the world, 1,000 kilometres (621.371) crude pipeline designed to pipe 110,000 barrels of crude daily should be in a 12inch-pipe and would in West Africa cost as follows:
Installed cost is estimated at $36,000 per inch per mile, totaling $270 million (at official rate of 305 Naira per $, amounts to 82.350 billion Naira). Unit construction cost is usually higher if pipelines are to be constructed in areas with steep terrain, as pipeline will be longer and take more hours of labour and additional pumps. Estimated Operating and maintenance cost is $70 million (21.35Billion Naira) per annum. Above estimates seem to compare favourably with the published figures in US National Association of Manufacturers’ report – The Economic Impact of Crude Oil Construction and Operation/ECR/PrivateReport nam.org . The report shows that total unit cost based on an assumed capacity of 70,000 barrels per day and a length of 200 miles, is $1,551,000 per mile for a 12-inch diameter crude oil pipeline; and that annual operation and maintenance (O&M) expenditures for newly constructed 12-inch crude oil transmission pipeline is $136,000/mile in the first few years of operation.
 More importantly, Nigeria must cough out daily payment for importation of 110,000 barrels of crude (the installed capacity of Kaduna refinery). At $40 per barrel, Nigeria would be bound to pay crude oil bills of $4.4million per day and for say, 300 days operation in a year, $1.32 billion, which at 305 Naira official exchange rate, adds up to 402.6 billion Naira per annum. 
Thus despite extreme scarcity of foreign exchange resulting from the collapse of crude oil prices which has caused industrial closures and mass unemployment in Nigeria, the nation not only needs to cough out $270 million in installed cost of the pipelines; but also $1.32 billion, annual cost of crude supply and $70 million in O&M of the pipelines, both totaling $1.39billion (423.95 billion Naira at 305 Naira official rate). This annual cost which would have been saved and invested in more meaningful avenues for salvaging the tottering Republic, would be squandered in shoring up another equally distressed country. All that is required is to give up the dominion posture of the oligarchy manipulating Nigeria, climb down from their high horse of arrogance and accept to restructure the Federation, including true federalism. Restructuring and true federalism would enable the Niger Delta people reap the benefits of their God-given bestowals; and would restore peace to the region that lays Nigeria’s golden eggs, thus reducing Nigeria’s enormous peace-keeping costs and forever escalating militancy in the region.
The annual dissipation of enormous sum of over $1.39billion, excluding capital costs ($270million) which could easily have been saved would probably, along with such other several wasteful and unplanned expenditure drive Nigeria’s recession into depression.
Above estimates are based on genuine costs for a West African operation. If one factors in NNPC and other arms of the Federal Government of Nigeria’s penchant for quoting and accepting surprisingly extraordinarily over-priced bids, sometimes more than twice normal prices, the 1,000-kilometre crude pipeline, might as well bankrupt Nigeria and help to drive it to its doom.
NNPC and Its Bloated Estimates for Refineries: NNPC and other arms of the Federal government have not done so well in their most recent refineries estimates. In 2014, for example, privately owned Dangote Refinery with crude refining capacity of 650,000 barrels per stream day (BPSD) including 3.6 million tones petro-chemical complex, was estimated to cost $9 billion and construction work started in 2015.  But in 2010 NNPC signed a memorandum of understanding (MOU) with China Engineering Corporation to build three Greenfield Refineries with total capacity for 750,000 BPSD at the cost of $28.50 billion. At an Offshore Technology Conference in Houston, Texas, USA, in 2013, Engr. Andrew Yakubu, then group managing director of NNPC, announced that the Greenfield Refineries’ capacity has been down-sized to a total of 400,000 BPSD, the same time the total project price had gone up from $28.50billion to $51.8billion – less capacity at nearly double price. (NNPC Greenfield Refinery Initiativewww.nnpcgroup.com/nnpcbusiness/midstreamventures/greenfieldrefineryinitiative.aspx)   
The NNPC outlandish price seemed to compare with the Nigerian Federal Ministry of Trade 2012 MOU with US-based Vulcan Petroleum for 6 modular units with total refining capacity of 180,000 BPSD at $4.5 billion. (.(Nigeria Signs $4.5B deal to build 6 refineries, July 3, 2012 . Associated Press; www.foxNews>world>2012/07//03>nigeri. . . ) This outlandish quote was in the face of Iranian Research Institute offering of 60,000 BPSD capacity modular units at $250 to 300 million; whilst confirmed sources in USA sold 100,000 BPSD capacity refineries at $900 million. 
The President’s Aides and their Disregard for Cost Control: President Buhari is an anti-corruption crusader but his ability to monitor costs and control his staff does not seem as good in his past and present positions. At his age (middle seventies), most men occupying such top position as President of a troubled nation, are invariably imperial and rely on trusted aides.  Recent events involving the President’s aides from 1994 to date, cast doubts as to whether they really render such dispassionate assistance to him, putting the nation’s interest above any other.
