Hope dims on fuel import reduction

With the initial planned privatisation of the nation’s four refineries, many watchers of the downstream sector, involving refining and distribution of petroleum products had expected a significant reduction in fuel importation. UDEME AKPAN reports that the continuous importation will have adverse effect on the economy following President Goodluck Jonathan’s reversal of the policy.

It was the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke that first confirmed that the nation’s four refineries with 445,000 barrels per day, bpd capacity would be privatised this year. In an interview with Bloomberg TV Africa in London last November, She stated, “We would like to see major infrastructural entities such as refineries moving out of government hands into the private sector. Government does not want to be in the business of running major infrastructure entities and we haven’t done a very good job at it over all these years.

Probably pleased with the success of Tuesday, January 14, 2014 www.nationalmirroronline.net SUPER TUESDAY the privatisation of Electricity Generation Companies, GENCOS and Electricity Distribution Companies, DISCOs, the Minister stated that the privatisation of the refineries would be completed within 18 months.

The minister was not alone. The Bureau for Public Enterprises, BPE stated that it was working with the Nigerian National Petroleum Corporation, NNPC to accomplish the ambition. BPE spokesman, Mr. Chigbo Anichebe stated, “We are working with the NNPC and Ministry of Petroleum Resources on the privatisation of the four refineries.

We are just in the preliminary discussion with them and very soon, we will make public the work plan for the privatisation processes, including the engagement of advisers to advise us on the transaction.”

Expectedly, the pronouncements attracted the comments of relevant stakeholders. For instance, the Executive Secretary of Major Marketers Association of Nigeria, MOMAN, Mr. Timothy Olawore stated that policy would enable the Federal Government to place the burden of managing the nation’s four refineries on private operators.

Olawore envisaged that the injection of additional resources, including funds would increase operational capacity of the plants, thus leading to a gross reduction in importation and foreign exchange conservation. But this was not to be.

move stating that it has never been the plan of the Federal Government to privatise the plants located in Port Harcourt, Rivers State, Warri, Delta State and Kaduna, Kaduna State. The spokesman of President Jonathan, Dr. Reuben Abati stated that the government has no plan to place the plants in the land of private local and foreign investors.

Reacting to the proposed strike by oil workers, under the auspices of the National Union of Petroleum and Natural Gas Workers, NUPENG, Abati stated, “Government is not going to sell any refineries. There is no such plan and there is no presidential approval for such. Nobody, not even the minister of petroleum has powers to sell any government property.”

This reversal has a lot of implications. First, it means that the nation would not be in a position to increase its limited domestic refining capacity in a short and medium-term as all the plants are not in good condition. In other words, the nation may continue to engage offshore refining and direct importation, which come at additional costs.

The costs are always incurred in the areas of transportation and storage. In a bid to sustain fuel importation in the first quarter of 2014, the Federal Government has selected over 30 oil-marketing companies for the 2014 first quarter fuel importation programme.

Investigations over the weekend showed that PPPRA has already compiled the list of importers for the programme. Authoritative source at the agency that preferred not to be named stated that the list has been submitted to the Ministry of Petroleum Resources for scrutiny and approval.

A reliable Ministry of Petroleum Resources said, “the selection was based on the past record of the companies. Many of the firms have participated in the programme in the past few years. Fuel supply is crucial, especially at the beginning of 2014. We cannot afford to engage the services of companies that failed to deliver in the past.”

He stated, “That clearly explains why we have ensured that only committed firms that have the capacities to deliver were shortlisted for the importation. One major condition is that the importer must own a depot that we cannot compromise.” From all indications the importation would culminate to a continuous drain of the nation’s foreign exchange at least for a reason.

The importation usually comes at additional costs, including transportation and storage. For instance, the Federal Government’s fuel subsidy for the month of December 2013 has fallen from over N1.9 billion recorded in September to N1.6 billion based on the estimated daily consumption of 36 million litres of the product. The latest PPPRA, statistics showed that government’s subsidy, which stood at N53.53 per a litre in September has fallen to N46.63 per litre.

The template of the agency stated that the landing cost, including cost and freight, traders margin, lightering expenses, NPA, financing, jetty depot thru’ put charge, and storage amounted to N128.14. The figure was even higher in September 2013. The PPPRA data showed that the Federal Government’s fuel subsidy was over N1.9 billion based on the estimated daily consumption of 36 million litres of petrol per day.

The statistics showed that government’s subsidy, which stood N55.21 in August crashed to N53.53 per a litre. The template showed that landing cost, including cost and insurance, traders margin, lightering expenses, NPA, financing, jetty depot thru put charge and storage charge amounted to N135.04 while sun total margins, including retailers, transporters, dealers, bridging fund, marine transport average and admin charge amounted to N15.49, thus increasing total cost to N150.53.

These included OPEC basket such as Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela) which price is presently in excess of $100 per barrel.

Consequently, global refiners who export petroleum products, including petrol to Nigeria have in recent times incurred higher costs in the process of procuring, refining and shipping products to Nigeria and other parts of the world. The costs, it was learnt have been passed to net importing nations, including Nigeria, which have over the years resorted to increased fuel importation to meet domestic demand because of the inability of local refineries to refine adequate fuel for its citizens.

The government, which budgeted to spend N972.138 billion on fuel subsidy this year has not yet paid all importers for last year. The National President of Oil and Gas Service Providers Association of Nigeria, Mr. Colman Obasi challenged the government to initiate measures capable of leading to the construction of new refineries in the nation.

He said, “The privatisation of the old plant would not be a bad idea. But it is even better to think of building new modern plants in the different parts of the nation.” Obasi pointed out that the plan may not work out without the completion of work on the nation’s Petroleum Industry Bill, PIB.

“The plan to construct new refineries sounds good but it may not work out without the passage of the PIB into law. There is a great need to pass the PIB into law,” he stressed. Investigations showed that the legislators are still far from passing the bill into law, barely eight years after the late administration of late President Musa Ya’Adua had forwarded it to the National Assembly. Sources at the Assembly doubted the possibility of passing the PIB into law this year as the consciousness of the legislators seemed to be focused more on politics than legislation.

This may have more negative impact on the sector. The Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr. Andrew Yakubu, decried the persistent attacks on major pipeline arteries supplying crude oil to export terminals stressing that the menace has impacted negatively on the nation’s economy.

Yakubu made this known during his submission to the Senate and House of Representatives Joint Committee on the Medium Term Expenditure Framework, MTEF, for the period of 2014 to 2016. Yakubu, deplored the frequent attacks on the Bonny to Trans Niger trunk line, the Forcados, the Brass and Nembe crude trunk lines which ultimately have impeded revenue accruals from the Oil and Gas sector to the economy.

He declared that the menace is now a national embarrassment considering its negative impact on the economy and urged all relevant stakeholders to declare war against illegal bunkering and pipeline vandalism.

He submitted that the scheduled turnaround maintenance and rehabilitation of the refineries are on, disclosing that at the moment Kaduna Refining and Petrochemical Company, KRPC, is operating at 60 per cent capacity. From all indications, there is a compelling need to address all the challenges that threaten the operations of the downstream sector in order to ensure adequate products are supplied to all parts of the nation on a sustainable basis.