Major marketers yesterday said November 1 is not feasible for the Federal Government’s planned deregulation of the oil sector.
Deregulation, which is the government’s answer to the ailments of the sector, is expected to save a huge amount of cash and ensure a steady flow of products – according to the government. But, opponents of the policy insist it will raise fuel prices and compound the misery of the poor.
Expressing doubts over the date at a conference in Lagos, the marketers, who play a key role in fuel importation, said there were no indications that the government is ready for the exercise.
But the Minister of State, Petroleum Resources, Odein Ajumogobia, said there was no going back on deregulation.
They spoke at the conference entitled: Investing and Profiting Downstream Africa, organised by Oil Trading and Logistics (OTL).
The marketers said as stakeholders in the industry, they had not seen anything to show that the government was ready for deregulation.
According to the Executive Secretary, Major Oil Marketers Association of Nigeria (MOWAN), Mr Obafemi Olawore, the Petroleum Products Pricing Regulatory Agency (PPPRA), which controls fuel price, is not doing anything towards the take-off of deregulation on November 1.
He said: “If the government wants full deregulation to succeed, there should be consistent and reliable policy framework, which will guarantee investors’ confidence, a level playground for all players and an empowered industry regulator.
Olawore noted that the industry needed an empowered Department of Petroleum Resources (DPR), different from the present one, which he described as weak.
In a deregulated environment, he said, such a strong DPR would be able to stand against anti-trust collusion. The industry’s regulator does not have a laboratory, he claimed.
Olawore said: “The regulator in a deregulated environment should be able to stand against the government’s usurpation of its powers as currently done by the Nigerian National Petroleum Corporation (NNPC).
He called on the National Assembly to pass the anti-trust legislation part of the Petroleum Industry Bill (PIB) before “full deregulation” could take off.
Besides, he said bottlenecks at the ports, including those from the Customs Service, should be addressed before deregulation.
He noted that anytime a vessel is detained at the jetty, other vessels behind it accrue demurrages of between $15,000 and $30,000 daily.
Managing Director of Mobil Oil Nigeria Plc Mr. Tunji Oyebanji said there should be a strong and vigorous anti-trust mechanism in place before deregulation.
In his view, “the development will prevent dominant players coming together to determine how much petroleum products should be sold”.
Oyebanji said the anti-trust law should be as strong as it is in Europe and America, adding that in Europe, if evidence of violation of the law is proved, it attracts serious sanctions.
In America, he said, even a merger would not be allowed to dominate the industry, citing the merger of Mobil and Exxon, where the companies were asked to divest some of their downstream equity holdings.
Oyebanji said: “Controlling and dominating the industry by a few individuals or entities would put the sector in trouble. The regulator has to provide a level playing ground for every participant to have equal opportunity. The regulator should ensure that no person through access to government or government agency has undue advantage over other competitors. The sector should be a free market where people can enter and exit at will.”
In his paper entitled: “Investment in the downstream”, Ajumogobia said deregulation was imperative and there was no going back on it.
He said Nigeria represents the downstream market in Africa and should be the downstream hub in the region. He said: “It was very important for us to consider that a holistic framework from which Nigeria operates will affect other African countries.”
The government, he said, spent N650 billion on subsidies last year, adding that besides, Nigeria is still the only member of the Oil Producing Exporting Countries (OPEC) still importing refined petroleum products and has become so dependent on imported refined petroleum products.
Noting that presently there is partial deregulation, Ajumogobia said petrol and kerosine were highly subsidised, adding: “To close the gap between supply and demand, there must be full deregulation of the downstream sector.”
Deregulation, he noted, would take the control of the downstream from the government, which has resulted in the mismanagement of existing refineries and lack of investment in the sector because of lack of incentives.
Ajumogobia spoke of infrastructure constraints, including the inability of the ports to support imported products as another reason for deregulation.
He highlighted other inefficiencies arising from the government’s control of the downstream, adding that the country needs self-sufficiency in refining, regular supply of products at affordable prices, creation of favourable investment plan to aid the harnessing of the enormous potentials in the oil and gas industry and a downstream sector that is self-sustaining, guaranteeing returns on investment.