WHY NNPC, others insist on oil sector deregulation
Deregulation of the industry - NNPC, others unveils fresh model to boost refinery capacity • U.S., IPMAN okay reforms
TO ensure efficiency, transparency and free enterprise in the country’s oil sector, the Nigerian National Petroleum Corporation (NNPC) has reiterated the need for deregulation of the industry.
The NNPC also disclosed that it was putting in place a fresh strategy aimed at rehabilitating brownfield refineries using a new business model.
Meanwhile, the United States (U.S.) and the Independent Petroleum Marketers Association of Nigeria (IPMAN) have pledged their readiness to work with the new management of the NNPC to achieve the Federal Government’s reform agenda in the oil and gas industry.
Speaking at a yearly energy conference in Lagos yesterday, Group Managing Director of the NNPC, Dr. Emmanuel Kachikwu, said a speedy implementation of deregulation would encourage private sector and international investment into the country.
Speaking on the theme, “Energy Crisis and Sustainable Development in Nigeria: The Way Forward,” Kachikwu noted that subsidy creates distortions in government revenue distribution as a result of round tripping and unnecessary carry-over of expenditures yearly in a way that is difficult for government to control or sustain.
Furthermore, Federal Government is not in control of the factors that influence retail fuel price, particularly fluctuations of crude oil price at the international market.
Deregulation policy is essential to the transformation and growth of the downstream sector of the oil and gas industry,” he said. The NNPC boss, however, said the corporation was fully committed to reforming the existing refineries to boost product supply, adding that Africa produces 10 per cent of the world’s crude oil but only 3.6 per cent is refined locally.
Kachikwu said that speedy implementation of the deregulation policy would go a long way in encouraging inflow of private sector and international investment; ensure that Nigerians derive fair deal from the abundant petroleum resources in the country through fair product prices for consumers and full cost recovery and reasonable margins for operators.
The NNPC chief also gave assurance that the corporation has enough stock of petrol to service the country for 25 days at a consumption rate of 40 million litres daily.
He, however, added that the reserve will not be available in all the 21 depots across the country in view of the challenges facing the pipeline network.
Kachikwu also restated NNPC’s commitment to the construction of 1,350 megawatt (MW) capacity Abuja power plant and another 900 megawatt facility in Kaduna in partnership with reputable international power producers. “The Nigerian oil and gas industry will be transformed rapidly for greater efficiency and sustainable growth through market reforms, diversification of the revenue base and the monetisation of the vast natural gas resources,” Kachikwu added.
According to him, if there is investment in Compressed Natural Gas (CNG), the poor, who may not afford the cost of PMS in a deregulated regime, will switch over to CNG as vehicular fuel.
He acknowledged that a country with huge population like Nigeria would not find it easy to move from a regulated regime to deregulated regime overnight.
In his presentation on “Deregulation of the Petroleum Products Sector: A Key to Sustainable Development,” the Chairman and Managing Director of Mobil Oil Nigeria Plc, Mr. Tunji Oyebanji, stated that the regulation of price of petrol is a disincentive to investment in the downstream.
He stated that subsidy removal will lead to a significant reduction in government expenditure and guarantee more money for productive capital projects and to finance intervention programmes He said: “Pump prices will trend international product pricing with consumers’ benefits from seasonality and there will be increased confidence from the international community in the Nigerian economy.
It will also improve transparency and accountability in the downstream sector for all stakeholders and increased competition and investment in the sector by players.”
Discussants at the event believed that deregulation would curb corruption, promote operational efficiency and effectiveness through better corporate governance.
They noted that it would generate employment through private sector-driven expansion and cut down on public debt and control spending.
They stated: “Deregulation will free funds being spent on subsidy for development of other critical infrastructure. It will also develop the capital market, increase the stakes of individual citizens in public enterprises through share ownership and encourage activities in other sectors of the economy.”
For deregulation to succeed in the country, they urged the government to provide a stable and globally comparable policy and institutional framework.
The panelists said: “There should be optimisation of our crude oil to foster local production at affordable process to the populace; enabling environment that is supported with the provision and security of infrastructure and fair and equitable opportunity for players and operators to stimulate investment flow.
There should also be regularity in plants maintenance culture and other experienced operational issues. Government should declare a state of emergency in the downstream oil and gas sector and convene an all stakeholders forum to come up with concrete and sustainable steps with reliable timeline for achieving demand and supply equilibrium through local refining.”
The panelists added that the country should keep with Organisation of Petroleum Exporting Countries’ (OPEC) principle that member countries should hold good grip of the commanding height of their economy. “Our expectation is that the Petroleum Industry Bill (PIB), when passed, will clarify the rules and procedures that will entrench good governance, transparency and accountability in the oil and gas sector as well as operational and fiscal terms,” they further stressed.
Speaking during a courtesy call to Kachikwu at the Corporate Headquarters of the NNPC in Abuja, the U.S. Ambassador to Nigeria, James Entwistle, said the Washington was willing to provide all necessary support to the corporation’s new management to realise its set goals and objectives.
Entwistle noted that though the job of the GMD of NNPC was about the most challenging job in Nigeria, the U.S. is convinced that Kachikwu has the skills, training and requisite experience to lead the oil and gas industry in Nigeria towards the path of growth and sustainable development.
Commending the U.S. for the pledge of support, Kachikwu reiterated the determination of the new NNPC management to implement the spirit and letter of President Muhammadu Buhari’s reform agenda in the petroleum industry.
The GMD stated that the new NNPC would be driven by a deep sense of commitment to service delivery anchored on the principle of transparency, efficiency, people, purpose and profit.
In a statement by its National Secretary, Danladi Pasali, in Abuja yesterday, IPMAN said it has been yearning for positive changes in the oil sector such as the on-going reforms as being executed by the NNPC chief. IPMAN noted that the downstream oil sector was almost dead before the rescue mission of the present administration, adding: “No genuine investor was happy with the past situation of the oil sector.
Several of our investments were ruined due to corruption at all levels, favouritism and impunity.” It, therefore, submitted that with the appointment of Kachikwu, IPMAN was convinced that the Buhari administration is ready for business.
