The emphasis was on biofuels. American farmers were charged with all manner of tasks and the fuel output of various food items was the prime issue at most US research national energy policy discussions.
But fuel yields from most agricultural products were found to be rather unimpressive, given the huge volumes for agricultural products needed as input. The comments on the matter on this page attracted scant attention at the time, but events have now come full circle. The US, which had hitherto been Nigeria’s biggest oil customer, has stopped buying our oil. Last week, we heard it from the US authorities and from official sources in Nigeria that the total volume of oil bought from Nigeria by the US now stands at zero litres.
For a nation that operates an ‘almajiri’ national income management policy, Nigeria is up against the wall as I write. At regular intervals, all states of the federation present their empty plates. The plates are then filled to varying degrees from the federation account, depending on the agreed national sharing formula. There is never a talk about a national production formula. In addition, nearly all the states are in debt. Saving is anathema. The driving disposition of all ‘stakeholders’ in matters pertaining to the national treasury is consumption. No one ever hears about production. Meanwhile, what is being consumed is dug out of the ground by foreign companies whose alleged output we accept in good faith. No one also knows for sure the truth about the actual daily output of Nigeria’s oil fields.
We must wake up to the fact that the America’s quest for an alternative energy source has sounded the death knell for the large quantities of oil that used to go to the US and created new problems. Loss of market and loss of revenue for Nigeria are it! Voila, the grave dangers facing Nigeria and other countries whose economy is highly dependent on revenue from oil! With imports from Nigeria dropping to zero in July, and with clear indications that the situation is now irreversible, are we re-strategizing?
Amidst the declining revenue, disappearing foreign reserves and colossal pressures on the exchange rate, some allegedly knowledgeable experts are saying that the Nigerian economy is more than robust enough to withstand the shock waves all manner of economic counter currents. Brilliant, is it not? A man is told that a trailer has just run over someone and replies with: “Don’t sound so tragic, as a toe is still twitching in the dead man’s crushed right leg!”
That Nigeria in now the first country from which the US, the world’s largest oil producer and consumer has completely stopped buying oil is because of the growing sourcing of very high quality oil from shale. This shale revolution has led to dramatic increase in its domestic production, following the use of such new technologies as horizontal drilling and hydraulic fracturing, or fracking to maximise oil yields. As I write, international oil firms like the Royal Dutch Shell, ExxonMobil, Total and Chevron, which operate most of Nigeria’s major oil fields, are divesting. What is going on today among these oil companies is a portfolio rotation of their assets, as they divert more resources into shale oil production. Does Nigeria have shale in the right quantities and is working towards its commercial exploitation? Shale is more ‘democratised’ in the world than petroleum. Nigeria shares the same fate with countries like Algeria, Libya and Angola, whose high quality crude is similar to the one pumped in the new oil fields of North Dakota. See how our ‘sweet crude’ has now become a curse?
It is interesting that the Middle East nations, like Saudi Arabia and Kuwait are less affected by this development, because their lower quality crude oil is still very much in demand by US refineries. The one year old warning of the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, about the threat posed to oil producers by energy from shale did not, to my knowledge, elicit a national response or a strategic position document from her ministry. The nation’s switching of more of its oil exports to Asia, and the replacing of US with India as the largest importer of Nigerian oil, is an ostrich move. The truth is that we have a lousy product in a demand-switching world.
The solution is diversification of the national economy. Otherwise Nigeria’s global relevance and economic viability in the medium and long term will become history. Slaves became unwelcome commodity in international trade when mechanisation came on the scene. Coal gave way to petroleum over time. These ‘energy sources’, as well as and national economies that depended on them in a mobile world, collapsed because they were overtaken by the march of events.
Other nations facing the same problem as Nigeria today are also in search of new markets in the same Asia. The possibility of price crashes and all manner of undercutting by marketers will reign. The giant of Africa must now find other ways of measuring its greatness, besides talking about its large population with limited capacities and misused high income from oil. Almost every country in the world today can produce fuel from shale.
In addition, countries like Ghana, Cote d’Ivoire, South Sudan, Equatorial Guinea, Ethiopia and Kenya, which have discovered oil in commercial quantities, will not tremble before Nigeria because it once wielded a big purse that it did not manage strategically. Looks like it’s back to our agricultural products of the thirties, forties and fifties; this time with cutting edge technology and a focused national leadership.
Source: Thisday
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