Tuesday, March 25, 2003
ENERGY: Why fuel crisis persists — NUPENG
Nigeria: Double speak
By Victor Ahiuma - Young
Tuesday, March 25, 2003
AS Nigerians groan under the torturing fuel crisis despite being a major producer of the products, president of the National Union of Petroleum and Natural Gas Workers (NUPENG), Comrade Peter Akpatason, in this chat with EnergyThisWeek, gives insight to reasons for the un-ending fuel scarcity in the country. He also speaks on the union's preparedness to take on alleged anti-labour practices and employers in the industry.
Excerpts:
What is the union’s position on the un-ending fuel crisis?
Well, our position is that the government has not been sincere about its efforts to address the issue from the onset. They made a mistake in attempting to give Nigerians the impression that the only way to solve the problem of fuel scarcity is to increase the pump price. They wanted to increase the fuel price as a result of that they had to seize the opportunity of the gulf war threat as well as the Venezuela problem to create the artificial scarcity situation that we have.
The truth is that government has always been in a position to forecast such situations and make arrangements to forestall such developments or to absorb such shocks. That is what happens elsewhere in the world. People have reserves to address problems like this.
Unfortunately, we don’ t have reserves in Nigeria. The government at the moment, rather than think of how to find solution of the fuel scarcity, is actually waiting to use that as an opportunity to increase prices. That exactly is why they have not been able to address the problem.
We want to see the attempt by major marketers to push for a price hike as a furtherance of government plans. They are just acting as agents of government to give Nigerians the impression that without price increase, it would not be possible to address the problem. But the truth is that government has all it takes to address the problem. They get a lot of revenue as a result of this increase in crude prices. What they are getting is so much that they can use just a little of it to subsidise the import for this period and after which the situation might stabilize and we would go back to the normal where they would not have to subsidize beyond what it is presently. But unfortunately, because of their insensitivity to the needs and problems of Nigerians, they have not bothered to do that. I think they owe us a duty in that respect.
The authorities have talked about low production of the local refineries and heavy dependance on import. Why is it that up till now, we still talk about low capacity utilisation, can’t the government do something to increase the capacity of local refineries?
Part of the insincerity of government is manifest in the area of refinery maintenance. They have always come out with programme of maintenance. The last one they came out with was so uptismistic. They gave us the impression that by June last year, everything would have been all right. Again, unfortunately, they did not do much. So, we want to believe that it is not as if they don’t have the solution to it or the idea as to how to solve the problem. But what happens is that, this same politicians who are the policy makers, they are the core investors who want to sell NNPC to themselves. So they want to perpetuate this situation. They want the situation to persist such that Nigerians will believe that the best way out is to sell NNPC and its subsidiaries. They are creating the ground for themselves to buy the corporations’ subsidiaries. It is not going to be good for Nigeria because these people don’t actually have the interest of Nigerians at heart. Most of them fraudulently acquired their wealth from public treasury and they want to use the same public wealth to buy public companies, to own them and turn public monopoly to private monopoly without actually attempting to really solve the problem of NNPC. We want to believe that if they really want to solve the problem of the refineries, they have the resources to turn around the refineries to make them work. Not by politicizing issues. Not by awarding contracts to companies that lack the technical and other resources to make the refineries work. If they are sincere, they will award the contract to competent contractors. The oil wells are flowing. There are buyers who we are exporting oil to. The money is coming. They divert too much of the money into politics. They should use part of the money to make the refineries work. Let the technocrats, let those who have the technical know how be involved in this repairs not for politicians who know nothing about the technical management of refineries to take charge. That is what is killing the country. We don’t see the sincerity of the present government and the party in power to address the problems of this country. Rather than address problems, you see top party officials saying all sort of funny things about workers resistant to privatisation of public companies. Like the chairman of PDP, Chief Audu Ogbeh said recently. I think that is not a very responsible way of talking. They should make very visible and responsible efforts to solve this problem.
