‘Gas Should be Given Equal Prominence With Oil to Ensure Growth in the Sector’

In an environment where partnerships hardly survive, the Aelex Legal Partnership has thrived against all odds. It is one of the largest law firms in West Africa with offices in Lagos, Abuja, Port Harcourt and Accra, Ghana and its Annual Lecture Series has been well received by the legal community. May Agbamuche-Mbu, Jude Igbanoi and Tobi Soniyi interviewed its Managing Partner, Mr. Soji Awogbade. The oil & gas expert gave insights into a wide range of issues, including the nation’s present economic outlook and the urgent need for diversification.

You commenced your legal career as a Public Prosecutor before building a Civil Litigation practice for yourself. Have your origins in prosecuting helped you hone your courtroom advocacy and general outlook on the practice of the law?

Yes. My stint as a Youth Corper in Sokoto State was pretty much a self-starting experience where I broke the ice in what you could call a benign setting. The Judges were kind and sympathetic and I benefited greatly. They even considered retaining me at the Ministry of Justice but Sokoto was far from home (difficult to access and exit in those days) and the weather somewhat different to the South-West where I grew up.

Again, drawing from your experience as a Public Prosecutor what are your views on the recently constituted National Committee on Prosecution by the Attorney-General of the Federation and Minister of Justice?

It is highly commendable in view of the fact that the current prosecutorial bodies have not displayed sufficient expertise in the prosecution of high-profile corruption cases. So I hope the National Prosecution Coordination Committee will assist in bringing closure to most high-profile corruption cases, aided by the brilliant provisions of the Administration of Criminal Justice Act. Hopefully, the committee will help recover some funds in line with the anti-corruption drive of this present administration.

I understand that during the course of the inauguration of the Committee, the Vice President of Nigeria observed that the Committee was established by the Attorney General of the Federation in pursuance of his powers to institute, take over and discontinue criminal proceedings under Section 174(1) of the 1999 Constitution of the Federal Republic of Nigeria. It is not unlikely for the defence lawyers to argue that this section does not empower the Attorney General to set up a committee of this nature.

I think it is therefore necessary for there to be a legal instrument empowering the Attorney General to establish committees of this nature in order to clear such doubts, so that future Attorneys General can rely on such legal instruments to set-up similar committees that would assist them in the discharge of their constitutional functions.

In the face of the economic realities of dwindling oil prices with total global oil supply surpassing global demand by 1 million barrels, the economic outlook for a single product budget as ours is bleak. What advice would you give the Government to mitigate the impact of these developments in the oil sector on the Nigerian economy?

The obvious solution is to diversify our revenue streams and reduce the unhealthy overdependence on oil. Unfortunately, there is no quick fix in achieving diversification.

In the meantime, it is imperative to do a reality check on what we spend our scanty resources on, in order to ensure that government’s expenditure is focused and sustained on developing critical areas, i.e. infrastructure and education, as well as health and law and order, which will provide the enabling platforms for the diversification of our revenue streams in the long run.

The current level of core infrastructure i.e. power, roads, rail, seaports, airports, water and ICT, estimated to be 20-25% of GDP of $500billion is less than the level for any of the BRICS countries and grossly insufficient for Nigeria to break into the ranks of the top 20 economies in the world within a decade as expected.

It is reckoned that Nigeria would need to invest about $3 trillion over the next 30 years for her core infrastructure to reach 7o% of GDP, which is the current international benchmark.

As government cannot achieve this alone, government must commit its own expenditure, whilst ensuring that the required legal and investment incentives framework are in place in order for the private sector to play its part.

In the interim however, there is a need for a massive re-orientation of our people on the need to pay taxes and contribute to government’s revenue, especially the majority of gainfully engaged Nigerians who are currently outside the tax bracket.

It is estimated that about 75% of SMEs are outside the tax bracket and this has led to tax contributing a negligible 7% of GDP compared to 30-50% amongst the top economies in the world.

Lastly, it is imperative that this economy be led away from its import predilection. Currently, as highlighted by our “new “President, Nigeria imports virtually everything! And produces little for export apart from primary commodities including the crude and gas.

