Recession: Exploring bitumen potentials as foreign exchange earner

Monday, September 19, 2016

The recent pronouncement by the Minister of Solid Minerals, Dr. Kayode Fayemi, that the Federal Government would soon flag off the bid for allocation of operational licenses for the exploitation of the country's vast bitumen deposits was received with joy from Nigerians and stakeholders in the mining sector.

For decades, the country's bitumen deposits have remained untapped, robbing the country the opportunities to reap the benefits inherent in the sector.

But the exploitation and development of the resource has been limited to the artisanal level, as the operational permit is yet to be formalised by government.

According to Foraminifera, a marketing and research firm, Nigeria's bitumen deposits are estimated at 42.74 billion metric tonnes, the second largest in the world and first discovered in 1900. It covers 120 kilometres costal belts of Lagos, Ogun, Ondo and Edo states.

But despite being the country with the second largest deposit of bitumen in the world, Nigeria, according to Foraminifera, spends about N2 billion yearly on importation of asphalt, a derivative of bitumen.

The occurrence of bitumen deposits in Nigeria is twice the amount of existing reserves of crude petroleum. When fully developed, the industry will no doubt meet local requirements for road construction and also become a foreign exchange earner for the country.

Fayemi had lamented that about 80 per cent of asphaltic materials used for road construction in the country are still being imported despite the vast bitumen deposit, assuring that the government would focus on ensuring that serious investors with proven work and financial plans are given licences.

"Priority will be given to investors with the capacity to build processing plants to boost local production, help meet local demand and create jobs for our youths," the Minister said.

He reiterated the commitment of the ministry to ensure that the solid minerals sector contribute an average of 0.3 to 10 per cent to the Gross Domestic Product (GDP) in the near future.

Obstacles to bitumen exploitation

The inability of the Federal Government to formalise operational permits for those interested in the exploitation of bitumen has restricted the development of the sector to artisanal practice.

For decades, there was no clear cut government policy, document or guidelines for the exploitation of bitumen, a development that gave rise to the growth of an unstructured bitumen sector alongside huge numbers of illegal miners that polluted the environment with their crude mining skills.

''Apart from the regulatory framework to protect local and foreign investments, other incentives like tax holidays and duty-free regime on mining equipment have been put in place to encourage serious investors. Equally, local investors would be supported through access to funding as well as equipment leasing.

"Prospective investors must be prepared to play according to rules and standards, as the ministry would monitor closely activities of investors to ensure compliance with laid down procedures and guidelines,'' Fayemi had said.

Failed efforts/funding constraints

Fourteen years after, precisely 2002, two firms licensed by the Federal Government to explore for bitumen in Ondo State - BEECON Nigeria Limited and NISSANDS of Canada - have failed to mobilise to site, with lack of technical expertise and finance cited as setbacks.

The firms projected they would commence full operations within six months. They ostensibly won the bids based on their technical and financial competence, as spelt out by the Bitumen Project Implementation Committee (BPIC). By 2004, the firms raised the alarm that they could not source about N75 billion to kick-start the project.

The then Secretary of BPIC, Mr. Goni Sheikh, had said that each of the two licensed consortia required $300 million for their operations. BPIC was the agency mandated by the Federal Government to midwife Nigeria's dream of becoming a producer of bitumen related products.

He said the money would be spent on the procurement of equipment and technical expertise and on the building of refineries that would process raw bitumen and tar sand into various by-products, including petroleum and industrial chemicals.

He had noted that it would amount to a policy somersault for the government given its privatisation programme to invest directly in the bitumen sector as it has done in the petroleum industry, because "government is trying to divest from the downstream sector of the oil industry."

Sheikh, however, said that the government, through the BPIC, would be creating a conducive atmosphere for the growth of the bitumen industry by increasing assistance to all stakeholders in the sector.

''Raising the huge funds needed for take-off was one of the major problems being faced by the consortia because investors were still watching to ascertain the prospects of bitumen exploration in Nigeria.

"The two consortia have been having difficulties raising the type of funds required for the project to take off. They require between $250 million and $300 million each to enable them commence operations,'' Sheikh had said.

Economic benefits

According to a research document from Foraminifera, economic returns from bitumen exploitation include capital gains and contribution to road maintenance. Presently, Nigeria, which has 59,892km of paved roads with an additional 1,194km of dual carriageway, the longest in Africa, according to a research document from Foraminifera. The occurrence of bitumen deposits in Nigeria is twice the amount of existing reserves of crude petroleum. When fully developed, the industry will no doubt meet local requirements for road construction and also become a foreign exchange earner for the country.

The firm explained in the document that the mining of minerals in Nigeria accounts for only 0.3 per cent of its Gross Domestic Product (GDP), due to the influence of its vast oil resources.

''The domestic mining industry is underdeveloped, leading to Nigeria having to import minerals that it could produce domestically, such as salt or iron ore. Rights to ownership of mineral resources is held by the Nigerian government, which grants titles to organisations to explore, mine and sell mineral resources,'' the document stated.

The lawmaker representing the Irele-Agbabu State Constituency in Ondo State House of Assembly, Afolabi Iwalewa, one of the key voices of the pro-bitumen advocacy, explained that the shaky situation of Nigeria's oil is a wakeup call for the exploitation of bitumen.

"Any moment from now, crude oil will fade off. Look at what is happening now with the talk of oil theft. Every state is crying now, even the Federal Government is crying that it is not getting what it used to get from oil. What is the Federal Government doing, and why can't we find an alternative? If crude oil is not going to fetch us what we project (in terms of revenue), why can't we switch over to bitumen?"

But a geologist at the Federal University of Technology, Akure, Ondo State, Prof. Peter Odeyemi, presented a balanced picture of the realities on the ground.

Odeyemi, who was a member of the defunct BPIC, made a poignant observation when he noted that the mere presence of a resource does not necessarily translate into commercially viable deposits.

"The first thing is to ascertain how much bitumen deposit is available? We don't know! We need to carry out further work in that area in the first instance. Secondly, exploration can be carried out by an oil company because bitumen is a hydrocarbon. But if an oil company is going to carry out an exploration there, there is a financial interest, and this company will calculate how much it's going to get.

"Also, how will you exploit without exposing the soil to direct rainfall impact, denudation, erosion and degradation? If you look at the Niger Delta, the people just welcomed oil companies with open arms not knowing that oil companies are only interested in profits. They are not in any way interested in environmental sustainability, in flora, in fauna and even in the development of the people.

"Our problem is not bitumen; our problem is corruption. What do we do with the money we have been getting from oil? The one we are exploiting, what are we doing with it? The people are getting poorer; there is no electricity, water, healthcare and education. This is despite the fact that we are making trillions of dollars. So, if we now exploit bitumen and add other trillions, we are just going to multiply the corruption,'' he asserted.