How does the face-off in the gulf impact and relate to the crisis in the country?
The crisis in the gulf has not affected other countries the way it is affecting Nigeria. I said earlier that they are just using that opportunity to attempt to increase prices. Actually, we agree that crude prices went up and could still go up. There are two implications. One, the refineries in Europe and other parts of the world where we import refined products, they will definitely have their prices up because the crude, the raw material for refining the products has gone up. So, whatever we import is very likely that the prices would also go up. But another implication is that as a result of the crisis in the gulf region and the Venezuela problem, the crude we sell in this country has increase in quantity and the prices have also gone up. So a lot of money is accruing to the federal government. So, if so much is accruing to the government much more than what goes out or what will possibly go out as subsidy to get more fuel for Nigerians, then they don’t have reason for not been able to address this problem. They only lack the foresight to look at the situation as it was coming and have continency arrangement to checkmate the present suffering that Nigerians are passing through.
Do you think this time, it is politically wise to talk about pump price increase?
That is the blunder they are making. That is why they are coming up with a lot of unreasonable explanations and excuses like accusing sabotuers that are not existing. We believe that if there are saboturs at all, they are politicians in power. There are government officials who are sabotaging Nigerians’ efforts, who are sabotaging the efforts of oil workers in Nigeria, who are diverting money that ought to be used for more important thing into political campaigns and all sort of things . I think it is unfortunate and we in NUPENG are not happy about it. I know every responsible Nigerian is not happy about such development. The government needs to be forthright on issues. As for this one, they are not serious. I think it is very clear to them now that it is a wrong time to talk of increasing pump prices. That would not solve the problem any, way. It will be suicide mission to embark upon. If they do it, well only God knows what will happen but I know Nigerians would not be stupid enough to ask such people to come back, if they dare it this time. But for our union, as usual, you should know we will react. We will react in some new ways, not necessarily the way we use to do it. But definitely, we will make it very difficult for them. I will believe it is not going to be possible.
Recently, your union sent a petition to the minister of employment, labour and productivity intimating him, about unfavourable industrial situation in the industry and your resolve to tackle it head on. What is the situation now?
Well, the situation still remain the same. It is only one of them that I think his done a little improvement. In Eleme Petro Chemical Company Limited (EPCL), Port Harcourt, we are made to understand that NNPC has retired, instead of reinstating workers that were sacked because of their union activities. That is a far cry from our expectation. But all the same, because the people affected have decided to take it in good faith, we have decided also, to accept it like that. But in other areas like the contract workers in Shell, they are still facing the same problem. In fact, the situation is worsening. We are so surprised that the DGM of NAPIMS who is supposed to be a Nigerian and reason like other Nigerians in terms of the welfare of working in the industry has decided to turn the other way round. Rather than address an issue that was brought before him on the instruction of the Group Managing Director (GMD) of NNPC, we are surprised that he decided to take side with the multi-nationals. In fact, he made comments that are very unethical which we think are not good for the industry. But we are going to react. We are going to write the GMD of NNPC complaining about the activities and role of the DGM of NAPIMS and also to put the industry on an alert about our reaction to it. Definitely we are going to take on the industry. We are not going to allow Shell to just throw out that workers and change the contracting formular in the industry. There is a new development too. Just after the Shell issue, Chevron has also come up with something similar. Chevron is also pointing at the same DGM of NAPIMS. It appears he has some thing he is benefitting personally from that and as a result of that, he is all out to destroy the industry. But NUPENG will make sure we resist that. In fact, NUPENG and our petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), we are in concert, as a team in doing that. We are going to ensure that this neo-colonialism and re-colonialism is resisted vehemently. If it involves taking him as an individual or personalising it, we will do it with the man and we will take on every company in the industry that has decided to be anti-labour. On the case of Mike Adenuga and his management team in National oil, they have cleverly converted the sacking of our vice president to early retirement which for now we have not got the details. But one thing is clear, the man is out of employment for now as we are talking.
