…PIA provides clear objectives to promote competitiveness, equal access to infrastructure ensuring fair level playing field which is extremely important for a healthy industry.
-Felix Douglas
The Nigerian oil and gas industry has witnessed increased collaboration and continuous engagement.
For the past thirty-six months, the country has seen some positive regulatory steps, including the assent of Petroleum Industry Act (PIA), which is passed in 2020. There has been an enhanced engagement between regulators and industry coupled with resilience of Dangote industries which has enabled Nigeria to shift its focus towards achieving national fuel sufficiency.
Olumide Adeosun, former Chairman of Major Energies Association of Nigeria (MEMAN), an industry analyst that has been involved in the energy space for many years, spoke at a webinar organised by the association with the topic: Optimising the Nigerian Oil and Gas Industry.
Adeosun said the downstream industry is experiencing some positive trends but still enmeshed with pockets of challenges. The system isn’t perfect yet and the sector still relied on imports. There is still weak regulation and inefficiencies across the value chain with fuel scarcity and porous borders.
Notwithstanding, the emergence of new refineries such as Dangote, Aradel’s Ogbele, Walter Smith modular refineries, have all significantly contributed to Nigeria’s fuels value chain. There are still others coming on board and collectively, they all signal a positive future of energy security and opportunity for Nigeria even though there are some concerns by operators.
There are concerns about potential threats that these refineries or emerging ones will present. They include redundancy of long term businesses that are across the value chain, fear of preferential treatment including decimation of margins.
According to Adeosun, “inefficient business will struggle and potentially lose out. Where efficiency is the name of the game, particularly when it’s collectively pulled together amongst the players across the value chain, then we will always win.”
Unfortunately, recent communications within the industry have overshadowed major opportunities, making it difficult to see the green light.
The former MEMAN Chairman said, as a leading downstream association, it felt the urgency and therefore pull together an opportunity to address these issues through virtual congress.
The objectives of the virtual meeting were threefold. First, it is to provide a platform for stakeholders to express concern challenges and positions in response to the new market dynamics. Secondly, it hoped that as the conversation progresses, it will come with some strength of hope and concrete frameworks that will allow the industry to reach a common understanding and establish a frame for future consistent engagement.
Thirdly, it will explore in merging and potential business opportunities to drive efficiency, sustainability and productivity across the value chain.
Mr. Huub Stokman, current Chairman of MEMAN and Managing Director, NNPC Retail Limited, spoke on the pathway to optimizing the petroleum sector with regards to the downstream industry.
Stockman made it clear that the sole responsibility of MEMAN is to deliver goods and services to Nigerians with affordable prices and right quality. It is important to bring people together to make things work. The security of petroleum products is paramount driven by leadership, technology and automation. There has to be sufficient capital to keep on investing in infrastructure and customers’ experience.
He highlighted some challenges in the industry which includes poor infrastructures in the country that hamper efficient distribution of petroleum products across the country. This is coupled with increased inflation and lack of insufficient operational trucks.
There are issues of proper distribution and logistics including internal and cross border diversion spots. Some unscrupulous operators do want to play by rule of the game.
Although there is a regulator, the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), but some states have regulators that create conflict of interests on how operators will run their businesses. Safety concerns as insecurity hampers logistics in operational areas leading to low margins.
Stokman emphasized on energy security for the country which has been driven with refinery leading to efficient capacity.
According to the MEMAN Chairman, PIA has provided clear objectives to promote competitiveness, equal access to infrastructure and also ensuring fair level playing fields in terms of competition which is extremely important for a healthy industry. This will help to deliver better products services at affordable prices to the Nigerian public.
The country needs to focus on transition and address energy poverty. Since it is blessed with gas, Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) are added advantage. CNG is new to the market and Nipco has been a forerunner for it. This gives consumers alternative and helps energy transition.
Stokman advised that Nigeria should borrow leaf from the Netherlands, where people work together; hence “If you work together in business, or in every walk of life, you actually achieve probably better results.” As Nigeria is going through energy transition, stakeholders ought to work together for the interest of consumers.
Responding to a question at the webinar, why there are price differentials in Premium Motor Spirit (PMS) and diversion of petroleum products, Mr. Adetunji Oyebanji, former Chairman of MEMAN reacted that the market has reached equilibrium based on the landing cost of products.
Oyebanji added that a situation where prices appear to be managed in particular markets; there will be an ebb and flow of products looking for best greener pastures.
The regulator spends time to control smuggling and movement of products from one market to the other. The issue can only be resolved if there is a fair deregulated market based price across the country. It will curb sharp practices in the system.
The PIA has laid down guidelines on how the market should operate, but if the situation is left unchecked, there will always be disruption on the entire value chain. Petroleum products will always be diverted by unscrupulous people for their selfish and vested interests.
Part of the solution is properly implementation of the PIA. Looking for ways to assuage the negative impact of higher prices of PMS on the most vulnerable in the society in order to manage the situation, will only lead to disruptions which have been identified with movement of products to wrong places causing more harm than good.
Giving his closing remarks, Oyebanji was of the view that the MEMAN webinar addressed problems from different perspectives across the entire value chain of the downstream and midstream sector ranging from refining process to dispensing of PMS at filling stations.
He stated further that most of the issues and challenges are not limited to Nigeria but there are problems in different African countries.
The former MEMAN boss called for collaboration and consultation among stakeholders with holistic industry wide approach.
Therefore, MEMAN calls for forum where these problems can be discussed on a regular and consistent basis rather than mere press statements that would lead to unnecessary antagonism.
The objective of the association is to work with other stakeholders within the industry for solutions.
Passage of the PIA is commendable and its full implementation will help the industry. Deregulation of the industry leads to a breakthrough in spite of the teething challenges that will soon be overcome.
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