What would be your advice to would-be investors in such an environment, reputed for a harsh economic terrain and difficult conditions of business?

The oil and gas sector is a sector that is always quick to react to market conditions; so oil and gas investors and those who service the sector including even lawyers, know what to expect in a $100 price environment and when it becomes a $50 terrain.

For new players to enjoy the huge profit margin of the sector, they have to be very creative about the choices they make, be it of acreage, capital and recurrent spending, funding types and the expertise to be deployed. It goes without saying that certain fields will be cheaper to produce than others. New fields will predictably be more consuming than already producing fields because financing production is clearly easier than exploration.

To be successful new players must retain the services of seasoned experts who know the Nigerian terrain and who can show success already attained in this hydrocarbon district, in assisting similar operations.

According to the Nigerian National Petroleum Corporation (NNPC), Nigeria’s current undiscovered gas potential is 600 trillion Cubic Feet (TCF). Several experts have noted that Nigeria has the 9th largest proven gas reserves in the world and there is sufficient demand for natural gas locally as 80% of our electricity generation’s stock feed is gas. However this potential remains largely untapped. In your opinion what urgent steps should the Government take to harness the country’s natural gas resources?

Depending on your source of information, Nigeria has between 179 and 182 trillion scf of proven reserves with current daily production of around 8.2 billion scf.

Gas is fast entering the fuel framework of power generation in Nigeria, no doubt a late arrival.

The legal and regulatory framework of the petroleum sector has largely been centered on oil with gas as an afterthought and this has caused the slow growth of the gas sector.

While recent power sector reforms have led to the increase in the number of players in the power sector, with over 50 licenses issued for the establishment of electricity generating plants with a substantial number of them from gas-fired plants, much of the anticipated improvement in power generation has not materialised. This is due in part to inadequate or no gas supply to the plants and other technical, logistic and security challenges.

Nigeria’s current gas production is grossly insufficient to meet the needs of generation, industrial and domestic usage. It is estimated that about $12 billion will be required over the next 5 years to increase current gas production to 11,000mcfpd.

As I have said earlier, the core infrastructure for increased gas development and production need to be in place before we can see an increased role for gas in this economy.

However, as government cannot on its own provide the required investment, it is critical that government should continuously review, harmonise and streamline the legal, regulatory and incentive framework governing the utilisation of gas in Nigeria in order to encourage continuous investment. This should be done in consultation with all the stakeholders of the gas industry.

It is also noteworthy that the roadmap for achieving these goals has been captured in the National Integrated Infrastructure Master Plan. Unfortunately, implementation has been bogged down by a combination of factors which are common development obstacles to many sectors of the economy.

Numerous attempts at passing the Petroleum Industry Bill by successive governments is an indication of efforts to address these challenges. It is hoped that the current government will finally get it done.

As for the security challenges, I believe government should identify and understand the underlining causes, if it is to pin them down with a view to addressing them or with a view to factoring the tough issues into its planning and implementation.

Under the new administration Nigeria’s Power Sector has not shed its reputation for poor infrastructure, limited investment, poor performance and poor service delivery. As an expert in Foreign Direct Investment, what in your view are the major challenges to attracting the requisite investment by the power generating companies and distribution companies currently operating within the market?

It is clear that Nigeria needs both local and foreign investors to massively invest in its power sector. These players who do not necessarily have to undertake license play, provide an input which will be crucial to the sustenance of the sector.

Using international benchmarks, it is estimated that about $600 billion will be required over the next 30 years to develop the transmission and distribution infrastructure for the generation and effective distribution of 35,00oMW, which is the capacity required by Nigeria to significantly unleash her economic potential.

Investors are seldom charity organisations. Pricing has been one of the main show-stoppers inhibiting investment. If we get to an equilibrium on an appropriate tariff that is cost reflective, the required investments will come.

