‘To encourage investment, address infrastructural imbalance in oil, gas sector’

Operators in the downstream petroleum sector of the Nigerian economy have called on 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.

They are worried that all the refineries are producing at an epileptic average of less than 15 percent of its installed capacity, stressing that with the current infrastructural imbalance Nigeria has in refining capability, it will be difficult to attract the right kind of investment.

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

Ken Abazie, chairman, Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry, in an interview with BusinessDay reveals that statistics have shown that proceeds from crude oil sales contribute 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.

Abazie opines that government, as a matter of urgency must declare emergency on the refining of petroleum products in Nigeria, saying, “It is a big shame that after over 55 years 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.”

According to Abazie, Nigeria requires in the neighbourhood of 40-45 million litres of refined petroleum products daily but the country is 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.

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

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

Stanley stresses on the need for NNPC fuel import to be reduced and policies put in place for marketers to drive the downstream, and reiterates the need for NNPC refineries to partner investors based on a 51 and 49 percentage arrangements and the need for diversification in the downstream, given the excess capacity of 129 depots.

On his part, Tunji Oyebanji, managing director, Mobil Oil Nigeria plc, notes that easing of regulatory environment will boost investor considerations and hence bring about a competitive environment, which would in turn bring about self-sufficiency in local refining.

Oyebanji observes 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 discloses 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.”