Crisis Looms as NNPC, DPR Workers Begin Strike over pension issues
Indications that the nation may be heading for another round of fuel scarcity emerged yesterday as all four of the nation’s refineries were shut down as workers of the Nigerian National Petroleum Corporation (NNPC) embarked on an industrial action.
It was learnt that the four refineries located in Kaduna, Port Harcourt and Warri, were shut down yesterday as the strike began.
Similarly, all the 23 depots operated by the Pipelines and Products Marketing Company (PPMC), a subsidiary of NNPC, throughout the country, were shut down in the early hours of yesterday.
This is even as France’s Total SA, Europe’s second largest oil company, has put one of its offshore Nigerian oil fields up for sale.
Consequently, normal loading of petroleum products for supply of petroleum products to the filling stations in the nooks and crannies of the country, were suspended as the strike began.
Specifically, one of the nation’s four refineries, Warri Refining and Petrochemical Company (WRPC), was shut down by the aggrieved workers by 5pm on Monday.
It was learnt that the Fluid Catalystic Cracking (FCC) unit, the only operational component of the ailing plant, was shut down by the oil workers, hours before the official commencement of the strike, on Monday.
The main gate leading to the refinery was locked by the workers, who kept vigil in the area, on Tuesday.
Our correspondent, who visited the refinery, reported that only men of the company’s fire service and security personnel, were allowed into their offices in the plant.
It was gathered that similar actions took place at the other three refineries located in Port Harcourt and Kaduna.
At Warri Refinery Loading Depot operated by PPMC, tanker drivers, who reported for their routine operations, were politely turned back at the main gate leading to the depot.
Tanker drivers, who arrived the depot from other parts of the country, were stranded at the NNPC’s facility.
The depot was locked when our correspondent visited the scene at 3pm yesterday.
It was learnt 22 other depots located in the various parts of the country were also shut down by the NNPC workers.
However, security was beefed up at Warri refinery and adjoining depots, apparently to prevent any untoward development. Stern-looking soldiers were sighted at the two strategic facilities monitoring the development.
All other NNPC’s subsidiaries visited by our correspondent, especially the NNPC’s Zonal Office, in Warri, were shut.
The oil workers had threatened an industrial action if the management of the Corporation failed to heed their requests.
The workers were among other issues, requesting the management to broker an agreement with them on how it intended to adequately fund the in-house pension fund operated by the Corporation.
The development followed the withdrawal of the licence to operate the said in-house pension fund by the National Pension Commission (PenCom), LEADERSHIP learnt.
It was learnt that as at December 31, 2012, the deficit in the pension scheme was N133.56 billion.
Total Sells Oil Well
Reuters has reported that Total hired BNP Paribas to find buyers for its Usan deepwater oil field located in the Nigeria Oil Prospecting Lease (OML) 138, which could be worth about $2.5 billion (1.54 billion pounds).
“We have selected an advisor to pursue the sale process of Usan,” a spokeswoman for Total said, but BNP Paribas declined to comment, said Reuters.
Usan was not expected to be an easy sale for Total because deepwater exploration required significant investment and the new owner’s returns could be limited if Nigeria raised taxes on foreign investor profits as part of a long expected sector reform called the Petroleum Industry Bill (PIB).
Before deciding to sell the asset, which is about 100 km off the coast, Total was planning to drill several horizontal deepwater wells and build a deep offshore drilling rig.
“Anything in Nigeria is a tough sell,” said a London-based sector banker. “And anything with capex is even tougher these days. Very few players would be willing to acquire assets that have big investment commitments attached.”
Total said in November 2012 it had sold its 20 percent interest in the field to China’s Sinopec for about $2.5 billion in cash.
However, it was not known why the sale failed thus prompting this new offer.
The Nigerian National Petroleum Corporation (NNPC) is the OML 138 concession holder. Other partners include Chevron, ExxonMobil and Nexen.
