Introduction
Nigeria is richly endowed with natural resources, including crude oil and natural gas. Natural gas is one of the most important sources of energy today. It is environmentally friendly and has economic and technical advantages over crude oil products in terms of storage and usage. Recently, a study by the US Geological Survey revealed that Nigeria’s potential gas reserves could be as high as 600 trillion cubic feet, which is fourth in the global rankings (NTWG 2009). The gas is of high quality, particularly rich in natural gas liquids (LPG and condensates).
Despite these potentials, the level of gas production and utilisation in Nigeria is relatively low compared with countries with similar reserves. Research shows that Nigerians pay higher prices for gas products, which is not a reflection of the country’s natural endowment in the sector (NTWG 2009). This is largely attributed to the paucity of gas infrastructures; consequently Nigeria flares 17.2 billion m3 of associated natural gas per year in the course of crude oil production, yet lacks sufficient gas to meet its industrial and domestic demands. This volume of gas flared is equal to approximately one-quarter of the current power consumption of the African continent (Ajugwo 2013).
However, Federal Government efforts toward capacity development in the gas sector date back to 1969, with the Amended Petroleum Act, the Gulf Oil Company Fund Act 1973, the Petroleum Technology Development Fund Act 1975 and the Amended Nigerian Petroleum Corporation Act 1977. Following decades of gas flaring, poor production and utilisation, in 1990 the Federal Government launched the Nigeria Gas Policy, followed by the Strategic Gas Master Plan in 2004; the latter saw to the enactment of the Nigeria LNG (Fiscal Incentives, Guarantees and Assurance) Act, No. 39 of 1990, primarily aimed at attracting foreign investment and development of the sector. In addition, since 1999 the Federal Government has taken far-reaching steps aimed at liberalising the sector including introduction of local content policy, passage of the Nigerian Oil and Gas Industry Content Development Act 2010 and initiation of various gas projects in conjunction with international oil companies (IOCs) across Nigeria.
Since 1957, Nigeria has depended on oil and recently gas rents to run its economy. Hence it relies on IOCs that have the technological capacity to harness its gas potentials including liquefied natural gas (LNG). As such, foreign investments in the sector are run based on contractual regimes such as joint venture contracts, production sharing contracts, sole risk contracts and pure service contracts with the Nigerian National Petroleum Company (NNPC), largely on account of the technological capacity gap. It was expected that through Nigeria’s participation in the contractual regimes, over a period it will develop indigenous capacity for independent production. Unfortunately, six decades into gas production, indigenous firms and the government still rely on foreign capital to harness its gas reserves.
Drawing from the above, the briefing becomes imperative as it seeks to rely on existing data to advance an explanation for the continued technology gap between developed and developing economies. This is in furtherance of ROAPE’s coverage of the inherent contradictions in the global capitalist system and the attendant implications for African development. Furthermore, the briefing will provide a theoretical framework through which the paradoxes of Nigeria’s quest for capital inflow and its contradictions on technology development could be appreciated; hence provide a policy direction for future production regimes in the petroleum industry. In the light of the above, the author of the briefing will provide data on the composition of foreign capital in Nigeria’s petroleum industry. On the basis of that, he will demonstrate how the dominance of foreign capital has coerced reliance from indigenous operators and distorted initiatives towards indigenous technology development in the production of liquefied natural gas.
A sizeable literature exists on Nigeria’s external technological dependence in the LNG sector (Adenikinju 2008; Ahrens 2002; Aworawo 2011; Lall 1992; Onipede 2010). In sum, scholars could not account for the driving force behind the export of capital and its implications on developing economies, especially on indigenous technology development. Hence, they could not address the nexus between the dominance of foreign capital and poor development of indigenous technology in the Nigerian gas sector.
Theoretical framework and methodology
The theory of the rentier state is a complex of associated ideas concerning the patterns of development and the nature of states in economies dominated by external rent, particularly oil rent (Yates 1996). According to Beblawi and Luciani (1987), four characteristics must be present in order for a state to be classified as rentier. First, the rentier economy of which the state is a subset must be one where rent situations predominate. Second, the origin of the rent must be external to the economy. Third, in a rentier state, few are engaged in the generation of rents, while the majority are involved in the distribution and consumption. Finally, the government must be the principal recipient of the external rent in the economy.
