CHIKWEM FRANCIS CHINWE PG/Ph.D/10/58130 POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999 -2013 DEPARTMENT OF POLITICAL SCIENCE FACULTY OF SOCIAL SCIENCE Digitally Signed by : Content manager’s Name DN : CN = Webmaster’s name Paul Okeke O= University of Nigeri a, Nsukka OU = Innovation Centre i POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013 BY CHIKWEM FRANCIS CHINWE PG/Ph.D/10/58130 DEPARTMENT OF POLITICAL SCIENCE, FACULTY OF SOCIAL SCIENCES, UNIVERSITY OF NIGERIA, NSUKKA. DECEMBER, 2014. ii POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013 BY CHIKWEM FRANCIS CHINWE PG/Ph.D/10/58130 A THESIS PRESENTED TO THE DEPARTMENT OF POLITICAL SCIENCE, UNIVERSITY OF NIGERIA, NSUKKA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DOCTOR OF PHILOSOPHY (Ph.D) IN POLITICAL SCIENCE (INTERNATIONAL RELATIONS) SUPERVISOR: PROF. KEN IFESINACHI DECEMBER, 2014. i APPROVAL PAGE This thesis written by Chikwem Francis Chinwe (PG/Ph.D/10/58130) has been approved for the Department of Political Science, University of Nigeria, Nsukka. By _______________________ _________________ Prof. Ken Ifesinachi Date Supervisor _______________________ _________________ Prof. Jonah Onuoha Date Head of Department _______________________ _________________ External Examiner Date _______________________ _________________ Prof. I.A. Madu Date Dean, Faculty of Social Sciences ii DEDICATION Alma Redemptoris Mater iii ACKNOWLEDGEMENTS While I take full responsibility for weaknesses or strengths evident in this work, I would nonetheless like to appreciate with thanks God’s gratuitous gift of sustenance, care, provision and life. His inspiration and love urges me on. I am also grateful to my Local Ordinary, most Rev. Dr. S. Amatu, the Catholic Bishop of Okigwe Diocese, who encouraged me to undertake this course of study. Thanks also to my Late Bishop, Anthony Ilonu, whose far reaching decisions on every step of my vocation to priesthood has fortified and strengthened me for God’s future work. “Nna anyi, ka mkpuru obi gi zuo ike na udo”. I remember also my late mother, Mrs. Bridget Chikwem. She taught me how to cherish and embrace the virtues of hard work, diligence and excellence in academic life. May her Soul rest in perfect peace. My father, Mr. Boniface Chikwem and my Uncles Mr. Silvanus Chikwem and Mr. Jude Onwuzuruike deserve tremendous praises for their moral encouragement which served as a critical pillars in support of my academic pursuit. My brothers, Barnabas, Uchenna, Sunny and Chijioke as well as my five sisters, Ngozi, Ifeyinwa, Onyinyechi, Ijeoma, Nneka and their husbands proved exceptionally helpful when it comes to encouragement for me to continue my doctoral programme. Lofty’s prayers and prophetic declaration manifested as the Lord had directed. To God be the glory! My profound gratitude also goes to my supervisor, Prof. Ken Ifesinachi, who conscientiously “fathered” this research work. He painstakingly read, corrected and made useful in-puts and suggestions at every stage of this study. It is gratifying to acknowledge that I enjoyed working with him. I remain eternally grateful to you Sir, and may God bless you and your family. I wish to also appreciate the academic contributions of Professors Aloysius-Michaels Okolie, Obasi Igwe, Jonah Onuoha and all the lecturers in the Department of Political Science for their support during my doctoral studies at the University of Nigeria, Nsukka. I specifically acknowledge, with a great depth of gratitude the support and encouragement of Dr. Ezirim Gerald Ekenedirichukwu, Rev. Fr. B. Ochiagha, Nnaemeka Azom and Raymond Adibe towards the successful completion of this study. May God reward all of you. Next in the list of my creditors are my friends at the University of Benin (UNIBEN). In particular, I would like to thank Profs. O.J. Offiong, A. Ikelegbe and iv Musa Abutudu. I also benefited and learned a lot from Dr. Emmanuel Okonmah, who always prepared me on the ethics of paper language and methods of presentation before any of my defence. His academic arguments, as an advice, whenever I am about to seat for my doctoral defences, were quite encouraging “Dr. Ya Gazie o o”. Finally, I deeply appreciate the contributions of all the librarians that were helpful to me in the course of my research and those who posted and uploaded useful materials for this study either through e-mails, text messages, or direct telephone calls. Particular mentions are librarians of Institute of International affairs Lagos, NNPC in Benin and University of Benin. I also appreciate the contributions of Former Chairman, Nigeria Union of Petroleum and Natural Gas Worker (NUPENG) in Warri, Mr. Pemu Shola and Chief Emiko, who is Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) boss in Warri during my field work. They helped in contacts with other agencies during my field work. Sirs, I remain grateful. May God bless you. Francis, September 2014. v TABLE OF CONTENTS Title page - - - - - - - - - - i Approval page - - - - - - - - - - ii Dedication - - - - - - - - - - iii Acknowledgments- - - - - - - - - - iv Table of Contents - - - - - - - - - - vi List of Tables, Figures and Abbreviations - - - - - - - ix-xiii Abstract - - - - - - - - - - xvi CHAPTER ONE: INTRODUCTION - - - - - - - 1 1.1 Background of the Study - - - - - - - 1 1.2 Statement of the Problem - - - - - - - - 7 1.3 Objectives of the study- - - - - - - - - 15 1.4 Significance of the Study - - - - - - - 15 CHAPTER TWO: LITERATURE REVIEW - - - - - - 17 2.1 Did the allocation of fuel import licenses to independent marketers discourage investors in the development of new refineries in Nigeria between 1999 and 2013?- 17 2.2 Did fuel importation probes fail to adequately define the challenges hindering the development of new refineries in Nigeria between 1999 and 2013?- 26 2.2.1 Fuel subsidy Debate - - - - - - - - 26 2.2.2 Fuel subsidy probes - - - - - - - - 41 2.3 Did expatriates dominance of fuel importation and distribution undermine the integration of Research and Development (R&D) in Nigeria’s Petroleum Technology Development? - - - - - - - - - 50 vi CHAPTER THREE: METHODOLOGY - - - - - - 64 3.1 Theoretical Framework - - - - - - - - 64 3.2 Hypotheses- - - - - - - - - - 80 3.3 Research Design- - - - - - - - - - 80 3.4 Methods of Data Collection- - - - - - - - 86 3.5 Method of Data Analysis- - - - - - - - - 92 3.6 Logical Data Framework (LDF)- - - - - -- - - 94 CHAPTER FOUR: FUEL IMPORTATION AND DEVELOPMENT OF NEW REFINERIES IN NIGERIA - - - - - 103 4.0 Introduction - - - - - - - - - - 103 4.1 Investors in the development of refineries and the Nigerian State, 1999-2013 - - 103 4.2 Fuel Allocation: The Requirement in Nigeria - - - - - - 129 4.3 Prebendal Politics and Allocation of fuel import licenses in Nigeria- - - 145 4.4 Fuel importers and lack of storage facilities. - - - - - 155 CHAPTER FIVE: FUEL IMPORTATION PROBES AND THE CHALLENGES OF REFINERY DEVELOPMENT - - - - - 162 5.0 Introduction - - - - - - - - - - 162 5.1 Nature and Dimensions of Fuel Importation probes in Nigeria, 1999-2013- - - 162 5.2 Law enforcement agencies and prosecution of oil marketers/companies on fuel fraud - - 165 5.3 The fuel importation probes and identified challenges - - - - - 176 5.4 The fuel importation probes and structural challenges - - - - - 182 CHAPTER SIX: RESEARCH AND DEVELOPMENT (R&D) IN OIL SECTOR AND NIGERIA’S PETROLEUM TECHNOLOGY DEVELOPMENT - - 193 6.0 Introduction - - - - - - - - 193 6.1 The state and supply of fuel to NNPC by Multinational Oil Corporations in Nigeria - 194 vii 6.2 Supply of fuel to independent marketers by foreign manpower in Nigeria- - - 200 6.3 Control of largest distribution of fuel in Nigeria by foreign oil companies - - - 213 6.4 Dominance of expatriates and the challenges of integration of R&D in Nigeria’s Petroleum Technology development, 1999 – 2013. - - - - - - - 226 CHAPTER SEVEN: SUMMARY, CONCLUSION AND RECOMMENDATIONS - 242 7.1 Summary - - - - - - - - - - 242 7.2 Conclusion - - - - - - - - - 247 7.3 Recommendations- - - - - - - - - 248 Bibliography - - - - - - - - - 252 Appendix I- - - - - - - - - - 267 Appendix II - - - - - - - - - 268 Appendix III - - - - - - - - - 269 Appendix IV - - - - - - - - - 278 viii LIST OF TABLES 3.1 Logical Data Framework (LDF) - 94 4.1 History of Refineries in Nigeria - - - - - - 105 4.2 Refineries Average Annual Capacity Utilization, 1999-2011 (%) - 107 4.3 Domestic Crude Oil Refining by Local Refineries, 1999-2011 (in barrels) - - - - - - - - - 107 4.4 Domestic Crude Oil Refining by Local Refineries in 2011- - - 108 4.5 Domestic consumption of petroleum products from 2006-2010. - 109 4.6 Blocs offered to the ANOCs on RFR Terms, 2005 -2007 - 117 4.7 Total Assets of the ANOCs in chronological order NOC Date Blocs - 118 Comment (2005- 2007) 4.8 Summary of Strategic Deals with ANOC - 119 4.9 Local oil companies that secured licenses to build refineries in 2004 - 123 4.10 Petroleum Support Fund (PSF) Proposed Payment Schedule - 140 4.11 Checklist For Import Document - 141 4.12 Marketers not registered with PPPRA before they got first allocation for product supplies. - 149 4.13 Marketers that did not make first application to PPPRA for supplies before they got their first allocation - 151 4.14 Marketers that never applied to PPPRA at all but were given allocation to supply products. - 152 4.15 Marketers that did not obtain forex but claimed to have imported petroleum products based