Downstream Deregulation, Win-Win for All Stakeholders – Operators
Key operators in the Nigerian downstream operation have said that the Federal Government’s decision to deregulate the downstream sector of the nation’s oil and gas industry was a welcome development, however, long overdue.
Speaking during the Nigeria Petroleum Downstream Consultative Summit webinar organised by the OTL Africa Downstream in conjunction with Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and Petroleum Products Retail Outlets Owners Association of Nigeria, among others, the operators reiterated their support for full a deregulated sector. Adding that full deregulation of the sector is in the best interest of all stakeholders, a win-win for operators and consumers alike.
The discussion which centered around ending a subsidy regime, a call for full deregulation of the downstream petroleum industry, the operators posited that a holistic framework, a level playing field for operators created by the government through its key regulatory role are essential in the new regime.
Speaking at the online summit, the Chairman MOMAN, Mr. Adetunji Oyebanji, said that the twin effect of a global pandemic leading to unprecedented low prices of crude and refined petroleum products has presented a unique opportunity for Nigeria to really take some fundamental decision as far as the downstream industry is concerned.
The MD of 11 Plc who described the deregulation of the downstream operations by the government as a bold step said that it presents opportunity for market forces to determine the prices of petroleum products, particularly, of PMS.
Oyebanji, however, noted that there was need for private sector operators’ contributions towards government policy formulation on the downstream operations.
Continuing, he hinted that the downstream sector of the nation’s oil and gas industry require very significant investment in distribution facilities, stressing that “the only way you can really attract that kind of investment is to create an environment of certainty for the operators. An environment where they can get decent returns on their investments.”
“Therefore, our argument for moving for full deregulation is that it will benefit the industry and the country, tremendously by attracting the kind of investment. The situation that exists in the telecoms industry has attracted significant investment in that sector. The downstream sector needs more investment. And we believe that creating that kind of environment where the market determines the prices of product will give the operators the kind of certainty they require.
“And this is all through the value chain. Uncertainty is not a friend of investment and we believe that this is the time, this is the opportunity,” Oyebanji said.
Speaking also, the Chairman of DAPPMAN, Dame Winifred Akpani, dispelled the notion that full deregulation would mean consumers paying more, said that the policy would be beneficial to both consumers and operators.
According to Akpani, “Deregulation does not necessarily mean you are going to pay more, especially now we all know that globally, oil prices are so low; if anything, we are paying less. Today, if we had full deregulation, I am sure the pump prices would probably have been less than N125 litre in the past few weeks because prices really went so low.”
She stated that full deregulation will pave way for healthy competition among operators. “It is going to be Company A against Company B. At the end of the day, it is the consumers that will benefit more. They are going to get better prices. We understand that when prices of oil go up again, pump prices are going go up again. It is going to be win-win for everyone.”
Also, the Group Chief Operating Officer of MRS Holdings, Amina Maina stated that the deregulation policy was long overdue, hinted that for depot owners, it is the best thing that can happen.
She hinted that MRS had anticipated the deregulation of the downstream operations years ago and had invested in a petroleum jetty facility – the largest in West Africa. “Today, we have the largest jetty facility not just in Nigeria but within West Africa. Our facility can take a 100,000MT LR2 vessel. It is a lot of investment. You can only make that kind of investment because you anticipate that the market will get deregulated at some point.”
Speaking further, Maina said that for retailers, it is going to be a service-driven industry, because “there won’t be the comfort of government regulating price and you have a fixed margin. You are now going to determine what your margins will be because the market is now deregulated. You will fix your prices, you will have do those things that will make people to come to you.”
Similarly, the Managing Partner, Teno Eenrgy Resources Limited, Mr. Timothy Okon, said the fact that Nigeria does not have the luxury of fixing the price of crude oil, makes it absurd for the country to fix the price for product it doesn’t control.
He said the government should redirect the money for fuel subsidy to building infrastructure, education and health sectors. He disclosed that between 2006 and 2018, Nigeria expended $63 billion on subsidies.
Okon said: “This is an enormous amount of resource for a country that needs to educate its young people, to build health centres, to create the basis for this economy and to create employment opportunities.
“The key thing really is to have the political will to ease out of this current situation, and the ideal time is now when clearly oil prices are low. Things like education and health are quite fundamental if you want to redirect subsidies; those are the areas in which you build a more egalitarian society in the future.
The President of the Petroleum Products Owners Association of Nigeria, Dr Billy Gillis-Harry, said the group supported total deregulation and that it would be wrong to assume that retail outlets operators were indifferent to the initiative.