The implication of the above is that external rent largely liberates the state from the need to extract income from the domestic economy. Thus, unlike a ‘production’ state, which relies on taxation of the domestic economy for its income and in which economic growth is therefore an imperative, an ‘allocation’ state does not depend mainly on domestic sources of revenue. Rather, an ‘allocation’ state is the primary source of revenue itself in the domestic economy (Beblawi and Luciani 1987; Yates 1996). The theory postulates that rentier states exhibit indifference towards their socio-economic and technological backwardness. This arises from the ability of the rentier state to use its huge foreign earnings to purchase ‘welfare and prosperity’ from outside. Thus, the rentier elites’ ability to embark on massive spending and consumption pre-empts some of the urgency for change and rapid growth to enlarge state resources.
The economic behaviour of a rentier state is distinguished from conventional economic behaviour, in that it embodies a break in the work–reward causation (Beblawi and Luciani 1987). As rightly noted by Yates (1996), rewards of income and wealth in the rentier state do not come as a result of work, but rather are the result of chance or situation, as well as power capacities to secure rent capture. The economy of a rentier state is largely monocultural. In situations of decline in oil receipts, government public spending capacity is reduced. This makes a rentier economy more vulnerable to external manipulations (Beblawi and Luciani 1987; Yates 1996). The rentier state reproduces its own rentier mode of survival within the local economy. More importantly, it turns the state apparatus, including both politics and bureaucracy, into a rent-distribution bazaar (Roll 2011).
Application of the theory
Nigeria runs a rentier economy, relying largely on oil revenue received from rents paid by IOCs. For instance, oil and gas constitute nearly 80% of Nigerian revenue and foreign exchange earnings, showing that Nigeria is a monocultural economy where oil is the mainstay of the economy; rents therefore predominate. Nigeria gained political independence without economic emancipation and self-reliance. Hence IOCs that facilitated the implementation of obnoxious colonial policies in Nigeria continued to dominate and control the production processes, including petroleum production in Nigeria (Ake 2003). Since the discovery of oil in commercial quantities in Nigeria, the pioneering oil firms, with the aid of high-tech facilities, capital and skill, have been in charge of the industry while Nigerian firms merely provide ancillary services. In order to increase its revenue base, the state liberalised the gas sector aiming at attracting more foreign direct investment.
This briefing has adopted the documentary method for data collection and synthesised the data using content analysis. The qualitative nature of the briefing accounts for the adoption of the above methodology. Moreover, experiences have been brought to bear, including opinions and views of stakeholders in the gas sector, to supplement documentary evidence. Content analysis was considered appropriate for the briefing not only because it suited contextual analysis but because it is also useful when the task is to glean, illuminate, interpret and extract valuable information on the basis of which conclusions could be drawn.
Composition of international oil companies and indigenous firms in LNG production in Nigeria
The petroleum industry in Nigeria is broadly divided into three sectors: upstream, midstream/service and downstream sectors. The upstream sector involves exploration, production, transportation and exportation of crude oil and gas. This sector is the most important in Nigerian economy, accounting for over 90% of its exports and about 80% of revenue. Given that the sector requires huge capital, advanced technology and expertise, joint ventures between government and IOCs have become a common production arrangement. This provides leeway for IOCs that have the technology, capital and expertise to exploit, hence establish control and dominance over production.
The Federal Government is represented in the joint ventures by NNPC. The joint venture arrangements provide that NNPC will control between 55–60% of the shares while the participating IOCs have 40–45%. The operation cost was initially shared between NNPC and the participating IOCs. However, following the frequent inability of NNPC to meet its operational cost obligations, participating IOCs now bear all exploration and production costs. In the later arrangement, the oil produced is divided into ‘cost oil’, which is retained by the company, and ‘profit oil’, shared between the company and government. The implication of the arrangement described above is that NNPC is the only indigenous firm in the upstream sector of gas production in Nigeria.
The midstream or service sector provides technical, engineering and consultancy services to aid the upstream sector in the exploration and production activities. Table 1 shows the classification of services under this sector.
| 1. | Exploration support services | |
| 2. | Drilling services | |
| 3. | Production support services |
|
| 4. | Downstream services | |
| 5. | Others |
Sources: KPMG Professional Services, Nigeria’s Oil and Gas Industry Brief.