Total was said to be working on several asset disposals to meet a $10 billion 2015 cash flow generation target. The French group was also seeking to raise about $2.5 billion through the sale of its Super Glu maker Bostik.
Meanwhile a deal for the Usan field may have to involve a local company because Nigeria, Africa’s top oil producer, is renewing efforts to recoup the benefits from its oil and gas sector.
But few Nigerian players would have the money and ability to complete the necessary drilling and building works, several sector bankers said.
This meant Total’s hopes may lie again in the hands of Asian buyers like China’s CNOOC, which already had an interest in the USAN field, or India’s ONGC.
International oil and gas majors were not expected to show interest because most of them are under pressure from shareholders to cut capital expenditure and improve dividends. Most are seeking to leave Nigeria instead.
Earlier this year, ConocoPhillips sold its Nigerian operations to Nigerian oil company Oando for $1.5 billion.
Chevron was also in the process of selling assets in Nigeria and Shell recently sold off four oil fields in the West African country.
Taleveras and Transcorp were among the best placed Nigerian potential buyers because they had the strongest financial firepower, said one of the sources.
A sector banker said state-backed NNPC could also be interested though it already had a number of commitments with foreign investors, Oando was digesting the ConocoPhillips deal and Seplat was focused on Chevron’s assets.
“(Total) needs a couple of local players with deep pockets. The international banks aren’t showing as much interest as they were, and the local banks no longer have capacity to raise that kind of debt,” said a local industry source.
Commodity traders and miners such as Glencore or Mercuria could also be interested, in theory, as they have been actively hunting for oil & gas assets to diversify from volatile mining operations, said several sector bankers.
But trading houses might not have the required expertise to operate deepwater assets, said one of the bankers.
Glencore and Mercuria were among the short-listed bidders for Shell’s Nigerian energy assets worth about $3 billion, sources previously told Reuters.
RBC Capital Markets said in a report this week that Total was likely to miss production and cash flow targets for next year as it grappled with project disruptions. Total will update the market at a mid-year outlook investor’s day on September 22.
‘NNPC Offices Still Remain Shut’
Contrary to the report that the Nigerian National Petroleum Corporation (NNPC) has resolved the pension issue and other demands of its workers, there was total shutdown at all NNPC offices and locations all over the country.
In a statement by PENGASSAN Media and Information Officer, Comrade Babatunde Oke, the strike still continued until there was concrete commitment from the NNPC management to find a lasting solution to the issues.
The strike also affected all the subsidiaries of the NNPC, including the Petroleum Products Marketing Company (PPMC), Kaduna Refining and Petroc hemical Company, Port Harcourt Refining Company (PHRC), and Warri Refining and Petrochemical Company (WRPC), NETCO, Nigeria Gas Company (NGC), Hyson, Nigerian Petroleum Development Company (NPDC), National Petroleum Investment Management Services (NAPIMS), Integrated Data Services Limited (IDSL) and Department of Petroleum Resources (DPR).
The demands of the workers were adequate and regular funding of the closed pension system, immediate steps to carry out turn-around maintenance (TAM) on the four refineries as agreed between government and the two unions, NUPENG and PENGASSAN, and restoration of crude supply to the refineries.
Comrade Oke said that the issue had gone beyond granting of a one year grace to the NNPC by PENCOM but that the NNPC management should put in place machinery that would automatically fund the pension system without any bureaucratic bottle neck.
He noted that the funding had been delayed due to the inability of the board of the NNPC to meet for over a year to approve the proposal of the management for the funding of the pension system.
On the issue of TAM of the refineries, PENGASSAN spokesperson said the Fedral Government should implement without delay the memorandum of understanding between the government and the unions to carry out the TAM on the refineries, saying that the government promised to commence the TAM in April but this is September, we have not seen any commitment from the government on this.
This could affect export of the crude, as workers at the export terminals also joined the strike, while importation and distribution of petroleum products might also be affected as the NNPC accounted for 60 per cent of petroleum importation into the country.
As at now, the management of the NNPC has not called for another meeting to resolve the issue.
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