The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said that the reforms embarked upon by the government are targeted at cutting petroleum products’ importation by at least 60 per cent by 2018 and thereafter position the country for net export by 2019.
The minister, who said this in Lagos on Monday at the 10th Oil Trading and Logistics Africa Downstream Expo, stressed the need to fully liberalise and deregulate the midstream and downstream sub-sectors such that the open market prices of petroleum products would be cost-reflective and market-driven.
Represented by his Senior Technical Adviser on Upstream and Gas, Mr. Gbite Adeniji, the minister highlighted the need to build refineries and run them as profit centres that would purchase crude at international prices and deliver products at export parity prices, saying, “This is the only viable basis for financing new infrastructure.”
“Perhaps, the most important part of reforms in the midstream and downstream sub-sectors is creating a profitable products-to-market system for Nigeria and removing hindrances and bottlenecks through incentives and regulatory frameworks.”
According to Kachikwu, a key priority area in the road map for the oil industry is increase in local refining production capacity through the implementation of modular refineries and co-location.
He said the target “is to ensure that petroleum products importation is reduced by at least 60 per cent by 2018, and thereafter position Nigeria for net export by 2019.”
He stressed the need for a strong independent regulator to superintend activities in the sub-sector, “whose role is not price-setting but to develop and enforce open, fair and transparent rules in the downstream oil and gas sector.”
He added, “This ensures that pricing will be conducted on a market-derived basis. We need to establish an oil and gas infrastructure protection squad, with the responsibility for dealing with crude and products theft, vandalism and general criminality, which is currently on an upsurge in the entire industry.”
The Group General Manager, Crude Oil Marketing Division, Nigerian National Petroleum Corporation, Mr. Mele Kyari said the government had resolved the challenge of foreign exchange availability facing marketers, but noted that some of them were rejecting the dollar supply provided by the government to facilitate the importation of the products.
He, however, said, “There is no way today you can take petrol to the retail outlets and sell it at N145. So, if that is true, and I believe that is true because we all go to the market and we know what is going on, why can’t we sell above N145?
“And I know today that it is impossible to announce tomorrow that petrol price is N150. This government cannot sustain it. It is unfair even to expect it to do that today. That is the truth. But all of us, including myself, are not ready to take that number. That is why Vitol, Northwest, Petrocam, and others, are not importing; it is not forex.”
Kyari said the government has created a niche market for forex, explaining thus, “We have ring-fenced all forex from the upstream such that those forex will be available at a fixed price; a price that the CBN has agreed. I am part of the people who are involved in making sure that the forex is available.
“I am part of the committee allocating those forex, and I know and I can see some of you here; we gave you forex, but you returned it. And the reason that was given was that the forex was not enough to import. But that is not the truth. The truth is that if you go to the market today and buy products and land here, you are required to sell it at N145 maximum. That is the main reason why people are not importing.
“As I speak to you today, we have stranded forex that nobody is ready to pick up. So, we have closed the chapter on forex.”
Kyari, however, said the NNPC was very comfortable and could sell petrol at N145 per litre.
He said, “We saw the challenges coming and we decided to take a very competitive and a long position in the market, meaning that we planned ahead. So, that is why our product is selling at N145 and below.”