The Nigerian power market has no unique feature which should recommend re-inventing the approach used by either developed or developing economies, to ensure adequate and reliable power generation, transmission and distribution. However, until we are honest about the interplay between power production, its distribution and transmission and are weaned off the tendency to want to rob Peter to pay Paul on power matters, both the supply and demand side will continue to regard each other with suspicion, while the government remains a helpless onlooker. That is the current situation and it is hardly sustainable.

The privatisation of the power sector was largely successful with the transfer of distribution to private companies. Notwithstanding this development the old problem of lack of supply of electricity has resurfaced. Being an energy expert what are your comments on the privatization process? Do our laws adequately protect consumers from exploitation by electricity distribution companies?

The best you can say about our privatisation process is that it was bold.

The success of any privatisation exercise is globally indexed on how much easier it is to access the commodity that is privatised; how much of a commercial freedom there is to transact business in the sector; and how much it frees up the divesting government to face other priorities. You be the judge of all that for our experience of privatisation in this and other sectors.

On the protection of the environment, it should be said that for as long as the stakeholders do not exhibit an understanding of what it takes to have a sector that delivers to the expectation of all players in an economic mix that works for all stakeholders, some of the recent steps taken to ‘protect’ consumers without due regard to the economics or investment of the producer, may have provided no more than temporary respite.

Nonetheless, there are safeguards in the provisions of the Electricity Power Sector Reform Act (EPSRA) 2005 and the Consumer Protection Council Act, Chapter C25, Laws of the Federation of Nigeria, 2004 for consumer protection which are consistent with global requirements for the protection of the public for service delivery in the power sector.

Drawing from the experience of other countries such as Ghana that appear to have greater structural integrity or at least better certainty of electricity supply, what model would you advice be in the electricity market in Nigeria?

Ghana’s electricity sector, with which I am quite familiar, has its own struggles and they are by no means over. It is also a country of 27 million people. It is also a different political environment which is largely free of peculiar Nigerian issues.

Whilst I would recommend some aspects of the Ghana power programme, we have to exercise good judgment about what aspects of their programme to adopt. Electricity is by now almost a science, with many predictable outcomes depending on what you do; and there is already a lot of knowledge in Nigeria on the options.

Your passion for the environment is very well known and your work pioneering environmental law in Nigeria is well recognised. However apart from state-wide environmental laws in Lagos and other duplicating environmental regulatory agencies across Nigeria do you believe Nigeria has laws that are specific and effective in protecting the environment?

Thank you for the compliment.

The classical definition of the environment is that it consists of the air, land and water. From that definition alone, it is foreseeable that you can never have enough environmental law and guidelines so the quest should be for sufficient governance of the ever growing ramification of environmental media.

That said, we do have a plethora of environmental laws and various regulatory bodies charged with remit over segments of the environment. We also have laws drawn from treaties and conventions.

For the oil and gas sector, which is the sector with arguably the most environmental impact, the Department of Petroleum Resources exercises primary control over the players in the sector, ably assisted by the Federal and State ministries of Environment; the Nigerian Oil Spill Detection and Response Agency; the National Environmental Standards and Regulations Enforcement Agency and the Nigerian Maritime Administration and Safety Agency.

Some of these institutions are new; which points to the fact that we will always have room for more regulation and laws in the environmental sector.

Millions of barrels of oil have been spilled in the Niger Delta region since the beginning of oil exploratory activities there. The destruction is so great and unprecedented yet it was only on the 4th of August this year the Buhari Administration established the Governing Council and the Board of Trustees of the Trust Fund for the Hydrocarbon Pollution Remediation Project (HYPREP) as recommended by the United Nations Environmental Report (UNEP). Being an international consultant, why do you think this clean-up has been so long in coming and how would you advice in the council in carrying out this crucial task?

Ultimately, what is pretty much an environmental affair became political football. Politics always elongates and usually exacerbates a problem and the issue of oil spillage is not an exception, particularly given the strategic importance of the sector. Turf wars amongst the various regulators leading to poor coordination and conflicting regulations have also not helped matters.

This phenomenon is however not alien to our system, as many institutions grapple with similar problems over time in situations, even when the solution would appear simple and obvious.

