CHAPTER 8: Breaking the Intels oil and gas monopoly
Integrated Logistics Services, the company popularly known as Intels is one of the major players in the Nigerian Maritime sector. This became even more apparent after the President Olusegun Obasanjo administration privatised the sector between 2004 and 2005.
Although there were other levels of involvement, the company is better known for the service boat operations management agency, which was a constant source of altercations between the Nigerian Ports Authority and
Intels, from 2017 until the end of my tenure.
Between 2003 and 2007, the President Obasanjo administration embarked on widespread public sector reforms. As part of this programme, the administration prioritised port reforms, as the ports then were disorganised and ridden with corruption and inefficiency.
Personnel were largely unprofessional; infrastructure was poor, and government was apparently too weighed down by other issues to consider new investments at the ports. The reform was therefore to revamp the potential of the maritime sector and enhance efficiency. The government set up a committee, which spearheaded the reform.
Specifically, the reform was to ensure reduced turnaround time for vessels, reduced cargo dwell time, security of vessels at berth, cargoes at terminals and persons in the ports, all of which are major determinants of a good, efficient, and user-friendly port system.
One of the major recommendations of the committee was the need to concession the facilities which were until then, under the management of the federal government through the NPA. The committee reckoned that public/private partnerships at the ports would ultimately reduce the cost of port services for the end user; increase efficiency at the ports, free government from the cost of developing and managing the ports as well as increase revenue accruing to government.
The Nigerian government adopted the landlord ports model, which allows for separate roles and tasks between Public and Private sectors. The Concession approach ceded the operating rights in Nigerian ports to the private sector while NPA still retained ownership of port land as well as keeping responsibility for, harbour activities, licensing operators and regulating their activities.
25 private terminal operators out of about one hundred bids received for the three major categories of cargo that were established in accordance with global best practice emerged from this exercise. Intels was one of these 25 terminal operators with the concession to operate terminals receiving three major categories of cargo namely: bulk cargo, multi-purpose cargo or general cargo, in accordance with global standards.
The company got concessions for Onne Terminal A and B at the Rivers Ports, Rivers State, got Calabar Terminal A at the Calabar Ports in Cross River State as well as the New and Old Terminal, Delta Port, Warri Delta State. These concession relationships commenced after the Bureau of Public Enterprises and the Nigerian Ports Authority signed agreements with the concessionaires on behalf of the government. Each of the concession agreements has a 25-year lifespan ending in 2030.
At the time these agreements were signed, the specified categories of cargo were containerised/or container cargo, Bulk Cargo, Multi-purpose, or general cargo. As it is in maritime practice across the world, no terminal was allowed to deal in specialised cargo, while consignees also had the liberty to choose the destination for their cargos.
In addition to this, Article 18:2 of the contract with concessionaires, dictates that ‘no change, amendment or modification of this agreement shall be valid or binding upon parties hereto unless such change, amendment or modification shall be in writing and duly executed by the parties hereto.’
Curiously however, the BPE soon added a fourth categorisation which it called ‘oil and gas,’ without the knowledge or consent of all other stakeholders, as stipulated by the agreement. The NPA consequently designated the Onne Port Complex, Warri and Calabar Ports, which were all managed by Intels, to receive oil and gas-related cargoes.
Other terminal operators protested this illegal and discriminatory action until it caught the attention of President Obasanjo. The former President set up a committee to investigate the matter. On 16 May 2006, the Dr. A.S.P Sekibo-led committee submitted a report recommending that “importers of oil and gas cargo should be free to choose their ports of preference.”
President Obasanjo thereafter issued a directive confirming the liberty of importers of oil and gas cargoes to operate from any port of their choice in the spirit of free enterprise and healthy competition.
In 2008, after President Obasanjo handed over to President Umaru Musa Yar’Adua, the Ministry of Transportation again issued a directive for the restriction of oil and gas cargo activities to Onne, Warri and Calabar Ports.
The circular went further to appoint Integrated Logistics Services Limited (Intels) as managing agents for service boat operations for the Lagos Pilot District. It also requested that the BPE categorise the ports in conformity with the Minister’s suggestions.
The BPE complied with this request with a letter dated 10 July 2008 even though it clarified that the categorisation was without prejudice to the concession agreements between the Federal Government and the concessionaires.
Again, industry players resisted the move by the Minister and made representations to President Yar‘Adua.
The President consequently reversed the categorisation of oil and gas cargoes and agreed with stakeholders that importers could take their cargoes to any port of their choice.
There were a lot of policy changes during the President Goodluck Jonathan administration. Industry watchers attribute this to deliberate misinformation of the President by powerful insiders in his cabinet.
In January 2014, President Jonathan issued a directive granting exclusive oil and gas status to Onne, Warri and Calabar Ports. Just a few weeks later, he gave another directive for the suspension of the policy he had previously approved.
The subsequent directive however even had worse outcomes, because it came without indicating any policy to govern the administration of ports. Then in April 2015, just a few weeks before he would hand over power, stakeholders received a letter from the Nigerian Ports Authority mandating that all oil and gas-related cargo must be handled at the designated terminals at Onne, Calabar and Warri Ports.
This directive immediately unsettled the industry with agitation by concessionaires who felt short-changed. Ports and Terminal Operators Nigeria Limited (PTOL) filed an action against the Nigerian Ports of Authority (NPA) for an alleged breach of the concession agreement at the Federal High Court in Lagos.