The downstream sector focuses on retail distribution and conveyance, refining, gas treatment, liquefaction, degasification and marketing. It also covers Nigeria’s petrol chemical plants, Nigeria LNG and the four refineries located in Port Harcourt, Warri and Kaduna. Though the sector is dominated by indigenous firms, major operations are undertaken by NNPC and IOCs, such as petroleum refining, gas treatment, liquefaction and degasification. The rest of the indigenous firms engaged in distribution and marketing of products. Table 2 shows a list of foreign and indigenous gas firms and sectors of their activities in Nigeria.
| S/N | Companies | Scope of operations | Status | ||||
|---|---|---|---|---|---|---|---|
| Upstream | Midstream | Downstream | Indigenous | Foreign | Joint | ||
| 1. | NNPC | ✓ | ✓ | ✓ | ✓ | ||
| 2. | Shell | ✓ | ✓ | ✓ | |||
| 3. | Nigeria LNG Limited | ✓ | |||||
| 4. | Total | ✓ | ✓ | ✓ | ✓ | ||
| 5. | Chevron | ✓ | ✓ | ✓ | ✓ | ||
| 6. | ExxonMobil | ✓ | ✓ | ✓ | ✓ | ||
| 7. | Nigeria Gas Company Limited | - | ✓ | - | |||
| 8. | Xenergi | ✓ | ✓ | ✓ | ✓ | ||
| 9. | NF Western Limited | ✓ | ✓ | ✓ | ✓ | ||
| 10. | Nigeria Agip Oil Company | ✓ | ✓ | ✓ | ✓ | ||
| 11. | Brass LNG Limited | ✓ | ✓ | ||||
| 12. | Olokola LNG | ✓ | ✓ | ||||
| 13 | Oso NGL [natural gas liquid] Plant | ✓ | ✓ | ||||
| 14 | Escravos Gas-to-Liquid | ✓ | ✓ | ||||
| 15 | Pan Ocean Oil Corporation (Nigeria) Ltd | ✓ | ✓ | ||||
| 16 | Forte Oil | ✓ | ✓ | ||||
| 17 | Falcon Corporation Limited | ✓ | ✓ | ||||
| 18 | Oando Gas & Power | ✓ | ✓ | - | |||
| 19 | Owel-Linkso Group | ✓ | - | - | ✓ | ||
| 20 | Honeywell Group | ✓ | - | - | ✓ | ||
| 21 | NIPCO PLC | ✓ | ✓ | ||||
| 22 | Oilserve Limited | ✓ | ✓ | ||||
| 23 | Asiko Power Limited | ✓ | |||||
| 24 | O.T. OTIS | ✓ | ✓ | ||||
| 25 | Frontier Oil Limited | ✓ | |||||
| 26 | Ruhrgas | ✓ | |||||
| 27 | Algasco | ✓ | |||||
| 28 | Vigeo Oil & Gas | ✓ | ✓ | ||||
| 29 | Tamson | ✓ | ✓ | ||||
| 30 | Details | ✓ | ✓ |
Source: NCDMB Annual Report (2015).
It is evident from the table that IOCs control and dominate the upstream sector, as none of the indigenous firms participate, except NNPC in joint ventures with IOCs. The midstream is equally dominated by IOCs, with minimal participation by indigenous firms. The major operations in the downstream which revolve around gas treatment, liquefaction and degasification are undertaken by IOCs. Except in Nigeria LNG, where NNPC has 55% equity participation, the remaining 45% are shared by ExxonMobil, Shell, Chevron, Total and Agip. The rest of the operations in the downstream are shared between indigenous and foreign firms, with the former recording greater presence.
Dominance of foreign technology and paucity of indigenous science and technology infrastructures in LNG production
Besides the uneven composition of indigenous and foreign firms, ownership and control of LNG technology constitute the second plank of IOCs’ dominance in the sector. This implies that over 80% of the facilities, equipment and machineries employed for gas exploration and production are owned and controlled by foreign firms (Nwapa 2014). These range from drilling tools, rings, marine vessels, valves, pumps, spares, components, switchgear, control panels, chemicals and fluids, to fixed assets such as gas plants, pipe mills, machine shops, fabrication yards, workshops, ship/dock yards and logistics bases.