We are definitely not happy about that. They are also some other people in Belbop for instance who also are staff of that same conglomerate belonging to Chief Adenuga. They have been put out of job for more than a year now because they are members of workers’ union. Management attitude towards union in that place is so discouraging and we are going to resist that culture. If it is allowed to continue, it will definitely create problem. The syndrome will spread round the industry just like the Shell contract is going round the entire industry now. The union is very set at this moment to resist all those anti-labour employers. We are particular about those ones we have mentioned. There are a lot of others. You have the owner of Lonestar and Deutag who is completely anti-labour. He uses community influence, he uses all sort of crude measures to fight the union. He goes to court at will. He takes union from upper court to lower court. If he is defeated in an upper court, he goes to a lower court which is actually not the right thing to do. He claims he has the money and the influence to do whatever he wants and has decided he would continue to give us problem.
In Delta presently, you can imagine a situation where a whole rig is manned by expatriates and contract workers. No Nigerian staff. Every Nigerian there is a casual worker. That is against Nigerian labour law. Unfortunately, because we do not have effective judicial system and modern labour laws in place and our politicians are not ready to protect Nigerian workers they do what ever they like. Some of these multi-nationals and core investors take laws into their hands. It is very bad. But we are not going to sit down and lament. We will take them head on.
Industry Sees Opportunity to Push U.S. for New Rules
<a href=www.nytimes.com>The war in Iraq is not all bad
By CLAUDIA H. DEUTSCH
No one in the chemical industry will come out and say it. But the truth is, for chemical companies, the war in Iraq is not all bad.
Executives know that in times of war, people harbor nagging fears that burning Iraqi oil fields and rampant unrest in neighboring countries could quench the flow of oil and send prices up sharply, inevitably pushing gas prices up as well. And that, they think, makes the timing right to push Washington for energy policies that will at least curb the volatility of gas and oil prices.
"The fact that we are having a war reminds us again of the fact that we have to come to grips with a U.S. energy policy," said Greg Lebedev, president of the American Chemistry Council, the industry's main trade association.
To be sure, the industry has a lot to worry about. Its major input, oil, is expensive, and its outputs go to many cyclical industries that will weaken as a war wears on.
Even so, few industry experts think that war will drive oil or gas prices significantly higher. The severe winter, coupled with the long run-up to war, did that months ago. "The rise in natural gas prices was extraordinary over the last three months," said Klaus Peter Löbbe, chairman of BASF. "Some of that was the severe winter, but without the threat of war, prices would never have been this volatile."
Now, the weather is warming up, and there is no longer uncertainty about war. For two weeks, oil and natural gas prices crept down, until yesterday, when oil prices surged 6.50 percent and natural gas 2.44 percent.
"A week ago, I'd have said that as soon as planes start flying, energy prices would go through the roof," said William S. Stavropoulos, chairman of the Dow Chemical Company. "But Saudi Arabia is producing full out, Venezuela is coming back slowly, and it doesn't look like there will be huge damage to Iraqi oil fields."
The chemical industry has a lot at stake in whether the oil keeps flowing. It uses oil and gas as raw materials as well as fuel.
Thus, the council did not wait for war to break out to use it as a platform for seeking help. On March 11, the council led a campaign to press the government to work with Canada and Mexico to increase the supply of natural gas in North America, to cut consumption by governmental agencies and to encourage conservation among consumers and companies. It also asked that the president not support either environmental regulations that discourage drilling in new areas or those that offer incentives to switch from coal to natural gas, thus causing a run on already tight supplies of natural gas.
Natural gas now sells for $5 to $6 per million British thermal units, a sharp drop from the $19 price of late February, but more than twice the $2.50 per million B.T.U.'s the industry had grown accustomed to. Similarly, oil prices have dropped more than $10, to less than $30, but that is still well above the $20 the industry considers acceptable.