The company, joining the Attorney-General of the Federation (AGF) in the suit, claimed that the Federal Government, through the NPA, breached the agreement signed on 11 May 2006, over a terminal at Onne Port in Rivers State. It alleged that the defendants granted “monopolistic benefits” to another firm, known as Intels and sought an interlocutory injunction pending the determination of the substantive suit. This was granted by the court.
LADOL Investments Limited also filed a suit against the Federal Government in defence of its interest. It sought and obtained an order restraining the Federal Government and its agencies from implementing what it described as a controversial and adversarial economic directive.
A flurry of lawsuits from stakeholders like Nigerdock Nigeria Limited and SIMCO Free Zone Company, managers of the Snake Island Integrated Free Zone, followed the directive.
This chaotic situation was inherited by President Muhammadu Buhari’s administration. Not too long after the swearing-in of the President, Messrs. Julius Berger Nigeria Plc, concessionaires of the old Warri Port Canal Terminal, protested the injustice inherent in the after-the-fact categorisation of some terminals as exclusive recipients of oil and gas cargoes.
The various protests and litigation precipitated the stakeholders meeting convened by the Honourable Minister of Transportation, Mr. Chibuike Rotimi Amaechi in Lagos and Abuja between February and March 2016. Feelers from the meetings indicated that most industry players were unhappy with the restrictions placed on the movement of oil and gas cargoes especially because it did not form part of the initial concession agreement.
It was also argued by practitioners that designations like the one under contention were alien to the industry globally. The categorisations in the global shipping industry relating to terminal /port operations are Bulk Cargo, Container Cargo, and Multi-Purpose Cargo. The special oil and gas category was just a Nigerian creation which ran against the spirit and letter of the existing concession agreements.
The NPA launched an investigation into this situation on the directives of the Minister before I became MD and discovered that the stakeholders had legitimate concerns. Following my appointment, I maintained the same position and we confirmed that designating specific terminals for the berthing of oil and gas cargoes was indeed alien to the industry and contrary to the terms of the agreement with concessionaires.
We highlighted the security and economic implications of restricting the transportation of oil and gas cargoes to one part of a country that currently depends on imports to meet its domestic needs. We concluded that the country would be putting too much at risk if consignees had to transport all their oil and gas cargoes to one part of the country before distribution to other parts.
Mr. Amaechi opposed the stakeholders’ position on the reversal of Intels’ monopoly. Letters were written to the President on the issue making recommendations.
The President, however, went with the advice of the Attorney General of the Federation, Mallam Abubakar Malami SAN, who opined that the restriction of oil or gas cargo to certain terminals was contrary to the agreements with the concessionaires. The President approved the reversal.
This approval was conveyed to the minister and a copy sent to the NPA. Weeks after receiving the approval however, the ministry neither notified the Authority nor directed it to implement the approval as was the procedure. At this point, industry stakeholders who already got a wind of the approval and were waiting for its execution started to ask questions.
After weeks of silence from the ministry, I called the late Chief of Staff to the President, Mallam Abba Kyari to explain the situation of things. He advised that we could go ahead and implement the President’s approval, and that if the minister raised any queries about it, I should let him know.
We notified all stakeholders that there would no longer be any designated terminals for oil and gas cargoes and that importers were free to take their cargo to any part of the country.
As expected, the announcement of our decision was very well received. While most terminal operators saw it as a move in the right direction, one that was capable of restoring confidence in the readiness of government to play fair and protect the interests of all stakeholders, Intels saw the decision as unjust.
To entrench this narrative, the company started to promote the story that the reversal of the monopoly was aimed at the political career of former Vice President Atiku Abubakar, whose interest in Intels was well known. The Authority did its best to assure Nigerians that the policy was in the economic and security interest of the country.
Read also: Chapter 7: Dredging of Calabar Channel
This policy allowed people to conduct oil and gas maritime operations from anywhere. Rather than everyone having to go to Onne or Warri Ports for their oil and gas cargo, the distance from the place of final utilisation should determine their choice. This new policy ensured this and saved stakeholders the cost and risk of moving cargoes from the erstwhile designated ports.
We saw one of the benefits of the policy decision when less than one year later, when we received the Floating Production, Storage and Off-shore (FPSO), Egina at the LADOL Terminal of the Lagos harbour. The choice of Lagos for this project was a confirmation that the liberalisation of oil and gas logistics operation projects like this could be replicated at any port location of investors’ choice.
The 330m (1,083ft) in length, 61m (200ft) across, and 34m (112ft) high, with a storage capacity of 2.3 MMbbl (million barrels) of oil and topsides weighing 60,000 tons FPSO Egina remained in Lagos for about seven months during which the final integration of topsides modules built in Lagos was completed.
That the vessel could sail into Lagos to complete its construction was in the spirit of government’s promotion of local content with multiplier effects that include the benefits of employment opportunities, capacity building, technology transfer, cost saving, reduction in capital flight as well as the attraction of oil and gas hub to Nigeria for the sub-region; ultimately saving the country millions of dollars.
Operators in the oil and gas sector also benefited from the removal of the monopoly. For instance, in June 2018, the Managing Director of Shell Nigeria Exploration & Production Company wrote to commend the NPA for reversing the policy that restricted the movement of oil and gas-related cargoes across the country.
According to the letter, the decision saved the company over 1 billion USD for OML 18 and 40% of operation costs amounting to 15 million USD per annum.
This decision was recommended to, and approved by President Muhammadu Buhari, in the interest of the maritime sector. It was all about doing the right thing and protecting the interest of the country.