Besides ownership of these facilities, the bulk of the skill, knowledge and expertise is domiciled with IOCs. We also see that expatriates dominate decision-making positions. This dominance is evident given that out of eight functional gas plants, six belong to Shell, Chevron, ExxonMobil, Total and Agip. These firms also have 45% equity participation in Olokola and Nigeria LNG (Nwapa 2014). Table 3 shows indigenous and expatriate staff composition in the petroleum industry in Nigeria.
| Year | Mgt | Professional | Intermediate supervision | Clerical | Skilled labour | Unskilled labour | Others | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ng | Ex | Ng | Ex | Ng | Ex | Ng | Ex | Ng | Ex | Ng | Ex | Ng | Ex | |||||||||||||||
| P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | P | C | |
| 2010 | 112 | – | 401 | – | 3006 | 56 | 1291 | 1 | 1105 | 2089 | 306 | 9 | 2465 | 2960 | 4 | – | 6270 | 4752 | – | – | 2870 | 2094 | – | – | 1109 | 896 | – | – |
| 2011 | 182 | – | 601 | – | 3662 | 102 | 1701 | 8 | 1471 | 2311 | 348 | 4 | 2840 | 2134 | 3 | – | 7940 | 4971 | – | – | 3015 | 3153 | – | – | 987 | 1002 | – | – |
| 2012 | 172 | – | 612 | – | 3812 | 132 | 1602 | 2 | 1512 | 2004 | 681 | 15 | 2619 | 1974 | 11 | 2 | 8001 | 3842 | – | – | 3412 | 2986 | – | – | 1012 | 1032 | – | – |
| 2013 | 201 | – | 592 | – | 4117 | 403 | 1803 | 11 | 1484 | 1984 | 807 | 6 | 2432 | 2017 | 8 | – | 8021 | 4082 | 3017 | 2881 | – | – | 1213 | 1079 | ||||
| 2014 | 229 | – | 583 | – | 4283 | 398 | 1752 | 3 | 1618 | 2001 | 816 | 2 | 2617 | 2092 | 17 | 3 | 8331 | 3947 | – | – | 3482 | 2947 | – | – | 982 | 1136 | – | – |
| 2015 | 231 | – | 600 | – | 4312 | 400 | 1810 | 15 | 1700 | 2042 | 900 | 20 | 2688 | 2300 | 10 | – | 8010 | 4000 | – | – | 3900 | 3000 | – | – | 1002 | 1042 | – | – |
| 2016 | 240 | – | 608 | – | 4500 | 462 | 1900 | 23 | 1712 | 2068 | 904 | 17 | 2800 | 2402 | 20 | – | 8772 | 4056 | – | – | 3912 | 3012 | – | – | 1080 | 1040 | – | – |
| Total | 1367 | – | 3997 | – | 27,692 | 1953 | 11,859 | 38 | 10,602 | 14,487 | 4762 | 73 | 18,461 | 15,879 | 73 | 5 | 55,345 | 29,650 | – | – | 23,608 | 6012 | – | – | 7385 | 7227 | – | – |
Note: P and C refer to numbers of permanent staff and contract/casual staff.
Source: NCDMB Monitoring and Evaluation Reports, 2010–16 (researcher’s compilation).
The data displayed in the table speak volumes about the dominance and control of the sector by IOCs. In the gas sector, out of the 32 firms, Shell, ExxonMobil, Chevron, Texaco, Elf and Agip account for 82% of gas production (EIA 2011). Shell alone accounts for about 50%, and has been operating in that sector since the 1950s. Since then, oil and gas production in Nigeria has been undertaken by IOCs, mainly in production sharing contracts with NNPC (Okorie 2005).
