Comparative advantage, interest politics in seaport concessioning

The last minute decision by the Goodluck Jonathan administration directing all oil and gas cargo ships to first use Intel’s facilities at the Eastern ports reflects once more the predilection of Nigerian leaders to do the right things late. Correspondent  SAM NWOKORO reports.

 

Ado Bayero

At the centre of the controversy generated by the directive is the reaction of port operators who feel that it favours only Intel Logistics, the concessionaire of Onne, Warri, and Calabar Ports.
Those challenging the directive, the other terminal operators under the aegis of the Seaport Terminals Operators Association of Nigeria (STOAN), are pressing President Muhammadu Buhari for a “decisive intervention and resolution.”

 

 

Spoiling for court action

STOAN recalled the agreement signed by all terminal operators/concessionaires in 2008 to compete under similar constraints, benefits and responsibilities to their workers, regulatory bodies and the nation, so as to encourage efficiency and competition.

 

Soon after the agreement, the Nigerian Ports Authority (NPA) started compelling cargoes labelled “oil and gas cargoes” to discharge in any of the three ports in Onne, Warri, and Calabar.

 

The three ports belong to Intel, part of the concessions it won during the ports reforms of 2006.

 

About 25 other terminal operators insist that the directive by the NPA contradicts the Ports Reforms Act of 2006.

 

Some, like LADOL and its allies, are spoiling for a court action against the NPA, a government parastatal which believes it is complying with the law.

 

When the ports reform law was made in 2006, the business space was different from what it is today. Changes have occurred in maritime.

 

Establishing maritime business hubs, such as free trade zones, has become the model for faster economic development as the government has learnt from the developing economies of Asia, such as Malaysia, Indonesia, China, Singapore, Taiwan, and South Korea.

 

Nigeria’s economic managers, among them former Trade and Industry Minister, Olusegun Aganga, have been pushing to concentrate businesses closer to sources of raw materials and other facilities to reduce losses arising from long distance transportation.

 

A publication on Onne Oil and Gas Free Zone says “the free zone is supported by an oil services centre and other facilities to provide oil companies and services companies alike with virtually everything they need to operate.

 

“Most importantly, the free zone offers a highly competitive range of tax concessions plus other investments, including minimal bureaucracy, to ease the flow of business.”

 

Onne Oil and Gas Free Zone is planned to be a mix of several types of free zones; at various stages in its evolution, a free port, a free trade zone and, ultimately, a specialised export processing zone.

 

 

Amendment that irked

The Senate amended the Oil and Gas Export Free Authority Act last year to include the wordings that “the president hereby designates the Delta Ports Warri, Onne/Ikpokiri area, and Ogu creek of River State as an oil and gas free zone.”

 

Section (2a), Subsection 5 says: “In consideration of the substantial investments in oil and gas free zones, all oil and gas related cargoes must be handled only at approved oil and gas concessioned ports.

 

“However, investors are free to choose ports of discharge of their cargoes within the designated terminals, Onne, Warri and Calabar Ports.”

 

 

Double speak

A maritime lawyer, M. Uko, explained that neither Jonathan nor the NPA committed any error because “the amendment of the Port Reform Act followed constitutional procedure.

 

“The Act was amended to compensate investors like Intel and to encourage others to invest their wealth wisely to accelerate the growth of the economy instead of buying idle mansions and private yachts abroad.

 

“It is meant to encourage, and I think it is right. That you benefit in the port concession exercise does not mean the government has no authority over strategic assets as ports.

 

“If you are not meeting up with what is required of you in terms of maintenance and development of the ports, the government reserves the right to even terminate the concession. A clause like this must have been embed in the concession agreement.

 

“The members of STOAN and LDOL are just hooting for nothing. Among all the concessionaires, only Intel has been serious about developing and improving facilities at its lots.

 

“Governments all over the world exist to encourage worthy examples. That is what I think is happening here.

 

“And even then, the government was magnanimous, making it open-ended so that it would not appear as though it was a witch-hunt.

 

“The amendment says, ‘However, investors are free to choose ports of discharge of their cargoes within the designated terminals at Onne, Warri and Calabar ports.’

 

“What it simply means is that if Intel decides to charge any other seaport terminal operator extra apart from what the government stipulated, such a one should not expect that the government would take up arms against Intel. Period.”

 

 

Growth enabler

Aganga disclosed that total investment in Onne Oil and Gas Free Zone in May this year stood at $6 billion (N930 billion).

 

It has registered about 150 investors and created over 30,000 jobs, direct and indirect. It is the only free zone in the world that focuses exclusively on the oil and gas industry.

 

It was opened in 1997 to draw in foreign investment and promote local and regional growth.

 

Onne Oil and Gas Free Zone, located in Rivers State, is supported by other services companies to provide everything oil and gas companies need to operate and create more value chain in that sector of the economy.

 

It offers a range of tax concessions and other incentives with minimal bureaucracy.

 

 

Ambition of Intel

Among all concessionaires of port facilities, Intel Logistics has been more visible in fulfilling its own part of agreements with the government on the upgrade of port facilities. It also has a minimal record of infringement of the rules.

 

The government has awarded it more concessions in a yet to be developed port facilities, for which the firm plans to invest $500 million.

 

“Intel is managing three ports in the country on behalf of the Nigerian ports Authority (NPA). It has a 25-year concession starting from 2006 with an extension opportunity for another 25 years,” disclosed Simeon Volpi, Managing Director/Chief Executive Officer of the American firm.

 

“We manage a four-kilometre stretch in Onne with drafts ranging from eight metres to 14 metres. We have received approval from the government to invest approximately $500 million in phase 4A of the Onne project.

 

“Onne port has two terminals namely: the Federal Ocean Terminal (FOT) and the Federal Lighter Terminal IFLT). A Dutch company started the construction in the 1970s but never got to finish it.

 

“In 1982, they started developing the FLT under a PPP (public private partnership) structure.

 

“Intel, which took over these developments, was established about then with a vision to develop one-stop transit and supply bases within government-owned port complexes and in close co-operation with the NPA.

 

“Today, the total length of the quay is around 1,670 metres. The second, third and fourth berth have been deepened to an eight metre draft.

 

“Apart from that, we are talking with the government about the creation of additional 2000 metres of jetty. These are within the oil and gas region.”

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