  1. At Petroleum Trust Fund (PTF): In 1994 before the General accepted to be Chairman of General Abacha’s Petroleum Trust Fund (PTF), and at his insistence, the General was given the title of Executive Chairman with a free hand to run the Fund as he deemed fit, without any interference from anyone, including the Head of State. The Petroleum (Special) Trust Fund (PTF) Interim Management Committee instituted by President Obasanjo on July 7, 1999 in their interim report found that almost all the powers of the executive chairman was ceded to Afri-Project Consortium (APC) as management and project consultants, including the role of the Engineer, with full powers to conceive, execute and supervise projects. APC was found to have mismanaged N25, 758,532,448 including overcharging PTF for their services to the tune of N2, 057,550,062 from the inception of PTF in 1994 to 1999. APC management services fee and the budget for various projects executed during the existence of PTF, were also found to have been greatly over-priced. For example, vehicle ambulances which cost N3million in the open market were bought for N13 million each; and hundreds of thousands of glass frames ordinarily sold for N80 to N880 were bought for N1, 900 each. Drugs over-pricing totaled N1.5billion. Loss to ordinary banking operation amounted to N3.5Billion. The report confirmed that the General knew nothing about these extremely over-priced items and therefore no effort was made to control Afri- Project Consultants. (Ref. Ehiabhi Vincent: Obasanjo Exposes Buhari’s Mismanagement Of PTF www.naija,com>353981-obasanjo…www.pointblanknews.com>pbn>exclusive, May 23, 2013 and Nigerian Guardian, 17 January 2015 – 015: More Questions for Buhari; Nigerian Pilot, March 9, 2015 –www.nigerianpilot.com>News)
  2.  The first four to six months of President Buhari’s regime was run with no Ministers and his aides failed to advise that the absence of Ministers was at very grave cost to the nation. They instead spent their time defending this indefensible hiatus in governance at very grave consequence to the nation.
  3. In the absence of Ministers, Presidential aides over-loaded Aso Rock budget with such absurdities as rent for Aso Rock villa and excessive budget provisions for feeding and such other domestics.
  4.  The 2016 Federal budget was over-bloated and had to be returned to the Presidency by the National Assembly for trimming and other corrections.
  5. President Buhari’s London Medical Trip for Ear Infection: On June 8, 2016, Femi Adesina, Senior Special Adviser on Media and Publicity to President Buhari denied that the President travelled to London for treatment. But on September 19, 2016, Mallam Garba Shehu, the President’s Senior Special Assistant on Media and Publicity seemed to have contradicted Mr. Adesina by admitting that Mr. President spent only about £50,000 as operating cost for his ear treatment in London during the same trip Mr. Adesina had denied. 
    On 24th September, however, Dr. Farooq A. Kperogi, formerly of Bayero University, Kano (presently Associate Professor of Journalism and Emerging Media at Kennesaw State University, in Metro, Atlanta, USA),  who had initiated the President’s £6million ear treatment controversy, put the records straight in a public presentation, disclosing that the £6million cost of the trip included aviation fuel, accommodation, allowances (estacodes) for a multiplicity of aides and government officials, medical treatment, and landing/packing fees for 14 days the trip lasted for the aircrafts involved in the trip. Relevance of the trip was further challenged by the Nigerian Medical Association which reminded the nation that Nigeria has 250 Ear, Nose and Throat (ENT) specialists; and that the National Ear Centre in Kaduna State is very competent and well equipped to handle the President’s simple infection. Dr. Oshon Enabulele, Vice President, Commonwealth Medical Association (CMA) and former President, Nigerian Medical Association (NMA), while attesting to the extraneousness of the President’s medical trip as a shame on the nation, revealed that he had recently undergone surgical operation for ear infection in Nigeria, this year, and it was completely successful. 
    Three months after Prof. Kperogi and Dr. Enabulele’s disclosures, Messrs. Femi Adesina and Garuba Shehu, have not found their voices to contest the irrefutable disclosures of wastefulness of the president’s medical trip. 
    An Igbo idiomatic expression asserts that ogbalu nkiti kwelu ekwe (failure to refute allegations is admission of guilt). Incidentally, the Igbo wise crack tallies with Common Law position that an assertion not contested, challenged or disputed is accepted as admitted.
    The President is the Minister of Petroleum and as the Managing Director of the NNPC, Dr. Maikanti Baru, revealed, would be personally handling the Niger proposed 1,000 kilometres pipeline project. NNPC would be assembling the contract details. Against above NNPC record, reference refineries quotes, it would be no surprise if the above projected $270 million installed cost of the 1000-kilometre pipeline balloons to over $1Billion and the $70million annual operating and maintenance cost rises to some hundreds of millions of dollars.
    More importantly, it would be no surprise if the NNPC and the President’s aides fail to remind him that building the pipeline implies an annual recurrent payment of $1.32billion to Niger Republic for supply of 110,000 barrels of crude for at least 300 operating days in a year, assuming the price of crude is steady at $40 per barrel. On Tuesday December 13, 2016, for example, Brent sweet crude, with which Nigeria’s Bonny Light Crude is ranked, soared to $57.89 per barrel in overnight trading between Sunday and Monday (its highest in 18 months). That would mean that the $1.32 Billion annual cost of crude might as well shoot up to or beyond $1.910 Billion.      
    It is my firm belief that if President Buhari is fully informed on the economic and political consequences of building a 1,000 kilometres crude pipeline from Kaduna refinery to Agadam in Niger Republic, he would think again before venturing into such a suicidal venture. 
    Prince Chukwuemeka I. Onyesoh,
    Forum for Promotion of National Ethos and Values (FPNEV),

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