Between the 1950s and now, these firms have developed advanced technology for oil and gas production, which has made a substantial impact on Nigeria’s petroleum potential. For instance, the invention of high-resolution 2-D and 3-D seismic technology has revealed petroleum prospects at greater depths than ever. Therefore subtle traps and deep-seated structures have been discovered which in various instances are larger reservoirs than their shallower and more structurally complex counterparts (Ekpo 2012). Following these developments, Shell has successfully carried out 3-D seismic surveys over swampy terrain; IOCs have developed advanced drilling technology, which ensures that well drilling takes less than half the time spent in the 1950s and 1960s; Shell has also demonstrated that horizontal drilling is now attainable, involving the use of top-drive drilling and flexible drill pipes. In addition, Chevron has successfully conducted secondary oil recovery in Delta South and Merton Fields, where the reservoir pressure is too low to lift crude oil to the surface; this involves the injection of water into the reservoirs (Ndukwe 2008).
Besides gas exploration and production, transportation and marketing of natural gas are other areas where IOCs have demonstrated technological dominance in the gas sector in Nigeria. Broadly, natural gas is transported either by pipelines or road/sea tankers. However, gas transportation by tankers is popular because of cost and the international nature of the trade. Local distribution companies transport compressed natural gas from delivery points along the transmission system to local consumers via low-pressure, small-diameter pipelines. Small compressors are used in the distribution system to maintain the pressure required. Because LNG achieves a higher reduction in volume than compressed natural gas, it makes LNG cost-efficient to transport over long distances where pipelines do not exist. IOCs use specially designed cryogenic sea vessels (LNG carriers) or cryogenic road tankers to transport natural gas. Natural gas is principally transported as LNG to markets, where it is degasified and distributed as pipeline gas and shipped around the world in specially constructed seagoing vessels.
Also given Nigeria’s technological dependence, IOCs control the shipping industry; as a result almost all Nigerian gas exports are shipped ‘free on board’. Under this arrangement, the supplier pays the shipping costs, which normally include the insurance costs from the point of production to a particular destination, while buyers are responsible for coordinating shipment of their products. Besides, IOCs own and control the majority of oil and gas rigs in Nigerian waters and the vessels which service them, including those involved in coastal trade and inland waterways covered by the Cabotage Act.
However, given the minimal participation by indigenous firms in the gas sector, all the cryogenic sea vessels (LNG carriers) are owned by IOCs. Also, because of IOCs’ involvement in LNG domestic distribution and marketing, the majority of the domestic cryogenic road tankers which service major gas stations belong to them. The same scenario applies to gas pipelines. Table 4 shows the national origin of ships/vessels that entered Nigerian ports, including oil terminals, between 2010 and 2014.
| Year | Nigerian | Non-Nigerian | Total | |||
|---|---|---|---|---|---|---|
| Number | GRT | Number | GRT | Number | GRT | |
| 1997 | 353 | 1,650,604 | 3232 | 91,192,737 | 3585 | 92,843,341 |
| 1998 | 680 | 3,180,594 | 3292 | 94,741,599 | 3972 | 97,892,193 |
| 1999 | 557 | 778,514 | 3205 | 93,964,177 | 3762 | 94,742,691 |
| 2000 | 421 | 1,089,292 | 3666 | 121,950,617 | 4087 | 123,037,909 |
| 2001 | 270 | 2,415,765 | 4203 | 127,597,821 | 4473 | 130,013,586 |
| 2002 | 216 | 1,180,942 | 3927 | 117,030,100 | 4143 | 118,211,042 |
| 2003 | 223 | 986,696 | 4092 | 131,401,537 | 4315 | 132,388,233 |
| 2004 | 236 | 1,151,310 | 4317 | 189,754,244 | 4553 | 160,905,554 |
| 2005 | 269 | 1,997,996 | 4317 | 143,497,864 | 4586 | 145,495,860 |
| 2006 | 324 | 1,896,046 | 4476 | 139,559,130 | 4800 | 141,455,776 |
| Total | 3549 | 16,297,759 | 38,727 | 1,220,690,426 | 42,276 | 1,236,986,185 |
Figures for 2006 are provisional. GRT refers to gross registered tonnage.
Sources: Nigerian Port Authority Statistics Department, as cited in Okoroji and Ukpere (2011).