However, now that we are there, let’s do this one and make it a precedent to follow.

It is clear that the Buhari Administration is taking the unfortunate occurrence of Oil Spills and Pollution seriously, but one thing that is also clear is that it is a policy-led approach to dealing with the issue of environmental pollution. Conversely it has continued to prove incredibly difficult to prosecute polluters in Nigeria, for instance, a class action by Farmers and Fishermen devastated by oil spills in Bodo in the Niger Delta only successfully obtained a settlement in January 2015, reached in the UK. Why aren’t investigations and claims against polluting IOCs successful here in Nigeria and how does this affect jurisprudence on the subject?

The legal requirements for proving damage are not different for environmental torts. However, by the peculiar nature of environmental damage, scientific and technical evidence may be required to pinpoint the polluter and the extent and magnitude of the damage.

Generally, environmental damage is more likely to affect a community than an individual. Sorting out these unusual issues usually delays access to the courts and may, in the final analysis, lead to prolongation of the matters, when eventually filed.

The next obstacle is the relative unfamiliarity of the judicial system with the themes and concepts on which sustainable development is predicated.

The award of sanctions and remedies is where these gaps most conspicuously manifest. This sees our courts awarding what amounts to measly damages for infractions that have wide and sometimes life-threatening implications for citizens.

In the fullness of time, the evolving landscape may include just and fair dispensation of justice on a scale comparable to other jurisdictions.

On 20th April 2010 one of the most publicized Marine Oil Spills of recent times began when a fire broke out on the oil rig that burned for 36 hours straight. The British Petroleum Deepwater Horizon Rig Oil Spill is estimated by the American Government to have leaked some 4.2 million barrels of oil into the Gulf of Mexico after taking 87 days before it was finally capped. Within 24 hours of the seal of the oil spill the US House of Representatives, began conducting enquiries with the BP Chief Executive. Given the far-reaching consequences of the subject why do successive Governments in Nigeria fail to understand the huge implications- socio-culturally, economically and ecologically of oil spills and pollution in Nigeria?

It is probably not correct to say that government does not recognise the enormity of the implications. What is probably in deficit is the ability and willingness to respond in the aftermath of an environmental disaster. The state of readiness is directly proportional to the size of the resources including infrastructure and equipment at the disposal of relevant agencies, the training and competence of their staff as well as location of the current problem.

Many of the regulatory parties are usually far from the theatre of environmental damage, so urgency of action is sometimes lacking. The departments of government who are responsible for matters of pollution including spillage have their regulations in place and there are prescribed interventions which should kick in once an incident occurs. The duties of the spillers are clear and those of the agencies are similarly spelt out.

It is worth mentioning that the oil and gas industry, realising its own potential loss from a cessation of operations, is perhaps more astute in reacting to these matters than government agencies.

The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act (NESREA Act) stipulates that Corporate entities who discharge harmful quantities of any hazardous substance into the air, the land or the waters are liable to a farcical sum of N 1,000,000 and a continuing penalty ofN50,000 per day. When we consider that the economic loss to Nigerian’s livelihoods, the loss of sources of work, food, the biological effects of long-term exposure to pollutants and the loss to generations of Nigerians forced to live with the pollution is quite incalculable, should there not be greater penalties and mandatory polluter pay based restoration programs mandate at the initiation of such potentially harmful activities?

Again the rules are clear and very much in tandem with global standards. But as with prosecution of other infractions of laid down laws, please show me the record of enforcement that we can boast of across the board. I doubt it will be radically different to that of harmful waste discharge. The capacity of agencies charged with enforcement here again is suspect.

My view is that if agencies actually move to enforcement of the existing regulations, a jump in compliance will be noticed.

The Aelex Annual Lecture Series has continued to enjoy success as lawyers, businessmen, legislators, regulators and the Nigerian public attend these annual events. What is this year’s focus and what has been the sustaining power so far?

This year, we intend to bring diverse stakeholders together to discuss how to make state governments work, in view of the current reality.