As Ukrainian cities are buffeted by Russian tanks, the west are tightening the noose around the neck of Kremlin. The goal is to send a clear message that Russia has embarked on a suicide mission and so needs to retrace her steps.
Following the announcement by the United States and her European NATO allies shunning that nation’s crude, the global oil market is facing one of its greatest upset since the 1970s. The increase in energy prices is biting hard across the board and forcing many citizens of the world to make hard choices. Regrettably, this is happening at a time when the world is still grappling with the supply chain crisis occasioned by the Covid-19 pandemic.
The sanctions came heavy and far-reaching, making International banks, shippers and insurance companies to treat Russia like a pariah state. Big oil companies such as Exxon Mobil, BP and others are suspending all big operations in Russia and shippers are worried that their tankers might be trapped in the Black Sea and may not be allowed to deliver supplies already purchased.
In a comment following a meeting with the American oil producers during this year’s annual CERAWeek energy conference in Houston, Texas recently, OPEC’s secretary general, Mohammad Barkindo, offered little to allay the fears of millions of people all over the world impacted by the increase in energy prices. He stated in no uncertain terms that their is no capacity in the world to replace Russian output.
Before the invasion of Ukraine, Russia accounted for one out of every 10 barrels of oil consumed globally. With an average daily output of about 11 million barrels per day, Russia is one of the top three producers of crude oil, coming only after the US and Saudi Arabia. About 5 million bpd of her output is exported out.
There have been a few other times when crisis had caused comparable disruptions in global energy supplies. The Persian Gulf war of 1990-92 removed about 4.3 million barrels daily from the global market and the 1978 Iranian revolution took nearly 5.6 million barrels a day off the market. But even before the Russian invasion, however, oil prices were already on a steep incline, mostly due to increased demand as world economy begins to recover from the Covid-19 shutdowns. A big part of the issue was that at the peak of the pandemic, a slew of International oil companies had cut back investment in the oil and gas sector and laid off many of their workers.
In an audacious move to reduce energy dependence, Britain has announced plan to wean itself off Russian oil and set out on an aggressive agenda to phase out imports. The plan is to double down on renewables and other European nations are gearing towards similar action.
The US on the other hand, is far less dependent on foreign energy supplies. Since America pioneered Hydraulic Fracturing, colloquially known as Fracking in the 1950’s, the United States has become a major exporter of crude oil. This is a process of injecting liquid at high pressure into fine-grained rocks called Shale. This forces existing fissures inside the rock to open in order to extract oil and gas therein.
There are shale fields scattered across the US and American producers have increased their output over the last decade. The cost and complexity of extracting shale oil, however, makes it less than ideal as an alternative to conventional oil wells. Also, methane, a powerful greenhouse gas emitted during fracking continue to pose environmental concerns, making it a very contentious political issue.
With just a little under 12 million barrels of oil a day, America services about 60 percent of its national demand and has to import the rest. In November 2019, however, the United States became overall, a net exporter of all oil products, including both refined petroleum products and crude oil and by 2021 became the world’s largest producer of crude oil.
But how is Africa and specifically Nigeria, an OPEC member and Africa’s largest producer of crude oil fairing in all these? Well, your guess is as good as mine.
Despite the activities of pipeline vandals, illegal miners( bunkering) and perennial unrest in the Nigeria’s Niger Delta, the country is still Africa’s largest producer of crude oil and an important member of OPEC. But today, Nigeria refines almost none of its own crude oil and so imports most of the products it consumes with supplies often getting disrupted each time there is crisis even in places far removed like Ukraine. The nation has zero reserve to absorb any shock, no matter how inconsequential.
NNPC has four refineries, two in Port Harcourt (PHRC), one in Kaduna (KRPC) and another one in Warri (WRPC), with a combined installed capacity of 445,000 bpd. For the past 15–20 years the operating record is abysmal with the average capacity utilization hovering between 15 and 25% per annum. That said, even if the refineries were to operate at full capacity, they still will not be able to meet Nigeria’s aggregate demand of petroleum products which one study quoted to be around 750,000 bpd.
Nigeria’s airline industry has experienced one of the biggest hiccups in operations with the latest energy crisis. The price of Jet A1, otherwise known as aviation fuel, has risen from N190 per litre before the current crisis to N670 per litre now. Not only that, the product is mostly unavailable leading to lots of flight delays and cancellations across the country, leaving many travelers stranded at the nation’s airports . Airline operators had also alleged that some marketers were hoarding the commodity and so are demanding operational licenses from the federal government to begin importation of fuel themselves.
With the recent problems of air travel, the alternatives would have been to travel by road instead. But most Nigerian highways are now considered too dangerous and plying them is akin to signing a death warrant.
In February 2020, no fewer than 30 people, including a pregnant woman and a baby were killed after suspected Boko Haram terrorists set fire on sleeping travelers in Auno village, Borno state, about 20 kilometers from the capital Maiduguri. By the time they were done, a total of 18 vehicles were burned, including trucks carrying food products, and other goods meant to be sold the following day in the city’s market.
This was just one in a series of horror stories that has made road trips in Nigeria’s northeast a very scary experience. Today, however, it’s not just the northeast; embarking on cross-country road trip for fun anywhere in Nigeria has become a suicide mission.
Sunday Guardian in June 2019, published an article titled “133 Highways of Terror.” It was an explosive piece that brought to our consciousness the extent of reign of terror that has become so commonplace in Nigerian’s highways. The investigation identified not fewer than 133 highways across Nigeria’s six-geopolitical zones that had become major flash points for banditry, kidnapping and other related vices. A week hardly passes without scores of Nigerians falling into the hands of killer herdsmen, armed robbers, kidnappers or ritualists as they ply these roads.
All these with the widespread insecurity, banditary, terrorism has compounded an already precarious situation in a country that recently overtook India as the poverty capital of the world. Nigeria has for a long time now been punching far below her weight but the last eight years of this government is nothing short of a train wreck. 2023 can’t come soon enough. That said, no one is under any illusion of a super president after 2023 that will slow the rise of the ocean or heal the planet. Halting this nation from hemorrhaging further will be considered a great start.
In the nation’s energy sector, however, there seems to be a glimmer of hope in the horizon. Dangote refinery located in Lekki Free Zone, is set to be completed soon at a whooping cost of $19 Billion according to Bloomberg news. It is on schedule to start processing crude oil in 2022 and will process about 650,000 barrels of crude oil daily. This refinery is projected to not only meet Nigeria’s gasoline, diesel and aviation fuel need but a third of its output will be available for export.
Until then, Nigerians would continue to endure whatever hell has to offer.
Dr. Agbo, a Public Affairs analyst is the coordinator of African Center for Transparency and Convener of Save Nigeria Project. Email: [email protected]