IOCs’ technological dominance and control of the gas sector in Nigeria cannot be exhaustively discussed without reference to the roles played by research and development (R&D). R&D is the driving force behind the technological advancement and operational successes recorded by foreign firms in the industry. IOCs’ R&D initiatives have largely placed them ahead of indigenous firms and account for their dominance in the industry. It is admitted that the rentier character of the ruling class partly accounts for the technological disparity as reflected in the relegation of R&D in Nigeria, as the ruling class is content with paltry rents from IOCs. Besides, adequate funding of R&D initiatives could reduce looting and stimulate participation by genuine indigenous investors and accountability, perhaps pushing corrupt state officials and the comprador bourgeoisie out of business.
R&D, rather than fostering convergence of incomes as expected, has led to even higher income disparity among countries. This has further divided countries by creating a wide gap between developed and developing countries. This explains why the developed countries are striving to increase their spending on R&D activities. And it also accounts for why African countries are not only limited by underdeveloped R&D capabilities, but also rely technologically on developed nations (Chikwem 2014). The above scenario is replicated among firms in LNG production in Nigeria. In order to perpetuate dominance, control and further surmount the remaining operational challenges in the petroleum industry in Nigeria, IOCs over the years have been increasing their investment in R&D. In this regard, Shell, ExxonMobil, Schlumberger and PetroChina are the leading firms, with over US$1billion invested in R&D (Weijermars 2012). It is apparent that with this volume of expenditure, IOCs operating in Nigeria will continue to control the industry. They have successfully integrated R&D into production and at the same time tactically avoided possible diffusion of technology. This accounts for IOCs’ overseas location of their R&D departments involved in the upstream sector of the Nigerian petroleum industry, as shown in Table 5.
| Companies | Location of main R&D department |
|---|---|
| Royal Dutch Shell | Rijawijk (Netherlands); Bellaire, Wood Creek, Westhollow, New Orleans (USA) |
| ExxonMobil | Houston, Texas (USA) |
| Chevron | Richmond, San Raman and Bellaire (USA) |
| ENI (AGIP) | Milan, Rome, Messina (Italy) |
Source: Ramlongan, Shackley, and Tebepah (2009).
The implications of the foregoing for the development of indigenous science and technology infrastructures in the gas sector remain nebulous. As the government and private sector are apparently incapacitated and have given in, no serious effort is made to address the technological gap in the sector. Nigeria has over 200 universities, polytechnics, research institutions and colleges of education and agriculture, owned by Federal and state Government and the private sector across the country. In addition, in the petroleum industry a good number of research institutions exist, primarily set up to facilitate capacity development.
Instead of government investment and harnessing the potential of these institutions for the overall technological development in the economy, the political leadership prefers to struggle for wealth created by foreign capital. Hence, the rentier character of the Nigerian state and primitive accumulation by its elite are reflected in the neglect and poor funding of those institutions. The above equally account for the lack of synergy between those institutions and the petroleum industry. Besides, no effort is made to commercialise their research findings, largely on account of a poor capital base.
In comparative terms, Nigeria has a greater number of research institutions than most countries that have developed their indigenous petroleum technology, such as Indonesia, Malaysia, South Korea and Angola (Nwapa 2014). However, the difference is that the national bourgeoisie in those countries resisted foreign capital and invested substantially in R&D, but in Nigeria’s case, national bourgeoisie and foreign capital are in harmony. Besides, IOCs that pioneered the production processes in the LNG sector cannot afford to lose their position, hence they have continued to increase investment in R&D to further stifle local capabilities and keep them perpetually dependent on the IOCs. Table 6 illustrates Nigeria’s position vis-à-vis other African countries following a head count of researchers and personnel conducted by the National Center for Technology Management (NACETEM) in 2014.
| Country | R&D personnel | Researchers | Researchers as % of R&D personnel | Population in millions | Research personnel/million inhabitants | Researchers/million inhabitants |
|---|---|---|---|---|---|---|
| Cameroon | 5600 | 4562 | 81.5 | 18.66 | 300 | 244 |
| Gabon | 834 | 527 | 63.2 | 1.422 | 586 | 371 |
| Ghana | 2115 | 636 | 30.1 | 22.871 | 92 | 28 |
| Kenya | 6799 | 3794 | 55.8 | 37.755 | 180 | 100 |
| Malawi | 2884 | 733 | 25.4 | 14.846 | 194 | 49 |
| Mali | 2414 | 877 | 36.3 | 12.409 | 195 | 71 |
| Mozambique | 2082 | 522 | 25.1 | 21.869 | 95 | 24 |
| Nigeria | 32,802 | 17,624 | 53.7 | 147.722 | 222 | 119 |
| Senegal | 10,207 | 7859 | 77 | 11.893 | 858 | 661 |
| South Africa | 59,344 | 40,084 | 67.5 | 49.173 | 1007 | 815 |
| Tanzania | 3593 | 2755 | 76.7 | 41.276 | 87 | 67 |
| Uganda | 1768 | 785 | 44.4 | 30.638 | 58 | 26 |
| Zambia | 2219 | 612 | 27.6 | 12.314 | 180 | 50 |
Source: National Center for Technology Management (NACETEM) (2014).
