‘Infrastructural imbalance in Oil and gas sector slows investment’

With Nigeria’s oil Refineries still producing at an epileptic average of less than 15 percent of its installed capacity and the current infrastructural imbalance playing out in Nigeria refining capability. It will be difficult to attract the right kind of investment industry operators observe.

They observe that with 4 non-functioning refineries built in 70s and early 80s to service over 180m Nigerians compared with Saudi Arabia with a population of 26m that has 16 functional refineries, this present a worrying time for Nigeria as the second largest economy in Africa by GDP.

Operators in the downstream petroleum sector of the economy have urged the Federal government to urgently address the gross decadence in infrastructure in the oil and gas sector as this will encourage investment to grow the economy.

Ken Abazie, Chairman of the Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry only recently revealed that statistics has shown that proceeds from the crude oil sales contributes in the neighbourhood of about 88 percent of the total revenue accruable to the Federal government of Nigeria. This trend has remained so in the last 50 years without any significant infrastructural development in the downstream.

According to him, “It is a big shame that after over 55 yrs of the commencement of drilling of crude oil in Nigeria, we don’t have a functional refinery. Government should go out of its way to get investors to invest in refinery in the country. Nigeria should be able to refine all its 45 million litres daily requirement and even export”.

Abazie opines that Government as a matter of urgency must declare emergency on the refining of petroleum products in Nigeria saying that Nigeria requires in the neighbourhood of 40-45 Million liters of refined petroleum products daily but the country are scarcely supplying up to half of the requirement currently.

The gap in supply has been due to the policy somersault of the present administration which has been fuelled by the attempt by the government to supply all the needed petroleum products of the country without private marketer’s participation, he observes.

“Refined petroleum product are imported and funded by forex. The unavailability or inadequate volume of foreign exchange and its price has gone a long way to cripple a lot of companies in the downstream. This has in a very painful way affected the volume of import that our members have been able to execute in the last eight months”.  Abazie added.

Tunji Oyebanji, Managing Director, Mobil Oil Nigeria Plc insist that easing of regulatory environment would boost investor considerations and bring about a competitive environment which would in turn bring about self sufficiency in local refining.

Oyebanji observe that the supply challenges the country was experiencing would not go away until government reviewed its import allocation system, which gives NNPC a higher slot for the importation of PMS.

He disclose that the sector had not progressed due to the pervading participation of government in the affairs of the industry, and until that was cleared, “we will not see the benefits that accrue to the consumers and the economy at large.”

Operators are worried that High exchange rate risk exposure by depot owners and marketers as matured letters of credit (LCs) of over $1 billion are yet to be honoured, creating a major credibility problem for the fuel importers.  Many of their offshore suppliers have not been paid. Some have lost their credit lines

Analysts pointed out that the issue of policy somersault and inconsistency present a major challenge in the oil and gas sector as in other sectors adding that we have arrived at a situation whereby investors are not sure of the sustenance of their investment.

They further insist that the situation in the country at the moment would not allow for proper planning nor would it stimulate investment, be it internal or external. This would directly point to the fact that we should expect any meaningful growth in this sector for now. This is not good for investors and the country at large.

They observe that a complete deregulation of the downstream sector would encourage the construction of new refineries; liberalisation of fuel import and open access to oil and gas facilities such as pipelines, depots, jetties etc.

Reginald Stanley, managing director, Petrowest Energy Resources opines that the country’s refineries had been producing below 20 per cent capacity in the last decade which he insist had encouraged massive importation of petroleum products in the country and fuelling inefficiency and loses of revenue.

He pointed out that 90 percent of the country’s pipelines were out of operation which had necessitated high road transportation for distribution of petroleum product.

KELECHI EWUZIE