Like Enrico Mattei, like Aliko Dangote

In the global oil and gas industry, who was Enrico Mattei? What did he do? And what happened to him eventually?

Enrico Mattei was an Italian technocrat who was appointed by the Italian government after the Second World War to reorganise the Italian oil industry. His task was to break the Italian oil company AGIP (Azienda Generale Italiano Petrolico or Italian Oil Company) established by the Fascists under Italian dictator Benito Mussolini in 1926.

Mattei went about this by consolidating the entire Italian oil industry into a trust called ENI (Ente Nazionale Idrocarburi or National Hydrocarbon Trust) which included not just AGIP but such technical and engineering companies like Snamprogetti, Saipem, Montubi etc in 1949.

At first, ENI concentrated its search and development of hydrocarbons within Italy hoping to make the country self-sufficient in oil especially as the field was dominated globally by such major international players as Mobil, Esso, Gulf, Total and British Petroleum.

But when the crude oil finds in Italy were negligible, ENI under Mattei turned to overseas sources. Mattei negotiated oil concessions in the Soviet Union, in places like Romania and Iran in the Middle East with a production sharing arrangement of 75% to the country with the oil reserves. His stated aim was to break the monopoly of the “seven sisters”, a term he coined to refer to the dominant international oil companies made up of Esso, Mobil, Gulf, Texaco, Total, British Petroleum and Shell who, between them, had oligopolistic control of the global oil industry.

Naturally, the “seven sisters” were not happy at the tactics of Mattei and ENI even though they were more guilty of employing the same methods. They sought to undermine Mattei and ENI using all sorts of tactics including threats to life as he continued to undercut them the world over. Mattei’s explanation when asked was simple, “A little cat arrives where a few big dogs are eating in a pot. The dogs attack him and drive him away. There is oil for everybody, but someone does not want to let us get close to it”.

On October 27, 1962, Enrico Mattei, the enfant terrible and nemesis of the “seven sister” international oil companies died along with all passengers and crew of his private jet in a crash in Barscape, Italy. Investigators later found fragments of explosive devices on the crash site which conclusively proved that indeed a bomb was placed on the aircraft.

Aliko Dangote’s ongoing travails with his 650,000 barrels per day refinery draw some parallels with the experience of Enrico Mattei of Italy.

In both cases, Mattei and Dangote attempted to butt into an industry that is dominated by major players who do not tolerate those they regard as upstarts. Venturing into that sector, Mattei knew that he had two choices; either to subsume ENI under one of the powerful IOCs and get swallowed up in the process, or strike out on his own as a lone ranger in the field using ENI’s advantages to compete favourably against the “seven sisters” collectively. ENI’s advantages were that they had the same technical capacities and expertise that the IOCs could offer in their bargain with oil-producing countries. But unlike the IOCs, ENI could do more by offering the oil-producing countries more percentage of the production sharing arrangement because ENI was outside of the cartel and could act without any binding agreement that is normal with cartels.

Mattei too had the advantage of full support from the Italian government which was also trying to secure sources of energy for its development.

When Aliko Dangote built that 650,000-capacity refinery he had hoped like Enrico Mattei to take a major slice of the oil and gas industry in Nigeria just as he had done with commodities. He was also like Mattei hoping to key into the government’s stated aim of reducing and ultimately stopping the importation of refined petroleum products in the country.

But like the case with Mattei, the IOCs who have extensive interests in Nigeria did not look upon this with favour. The IOCs reckoned that if Dangote succeeded in this endeavour, their lucrative relationship through joint venture production sharing arrangements with the Nigerian National Petroleum Company Limited (NNPCL) would be in serious jeopardy. Apart from the joint venture agreements with NNPCL, the IOCs also have collaborative arrangements with local players which serve as fronts for their operations in the Nigerian market.

The reality is that like Mattei in the 1940s, Dangote Refinery is up against the well-entrenched interests who, in this day and time, control the entire value chain of the global oil and gas industry from upstream, midstream and right up to downstream operations. Furthermore, unlike in the days of Mattei, the operations of the IOCs today are expansive and ubiquitous to the point of their even influencing the oil policies of countries around the world. In today’s global operating environment of the oil and gas industry, any lone ranger operations will invariably be coming up against the IOCs.

It has to be said that, unlike Mattei, Dangote came into this venture with several disadvantages. First Dangote Refinery does not have the indigenous technical capacity to operate that plant; it needs and employs mostly Indian experts to run it. Secondly, Dangote does not appear to have support from the government and fellow players in the Nigerian oil and gas industry. We can see that after initial pledges of support, the government has been reneging on its commitment. Having pledged to take a 20% stake in the refinery, the government has now reduced its stake to 7%. The government has not shown a commitment to get the IOCs to supply the feedstock of crude to the refinery.

Ultimately the Dangote refinery saga is a tale of one ambitious but patriotically inclined person venturing into a project that the IOCs look at with disfavour. Behind the expected resistance of local players and recalcitrance of the NNPCL and the government to the Dangote refinery project lies the heavy, unseen hand of the IOCs. It is a no-brainer.

I sense that the Dangote project will never be allowed to function the way it was initially projected by its owner. The government, NNPCL and local competitors are all one way or the other proxies of the IOCs. Bottom line, we may not see the end of fuel importation yet; we may also not see the resumption of operations of the four comatose NNPCL refineries and we may not have fuel prices coming down.

Rather than be left with an inventory of non-performing iron and steel and mounting debts, Dangote will be compelled to reduce his stake in the refinery project which will either be bought by NNPCL or by a consortium of local players in the Nigerian market. And the idea behind it will be to see off an “upstart” and clip his “outlandish” ambitions in the Nigerian oil industry. The ventriloquist in all of this will be the IOCs as they have always done in the business.

Like Enrico Mattei and Aliko Dangote, the IOCs will triumph once again. Aliko will be defeated because he does not have the government of his country behind him, but his plane may not be sabotaged like that of Mattei. Mattei on the other hand was taken out brutally but his legacy ENI supported fully by the Italian government survived and even grew to be one of the major IOCs in the global oil and gas industry as he had envisaged. So wherever he is now in the great beyond, Mattei may be enjoying his Vino and making a middle finger salute at those who may have planned his fiery ending probably saying, “You may have taken me out, but look at the legacy I left behind in ENI”.

The oil and gas industry is an unforgiving industry and poor Aliko Dangote, found out to his eternal regret that being a “commodity king” is not the same as being an “oil king”.

They may have existed under different circumstances and may have experienced different fates, but both Mattei and Dangote attempted to come head to head with the same opponent and found out that heads or tails, the IOCs are just too powerful to be trifled with. The lesson in all of this is that you don’t just bring a knife to a gunfight with the IOCs.

Gadu can be reached via [email protected] or 08035355706 (texts only).