Improving Nigeria’s refining capabilities TEY_post_Ayodele_Oni

The Dangote Refinery should boost our market, and the federal government is investing in refineries across the country.


Improving Nigeria’s refining capabilities

February 1, 2023

Ayodele Oni of Bloomfield LP talks to The Energy Year about how the firm adapts its business strategies and challenges in the Nigerian upstream sector.

How would you evaluate the Nigerian energy industry?
The main problem the Nigerian energy industry faces is its lack of refining capabilities. On the oil side, we have an enormous amount of crude, but our state-owned refineries stopped working years ago. Gas-wise, we don’t have enough domestic gas processing and much of our gas has been channelled to the export market. Nonetheless, improvements are expected. The Dangote Refinery should boost our market, and the federal government is investing in refineries across the country.
The Petroleum Industry Act empowers the regulator to establish an obligation to reserve a particular quantity of crude and gas for the domestic market, which is a welcome initiative. It will build resilience, even from a currency perspective, because if we produce and refine locally, we will improve pricing, availability, currency strength and energy security. The Decade of Gas will boost our gas market and position Nigeria as a gas-fuelled economy by 2030.

How is Bloomfield adapting its business strategies to an ever-changing world?
Lawyers are now looking beyond legal activities; we also focus on the business and financial side of our transactions. Having a technical understanding of the business makes it easier to give good legal advice. A lawyer needs to understand how the world is changing and adapt accordingly.
For example, we have recently established a unit that will focus on renewable energy, and we are looking closely at the interface between technology and law. We are advising a client, OneWattSolar, that uses blockchain technologies for their solar power generation payment systems. We are also looking to become a consultant that brings additional value to our clients by building strong ties with the regulators. Our plan is to become a tier-one firm within the next three to five years.


What are the bottlenecks present in the Nigerian legal framework?
The legal framework in Nigeria is optimal and well crafted. The main challenge stems from its implementation and enforcement. Our bureaucracy is a problem, as it undermines the efficiency of the laws. The federal government should reduce corruption by welcoming digitalisation to foster transparency and clarity.
Our court system should also be modernised to change the perception that trials in Nigeria are corrupt by default. Overall, the federal government needs to do more to reduce the interface between the public and civil servants through the use of technology and the professional services of private consultancy firms to reduce corruption.

What are the possible solutions to the challenges present in the Nigerian upstream sector?
Pipeline vandalism and crude oil theft have been serious challenges in Nigeria. Businesspeople are already finding solutions by delivering crude evacuation alternatives. Instead of having it go through pipelines, they use boats to transport it from offshore. The only issue is legal impediments.
The legislature and judiciary should work with the private sector to reduce the burden on the operators by fostering partnerships between the public and private spheres. The current laws on vandalism are clearly not working and are not well enforced.
Most of the time, perpetrators are not presented in front of a judge, which is critical. Another possible solution could be to legalise illegal refineries instead of destroying them. Communities should also be assessed because the community trust fund is not working as it should. Host communities are sometimes involved in these illegal acts and should be held responsible if vandalism occurs in their area.

What is Bloomfield’s footprint in the Nigerian energy sector?
We are advising the newly established consortium called Optimera Energy, which is developing a first-of-its-kind gas-gathering project in the Lagos Free Zone. We advised on the first combined African sukuk and green bond issued with OneWattSolar, and we are advising prospective lenders on the AKK pipeline. We are also advising the lenders to the government on the Kaduna and Warri Refineries.
In the power sector, we are advising the NBET in connection with PPAs [power purchase agreements] for a number of power plants with the NNPC and the Niger Delta Power Holding Company. We also advised a major American company which wants to build several mini-grids in Nigeria. During the 2020 marginal field bidding round, we successfully worked with Zitts & Lords Energy.

How would you evaluate the 2020 marginal field bidding round?
It has been generally positive because it has many lucrative fields. The problem has been the legal regime and whether there was sufficient transparency. The delays of the PIA scared investors away because they were not sure how this new legal framework would have worked out. Now that we know the PIA, we can say that it is attractive, but its timing has affected the marginal field round.
The round felt opaque and a few participants decided to withdraw their interests. Many parties were matched together as strange bedfellows. The parties should be able to decide on their own partners in order to collect technical and financial expertise. Moreover, there is no public list of the awardees and this strongly violates the transparency of the round.

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