The table indicates that Nigeria lags behind South Africa, Senegal, Gabon and Cameroon in almost all the indicators for R&D researchers and personnel. The survey further reveals that Nigeria is yet to have a precise funding mechanism for R&D activities in the country. The report shows that Nigeria accounts for only 0.01% of global expenditure on R&D, while its global competitiveness index ranking is 94 (out of 134 nations sampled) and none of its universities is among the world’s top 500 (NACETEM 2011). The problem is further compounded by IOCs’ reluctance to adopt innovations generated in R&D institutions in Nigeria, owning that doing so might bridge the technology capacity gap between IOCs and indigenous firms, perhaps forcing IOCs out of business. Besides, the strict enforcement of laws driving technology transfer in the industry is compromised by the government in its quest for profit maximisation and increased revenue in its joint ventures with IOCs. In addition, strict enforcement could undermine government efforts to attract more foreign investments in the gas sector, considering the dwindling oil revenue in Nigeria.
The role of international oil companies in joint ventures and gas projects in Nigeria as evidence of dominance
The roles IOCs play as operators in joint venture contracts, production sharing contracts, risk service contracts, sole risk contracts and pure service agreements with NNPC further demonstrate the dominance of foreign capital in Nigeria’s oil and gas industry. Besides the control of joint venture engagements with NNPC, IOCs have invested substantially in numerous gas projects across Nigeria. Table 7 clearly illustrates IOCs’ stake in gas sector development in Nigeria.
| Projects | Participating firms | Production capacity |
|---|---|---|
| Nigeria LNG | NNPC (49%), Shell Gas BV (25.6%), Total Fina Elf LNG Nigeria Limited (15%) and Agip International BV (10.4%) | The combined total production capacity of Trains 1–3 is 28,500 metric tonnes (mt) per day. The production of Trains 4 and 5 came on stream in 2005. Upon completion, Trains 1–5 consume about 2.5 billion cubic feet per day of gas and produce 16.7 million mt of LNG for export. The final investment decision for Train 6 was taken in 2004 and construction is expected to be completed in 2007. This will raise the total production capacity by an additional 4 million mt of LNG and 4 mt of natural gas liquid (NGL) per year. Plans are also on the way for Train 7. |
| Olokola LNG | NNPC (49.5%), Royal Dutch Shell (18.5%) Chevron (18.5%) and British Gas Group (13.5%) | The plant is located at Niger Delta with a budgeted cost of US$7 billion and initial capacity of 11 mt per year. It will have four trains with a capacity of 22 mt/y by 2012/13, with the first two trains (11 mt/y) proposed to be on stream in 2011. Second phase targets 300,000 barrels per day (bpd) of LPG and condensate. Gas supply to OK-LNG (i.e. Olokola LNG) comes from Shell and Chevron operated joint ventures. About 1000 million cubic feet (mcf) per day of gas was required for each train. Another 500 mcf/d will be needed for internal energy consumption. |
| Brass River LNG | NNPC (49%), Eni (17%) Conoco Phillips (17%) and Total (17%) | The front-end engineering design of the plant was for two trains, each nominally sized at 5 million mt per year, facilities for liquefied butane and propane extraction, segregation and treatment, two 185,000 cm LNG storage tanks; two 110,000 cm LNG storage tanks; one 5,000,000-barrel-capacity NGL tank; marine facilities for the products export; and accommodation for plant operators. In early 2006, individual 20-year memorandums of understanding were signed with BP, BG Cargo and Suez LNG Trading S.A. |