"After the last few months, $5 for natural gas may not look so bad, but it still is not cheap," said Frank J. Mitsch, a chemical industry analyst at Bear, Stearns, who said that when all the chemical companies have reported first-quarter results, "we will see a lot of red ink."
The immediate effect is not the same across the industry. The DuPont Company, which derives a large part of its revenue from pharmaceuticals or other products that are not based on hydrocarbons, has kept earnings up. Dow, which makes basic chemicals that are dependent on hydrocarbons, is in the red.
DuPont spent about $2 billion on hydrocarbon fuels and raw materials last year. Dow, a similarly sized company, spent $8 billion. Dow's hydrocarbon costs rose $400 million in the last quarter alone.
"No question," Mr. Stavropoulos said, "the impact of high energy prices has been dramatic for Dow."
But DuPont and companies like it are not home free. They may not buy a lot of hydrocarbons, but their suppliers do. DuPont uses butadiene methanol and cyclohexane ammonia, oil derivatives, to make nylon, while it uses ethane, made from natural gas, in its ethylene polymers.
"There's a four-to-six month lag between the rise of energy prices and its impact on our income statements," said Raymond G. Anderson, DuPont's director for investor relations.
Thus, if the war drags on, or if it spurs terrorist attacks, all bets are off.
"If the war drags on, energy prices really could rise again even as global economies drop," said Mr. Mitsch of Bear, Stearns. "And that could be a real double whammy for the chemical industry."
A Roar, an Explosion, and First Thoughts Are of Terrorism (April 26, 2002)
ECONOMIC ANALYSIS: War in Iraq Could Bring U.S. Recession, or Economic Growth
<a href=www.nytimes.com>Concerns About Economy And War
By DANIEL ALTMAN
epending on the outcome of the war in Iraq, its impact on the economy could range from a recession to a mild stimulant.
The early indications for the economy, as for the war, had been good. Yesterday, however, a touch of trepidation dampened the mood.
"On Friday, when everyone went home for the weekend, there was a degree of euphoria," said Henry G. Willmore, the chief United States economist at Barclays Capital. "There's been a bit of reassessment given the events over the weekend." Yet he added that since a week ago last night, when President Bush announced the 48-hour deadline for Saddam Hussein to leave Iraq, "we've still had significant declines in oil prices and the stock market is up."
For months, expert studies have predicted that a brisk campaign followed by total victory would lead to lower oil prices and increased consumer confidence. In addition, the removal of uncertainty could help some businesses to make investment decisions. Even in the best case, though, some side effects — from higher mortgage rates to deepening government deficits — could shave off part of the economy's gains.
That best case would help to offset what has so far been a disappointing first quarter. Before the first Tomahawk missile was launched, the uncertainty that preceded the war had already taken a toll.
"In terms of growth in the first half of the year, we're going to be somewhere in the vicinity of 2 percent" at an annual rate, predicted Peter Hooper, the chief United States economist at Deutsche Bank Securities. Without the war-related uncertainty, he said, the economy might have expanded at an annual rate of 3 percent in the first half.
Economists generally agree that the economy needs to grow by at least 3 percent annually in order to improve employment. With growth of just 2 percent, hundreds of thousands of jobs could be lost in a year.
In addition to the stagnating effects of uncertainty, worries about disruptions of oil shipments from the Persian Gulf caused oil prices to rise in the months leading up to the war, putting further pressure on the economy. The strike in Venezuela's oil industry, which has reduced global supply, and now problems in Nigeria make isolating the war's effect on prices difficult.
Edward F. McKelvey, a senior economist at Goldman, Sachs, said that he had heard figures of a $7- to $10-a-barrel price rise in the first quarter of this year. An increase of $10, he said, would cost American consumers about $50 billion a year. Still, he cautioned, "you don't have any really good sense of where the baseline was."
