Mr. Huub Stokman, Managing Director, OVH Energy
…Downstream sector still bogged down by deregulatory uncertainty
…Improvement of decayed infrastructure
…Pruning of regulatory institutions
…Refinery as a catalyst to reduce consumption
-By Felix Douglas
Laying emphasis on downstream and investment, no other company is best positioned to explain better in terms of success other than OVH Energy. The company has made waves in the downstream and midstream of the oil industry in Nigeria winning awards. The Managing Director of OVH Energy with over twenty-five years of experience in the industry, Mr. Huub Stokman made it known at a session during the Nigeria Independent Petroleum Summit (NIPS), that in supply storage there are two key things that should be realized and the Nigerian National Petroleum Corporation (NNPC) supplies 100% of fuel needs of the country including Automotive Gas Oil (AGO) and other petroleum products. There is also a jetty and tunnel infrastructure that is underutilized with low returns.
In terms of distribution, Stokman was of the view that operators depend on trucking products to the end users with deterioration of the rail network coupled with pipeline vandalism. Products are taken in miles to customers with over 27 retail stations many of them dilapidated and not functional with a fragmented market where it is not more than 10% market share.
Stokman stated that Nigeria has the lowest margins on Premium Motor Spirit (PMS) and the most segmented market that is ever working.
According to the OVH boss, “it is good to explore and produce crude or gas and it is good to refine but at the end of the day, somebody needs to buy the product.”
He said it is important to understand what the customer wants. Operators sometimes forget that customers want quantity that they can trust and go for the products whenever they need them at the right price and the products delivered safely. This is where Nigeria is lacking and struggling especially at the downstream sector. In terms of quantity and quality, the country is struggling. “To meet customer needs, you need continuous investments and without adequacy it will be very difficult to achieve those goals.”
However, Stokman stated further that technology can help in the future to achieve objectives and satisfy customer needs. Since Nigeria is focusing on gas and making 2020 a year of gas, he said it was a good step in the right direction. Liquified Natural Gas (LPG) is a good intermediate solution for vehicles. But consumers will also demand for Compressed Natural Gas (CNG) and other means.
He spoke on quantity control that technology should be in full control with monitoring of funds while investing on workforce because they drive the products ensuring they are delivered safely.
Stokman emphasized on transportation with concern on aging fleet. Thus: “We need to start renewing the fleet of trucks in Nigeria to make the roads safer and make the delivery of the products more efficient.” On infrastructure, the country needs to invest more by optimizing and monitoring of the pipelines including flow products.
The OVH Managing Director decried regulatory aspect of the industry with over 15 agencies making conflicting demands and same requests. Downstream sector still has deregulatory uncertainties with hope that the Petroleum Industry Bill (PIB) will be signed in June. He added that the industry awaits deregulation of the PMS.
On the aspect of governance, there is need for improved compliance to control pipeline vandalism and truck accidents. Challenges abound in supply as part of the country still struggle to get petroleum products while trading and market efficiency have not changed for years. Inflation and cost of living keep soaring and market margin remains the same.
Showing concern on the country’s situation on shortage of manpower in the oil industry, Stokman warned, “Nigeria has a brain drain if it is not careful.”
To drive the Nigerian downstream, the country needs a free market both on the supply and consumer end. Plurality of transport in an open market access system. The jetties should be upgraded and improved infrastructure such as rail and pipelines network. There has to be healthy and transparent competition to drive efficiency and innovation, companies should be run efficiently and technology driven.
He advised on regulation that the passage of PIB and governance bill will help to prune down duplicated regulatory institutions for the downstream. The regulatory bodies have to be reduced at least one for the subsector.
Stokman averred that partnership among players of the downstream which involves private public collaboration must be imbibed. In his words: “As downstream players I believe that consolidation is happening, you might not see that much but some of you know that Mobil was taken over by NIPCO. So, industry consolidation is happening and will continue in my view.”
SOLUTIONS TO NIGERIA’S DOWNSTREAM
The OVH helmsman reiterated his stance on refinery, “you can’t have a conversation around the downstream of this country without refinery because everything is imported.” An enhanced refinery capacity which is imminent from conventional to modular refinery will changed Nigeria from a petroleum import country to a self-sufficient country. “This is a key catalyst for the rest of the industry.”
Stokman pointed out that there are benefits in refinery as a catalyst, it will improve and aid the environment and reduce consumption. On the aspect of skills, a good refinery and petrol-chemical industry will enhance skills that will be useful in the downstream. Going forward other derivatives like the plastic industry will be beneficial in creating employment for the sector with huge industrial base.
The OVH Managing Director opined that if Nigeria wants to capture full benefits of the downstream value chain, after refinery comes onstream, other downstream sectors in terms of distribution, sales and marketing need to use a short time window. This could be achieved by bringing other sectors into play to make improvement in customer experience, safety and operation standard. Use of technology to accelerate investments cannot be overemphasized but with the current margin in the sector, this might not be attained.
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