Stakeholders Seek Full Deregulation of Downstream Sector

Ugo Aliogo

Stakeholders has advised that there is a need for the downstream sector of the oil and gas industry to be freed from government control and ensure that there is also full deregulation to make it attractive for private investors to build refineries to meet Nigeria’s needs and also of West and Central Africa.

The advise was given yesterday in a comunique jointly signed and made available to THISDAY by the Chairman, Board of Trustees, Aret Adams Foundation, Mr. Egbert Imomoh, and the 2nd Vice-Chairman, Mr. Charles Osezua, it was noted that the existing refineries should be rehabilitated and brought back into operation to 80 to 90 per cent capacity utilisation, stating that it is a least cost option compared with building greenfield refineries of equivalent capacities.
The statement noted that the rehabilitation of the refineries can be achieved either through a private sector led financing and rehabilitation initiative which they noted are being pursued by the Nigeria National Petroleum Corporation (NNPC) “or through outright divestment of majority equity shareholding to the private sector from the current 100 per cent ownership by government.”

Imomoh and Osezua in the statement also stated that the refineries should be managed on a fully commercial governance structure in which decision making should rest with the management and board of the plants, with full control of their funds.

The statement further stated that the refineries should market their products directly to off-takers, in order to recover maximum value, adding that government should create an enabling environment with fiscal incentives to attract investments into refining in the country and make this happen.

The statement added that those interested in going into modular refining should carry out feasibility studies, noting that the Department of Petroleum Resources (DPR) should grant licenses and facilitating discussions for access to crude oil feedstock from upstream companies, “modular refineries should be treated as business ventures, not social services.”

According to the statement: “In spite of the challenges facing the industry, opportunities exist to attract investors given that even if all the current refineries were operating at maximum capacity, there still exists a robust demand for petroleum products. Current aggregate product demand is put at equivalent refining capacity of 750,000bpd. Hence at least 300,000bpd capacity is required right now.

“With population growth, the shortfall in refinery capacity would rise to about 550,000bpd by 2028 assuming a growth rate of 3% per annum. Furthermore, Nigeria actually supplies petroleum products to neighbouring African countries through informal channels. An investor could target to formalize this.

“This must have informed the decision by Dangote Group to invest in the construction of a 650,000bpd refinery which is expected to come into operation by 2020 or soon after. The actual conventional refinery capacity is 450,000bpsd, with the other 200,000bpsd being reserved for petrochemicals feedstock. Thus there would still be scope for another greenfield plant of at least 250,000bpd capacity, simply to meet Nigeria’s needs. A higher capacity would be justified if the intention is to supply the West and Central African regions.”