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Square Pegs and Round Holes

Month

April 2017

BBOG and the new “Us”

 

So, I was jamming my naija playlist the other day and Ovuloria motioned to me saying it was too loud, as she picked a phone call. Meanwhile, there I was nodding my head to “Shitor ooo, Shitor”, my inner selfish kicked in and I motioned for her to move to kindly the other room. As the playlist progressed, it got to a tune I was not really feeling. After a minute or so, I made to reduce the volume, because I then felt the music was too loud. Just then I saw the next tune on the list. I did a fastforward to the comforting chant – “Heyyy Maleek Berry pon dis”. I suddenly needed more volume. As they say in Warri, I gave it belle and the room filled with more chants of …”too much juice, too much sauce…”. Hmmm…I nodded away as I sipped #15.

 

What you saw up there is classic human behavior. At times, the mood changes or situations change and that tune previously listened to and enjoyed at the same volume, becomes too loud and you instinctively drop the volume. Sometimes, it gets so bad that you fast forward or remove it from the playlist altogether.

 

This was what came to my mind today as I watched the ongoing BBOG anniversary program on ChannelsTV. As a sign of our collective hypocrisy, it did not take a few weeks into this administration for the same folks who saw this advocacy as a rallying point to expose the cluelessness and maybe even wickedness of the last administration, to now see them as meddlesome gnats. So much so that some “supporters” of this admin even went to one of the BBOG events to disrupt their march in a counter show of support.

 

My heart goes out to all the families who have been impacted by the insurgency in the North East. Thousands have been killed and hundreds abducted, including under-aged boys and girls who have been used as “wives” to terrorists and as trainee insurgents and suicide bombers.

 

While I commend the current administration for the work done so far in pushing the terrorists to the fringes, I would also advise that we need to put a strong focus on the root causes that give rise to extremism, terrorism and insurgency and makes this find an appealing place in the minds of our young ones in areas where this is prevalent.

 

 

SAN

 

 

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The New Deal for Illegal Refineries

I am still keenly waiting for the details of government’s plan to absorb the illegal refineries operators into the mainstream. The VP is reported to have said “Our approach to that is that we must engage them (illegal refiners) by establishing modular refineries so that they can participate in legal refineries. We have recognized that young men must be properly engaged.”

I hope this is targeted more at the owners who established these refineries than the workers employed there? This is because what drives this is really illicit profit more than unemployment – and this is not saying unemployment is not a problem.

What I have picked up so far from news reports, is that there are plans for government to either build and partner or gather these folks into cooperatives and empower them to build and operate small capacity (1,000 bpd, etc.) type modular refineries.

Why this interests me is the following:

How do they plan to create incentive in this business?

Recall that the chief driver for this illegal activity is the combination of very low cost inputs and medium to high value outputs from:

  1. Free crude oil, ready market and poor enforcement by authorities.

So they basically get their “plant” crude oil feed for free.

  1. Simple operations.

What they do is a crude form of “Topping” or atmospheric distillation, with the aim of making diesel. They start by heating crude oil up to 350-400oC. This is done in two stages. The bottoms from the first stage is mostly bitumen. The distillate is moved to a next stage vessel and cooled to get diesel. The other by-products like fuel oils, gasses, jet fuel/kerosene and gas oils are not properly extracted and are disposed indiscriminately to the environment. Note that diesel is about 27-32% of crude oil types available in Nigeria. In a proper refinery, the next stages would be conversion and treating. These are quite complex steps involving different chemical processes, materials and equipment. This is where you’ll find scaled up refineries producing gasoline (petrol), LPG, etc.

  1. Proximity to crude.

They are usually sited a small distance from the pipeline where the oil is stolen from. So, no real transport cost.

  1. The absence of controls and standards.

It costs money to abide by product, operational, environmental and basic chemical industry process safety standards

  1. No taxes to government.

I suppose they can still get greenfield tax incentives for 5 years, per the regulations when they now go legal. So, this is a soft one.

  1. “Irregular” employment practices….and that is being modest.

These guys run as a cartel with a local strong man overseeing things. Nobody dey strike o. You don’t like the conditions – you leave. But I hear the money is not bad.

All these help to lower cost of operations a great deal and maximize profit.

*Note that refineries’ profits are determined by size and complexity, crude type and product slate, logistics, operational efficiency and regulatory environment. Generally, their margins run from minus (-ive) to 18% with 11-13% being the average for North America. I have not been able to gather data in Nigeria to determine how we have run in the past, for reasons of not having profit driven refining operations.

Conclusion

Whatever partnership, help, subsidies/loans and waivers the FG intends to give these operators, I don’t see how health, safety, environmental and product quality standards can be lowered. So, that element of operational cost will still be there to “temper” profit margins. Hopefully, government will still find a way to create incentive for this plan to work, regardless. I trust that they have enough people in the policy space of this sector, who understand the problem and can proffer solutions and advice on implementation.

All in all, reaching out in an inclusive manner in trying to solve this problem, in a win-win manner, is a good initiative.

I hope for the best in its implementation.

SAN

 

Additional reading

  1. http://sweetcrudereports.com/2017/02/15/nigeria-govt-to-work-with-illegal-oil-refiners-osinbajo/
  2. http://venturesafrica.com/federal-government-decides-to-work-with-illegal-oil-refiners/

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