In the first few days of the war, the premium in oil prices had seemed to be vanishing — dropping by Friday to under $27 a barrel from a peak of $39.99 during New York trading on Feb. 27. If that trend held, the war's indirect impact on the economy could be minimal, according to a study by William D. Nordhaus, a professor of economics at Yale. And yet, yesterday, as it appeared that Iraqi resistance might be stiffening, oil prices rose.
In the worst case, a price spike could cost the United States as much as $391 billion over 10 years, Professor Nordhaus wrote. The Center for Strategic and International Studies in Washington forecast that a prolonged war accompanied by serious terrorist attacks could drain $472 billion from the gross domestic product in this year alone, or 4.5 percent. A loss of that magnitude could qualify as another recession.
On the other hand, a successful conclusion to the United States-led invasion could give the economy an immediate shot in the arm for the second half of the year. A report published in November by the center suggested that the economy could gain an extra $52 billion in growth in the best case.
"If we get through this without major damage to Iraqi oil facilities, and without any kind of terrorist action, and relatively quickly on the military front, I would think that would be good for the economy," Mr. Hooper of Deutsche Bank Securities said. "It would be good for the equity market, and it would be good for consumer confidence."
In terms of companies' actions, Mr. Willmore of Barclays said, "quite a few of them have probably postponed making some decisions, so in effect you don't get the investment and the hiring that might be taking place."
Even while euphoria swept the stock market last week, not all of the war's immediate effects on the economy were positive. Since the White House signaled that diplomatic efforts to avert war had run their course, a sell-off in the bond market had been driving yields higher and putting upward pressure on mortgage rates. The bond market did rally yesterday as stocks plunged, but 10-year Treasury yields stayed 0.4 percentage point above the 44-year low reached on March 10.
The direct cost of the war to the federal government, which the White House estimated yesterday at $70 billion to $90 billion, could also hurt the economy, according to some experts. Swelling budget deficits and greater borrowing by the government, they argue, could push up long-term interest rates.
"Those who are writing the federal budget, to be prudent, must factor this in with everything else that they're doing," including fresh tax cuts and a prescription drug benefit for Medicare, said Robert L. Bixby, executive director of the Concord Coalition, a fiscal watchdog group in Washington.
Despite these potential drags, Mr. Willmore said he expected the economy to manage reasonable growth of 3 percent this year, with money from refinancing of mortgages and the tax cuts in the new budget helping to support consumers' spending.
The economy could also benefit to the extent, albeit unknowable, that the war diminishes threats to national security. But in the last few months experts have argued conversely that the war could actually increase the likelihood of terrorist attacks.
In either case, Mr. Hooper warned that the overall outlook was still unclear.
Even "if Iraq is resolved successfully," he said, "there are other potential geopolitical clouds on the horizon."
Setbacks in Iraq set Dow reeling
Read on..
By TOM WALKER
The Atlanta Journal-Constitution
Wall Street's rose-colored glasses, which last week envisioned a quick victory in Iraq, were shattered over the weekend by televised images of death and other troubling signs that the war might take time.
That realization translated on Monday into a steep stock market sell-off, with the Dow Jones industrial average plunging more than 300 points.
Each of the major stock indexes lost 3.5 percent or more in their worst session since last September. Airline, hotel and entertainment stocks took big hits on investor concern that travel and leisure industries would be big victims of an extended war.
Last week, investors were buoyed by hopes that the war's initial successes against Iraq would lead to a repeat of the relatively short and successful 1991 Gulf War against the same country.
But the U.S.-led coalition encountered stiffer resistance over the weekend, resulting in casualties and the first U.S. prisoners of war. Iraqi President Saddam Hussein vowed to make the war painful, and President Bush on Saturday repeated a statement he had made in announcing the start of hostilities -- that the war would last longer than some had predicted.
"Over the weekend, it was clear that those hopes were misguided, and that the road to Baghdad would be difficult," Prudential Securities strategist Larry Wachtel said Monday.