| Escravos Gas-To-Liquids | Chevron Nigeria Limited (75%) and NNPC (25%) | To engage in domestic and regional gas sales through West Africa Gas Pipeline (WAGP) and international sales of gas-to-liquids (GTL) products. The GTL plant is capable of converting over 300 million cubic feet of natural gas a day into premium environmentally friendly fuel, diesel and GTL naphtha products. The Escravos Gas-to-Liquids facilities combined technology from Sasol, a South African-based Fischer–Tropsch technology company, and Chevron, specialising in hydroprocessing technology with initial plant capacity designed for 3400 barrels per day and expected to expand to a 120,000 bpd capacity within 10 years of completion. Located adjacent to the Chevron Nigeria Ltd (CNL) Ecravos Gas Plant – phase 1 (EGP-1), which processes about 150 million cubic feet of gas per day and produces LPG for sales to the international market and pipeline quality gas for domestic use. The EGP-1 project, which cost US$550 million, was completed in 1997. The NNPC/CNL joint venture is currently expanding the gas plant (EGP-2) and plans to construct an additional plant (EGP-3) to ensure sufficient gas supply for the EGTL and the West Africa Gas Pipeline Project. |
| OSO NGL Plant | NNPC (49%) ExxonMobil (51%) | To convert associated gas into natural gas liquids (NGLs). Commissioned in 1998, feed gas for the NGL plant comes from the Oso condensate field and other associated gas production. The Oso condensate field began production in 1992 and produces 110,000 barrels per day. The project is expected to recover 350 million barrels over its lifetime. Without any impact on condensate production. The project involves two principal locations, the offshore site at the Oso field and onshore site at the Bonny River Terminal. The project current production capacity is 50,000 barrels per day. |
| West Africa Gas Pipeline Project | Chevron, Texaco, Shell, NNPC, Nigeria Gas Company, Société Béninoise de Gas, Société Togolaise de Gas and Ghana’s National Petroleum Corporation | To extend the existing Escravos to Lagos pipeline to Takoradi, Ghana. The total length of the pipeline is 1033 km and the total cost of the project is US$550 million. The initial capacity of the pipeline will be 200 mcf per day, while the ultimate capacity is estimated to be 580 mcf per day with additional compression at Lagos and Lomé. |
| Trans Saharan Gas Pipeline | N.A. | This is a 4000 km pipeline infrastructure proposed to link Nigeria gas fields through Mali to Beni-sat on the Algerian coast. Gas production from the fields will be sold to the European market. The estimated cost of the project is US$7 billion and is expected to develop the natural gas market and infrastructure in the northern parts of Nigeria. |
| Nnwa-doro Floating LNG Project | NNPC/Shell and Statoil | A proposed floating LNG plant. |
| Belema Project | Shell | Gas injection, mcf 80. |
| Lagos – Ikeja Gas Lines | UNIPETROL, Gas Link | Distribution and marketing, mcf 20. |
| Ota/Agbara & Aba Gas Lines | Shell Nigeria Gas | Distribution and marketing to cost US$35 m. |
| Escravos – Lagos Gas Pipeline Phases 1–8 | NGC | Distribution lines 1–8, total Phase 3 – 160 mcf per day. |
| TNEP Phases 1–3 | Chevron Texaco, ABB | Distribution, marketing and power, to cost US$2500 m. |
| Lagos Emer Power Purchase | AES Corporation | Power generation, to supply 270 MW at US$800 m. |
| ABB-IPP | ABB Group | Power generation, Phases 12 & 13, 300 MW. |
Source: CEE (2015), ‘Gas monetization in Nigeria’.
Conclusion and recommendations
The briefing argues that IOCs’ ownership and control of technology, capital, expertise and continued investment in R&D coerces the government’s and indigenous firms’ reliance on them for gas production and utilisation. Furthermore, that the relegation of R&D by government and the private sector has exacerbated the dominance and underdevelopment of indigenous science and technology infrastructures in the sector. In sum, the briefing recommends that government and NNPC should henceforth encourage and involve indigenous private gas firms and capital providers in joint venture operations especially in the upstream sector, and increase by 100% duties on imported gas equipment and machinery to enhance in-country manufacturing.