A sidelight to Monday's session was the fact it was also the third anniversary of the all-time closing highs for two major stock market indexes: the Standard & Poor's 500-stock index and the Wilshire 5000 index of market value.
That's the date most Wall Street analysts use as the beginning of the current bear market. Since that date, the S&P 500 has fallen 43.4 percent, and the Wilshire 5000 shows that investors have lost $7.56 trillion in market value.
The market's closing prices last Oct. 9 are the lows for this bear market. But before the war started, some strategists had begun to speculate that stocks could drop to new lows, given the economy's weakness and the slow recovery of corporate profits.
Optimists argued, on the other hand, that once the war against Iraq was over, consumers would feel free to spend, business firms would be confident enough to make investments, and the stock market would rally on a wave of improving profits.
That's still the big question, since the end of the war will not mean the end of the U.S. presence in Iraq.
And other global trouble spots won't go away either, said Salomon Smith Barney strategist Tobias Levkovich, "including North Korea, Venezuela and Nigeria."
But if investors were overly exuberant in expecting a quick war, there's no reason to be overly bearish on the downside because it will be difficult to predict, some analysts insist.
Balentine & Co. market analyst Dorsey Farr still anticipates a boost to the economy once the war is over.
"My argument is that the two missing ingredients in our economy -- capital spending and job growth -- are being hampered by the uncertainty of war. The successful resolution of the war eliminates that uncertainty," he said.
The risk, he said, is that a prolonged war would have a sustained negative impact on oil prices, which would indeed hurt the economy.
On Monday, crude oil prices posted the biggest gain in 15 months on the same concerns of a longer war than originally anticipated, while the dollar fell against the euro.
The Dow, which had experienced eight straight days of gains before Monday, closed at 8,214.68 with a loss of 307.29 points, or 3.6 percent. It was the biggest loss since Sept. 3, when it fell 355.45 points, or 4.1 percent.
The S&P 500 index fell 31.56 points, or 3.5 percent, to 864.23, also its worst day since Sept. 3, when it dropped 3.5 percent.
The Nasdaq composite index of mostly tech stocks fell 52.06 points, or 3.7 percent, to 1,369.78, its biggest drop since a 3.9 percent loss on Dec. 9.
Program exploits Windows 2000 flaw
Program exploits Windows 2000 flaw
By Robert Lemos
Staff Writer, CNET News.com
March 24, 2003, 5:45 PM PT
A Venezuelan security consultant has released a small program designed to compromise Microsoft Internet Information Service servers that haven't had a recent security hole patched.
Monday's public release of the program's source code--known in security parlance as an exploit--will allow less technically knowledgeable system administrators to test for the existence of the vulnerability or allow less skillful miscreants to attack servers.
"I released (the code) to enlighten the public and to promote system security for administrators unfamiliar with these exploits," said Rafael Nunez, information security consultant for Scientech de Venezuela and a former hacker who used the handle "RaFa."
The release of the code on two security lists--BugTraq and VulnWatch--is the latest twist in the story of the Windows 2000 flaw that Microsoft announced a week ago.
The flaw, which Microsoft said could be exploited through the World Wide Web Distributed Authoring and Versioning (WebDAV) component of Internet Information Service (IIS) 5.0, allows an attacker to take control of the server. The flaw was discovered March 12 by the U.S. military after a public Web server was compromised by the vulnerability.
Microsoft declined to comment on the issue, except to say that customers should patch their systems. Nunez also stressed that system administrators need to patch their systems before a virus writer uses the vulnerability as a vector for a computer worm.
"This exploit is very serious," Nunez said. "Any unpatched system can allow a remote intruder to obtain full administrator privileges. This exploit can be used by some malicious programmers to write worms that can automate Web site defacements and other malevolent operations."
Nunez said that he got the code from other hackers on the Internet and cleaned it up before sending it to the two security lists to be published.