By Thompson ABISOLA
Major Oil Marketers Association of Nigeria (MOMAN) has decried the neglect of the downstream sector and urges for a policy direction for the sector.
Speaking during a media interaction on Lagos on Thursday, the new Chairman of MOMAN, who also doubles as the Managing Director of 11Plc (formerly Mobil Oil Nigeria Plc), Mr Adetunji Oyebanji, said that there is need for policy on the future of the downstream sector “in next five years.
Oyebanji said that there must be a policy direction that will put the industry on a sound footing for the future.
The MOMAN members include Conoil Plc, 11 Plc formerly Mobil Oil Nigeria, Forte Oil Plc, MRS Oil Nigeria Plc, OVH Energy Marketing Limited- an Oando licensee, and Total Nigeria Plc.
According to him, Industry framework should be reviewed; legislation like the Petroleum Industry Bill (PIB) should be passed. Without this, we have an industry that is naturally dying.
He argued that MOMAN members are really suffering from lack of policy direction for the sector.
“Once there is no scarcity, people don’t care about what is going on along the distribution value chain. Jobs are being lost, other companies that provide logistics for the sector are dying. In the long run, it will have a negative impact on the economy as a whole.
“The entire value chain needs to be catered for through government policy. Most international oil companies have divested from the downstream sector, others have closed their terminals and this is not good for the industry,’’ he said.
The chairman explained that the reason for unattractiveness in the downstream sector is due to the fact that the sector is regulated as against deregulation, “Nigerian National Petroleum Corporation (NNPC) is the sole importer of premium motor spirit (PMS) otherwise called petrol and nonpayment of fuel subsidy debt.
“We are tied to a margin that we cannot adjust. Poor profit margin, low investment in infrastructure like pipelines, tank farms, depots and trucks are factors hindering growth in the sector.
“When asked to explain about partial payment of subsidy debt by the federal government recently, he explained that “a promissory note was raised to cover part of the legacy debt.
“We have issues with the banks on how to liquidate the notes. And we are still expecting the payment of the outstanding in near future. Reconciliation between marketers and PPPRA is still ongoing.
“Infact, the Central Bank of Nigeria (CBN) has directed commercial banks to fix interest charges on the debt effective 1st July 2017,’’ Oyebanji added.
He said that resumption of petroleum products importation is not being contemplated at the moment because the regulatory environment is not profit driven.
He also observed that the understanding expressed by the Petroleum Products Pricing Regulatory Agency (PPPRA), of possible downward review of pump price of petrol following decline in crude oil price in the international market may not necessarily prompt price adjustment.
The MOMAN boss explained that price adjustment is a function of several factors of which crude pricing is just one of the various indices.
He said that the exchange rate is a major determining factor, and that except the present price template is reviewed taking into account all the changing market variables pump price may likely not change in either direction.
He noted that since the association is operating under a regulated regime, it can only follow guidelines issued by the industry regulator.
The chairman while reacting to a question on whether price adjustment of petrol is convincing and conceivable, he said, available infrastructure may not support the idea, because beside high exchange rate, other associated costs like, bridging which is done by road takes toll on transportation of products.
He said, marketers are currently operating at huge loss and many operators have shut down operations because the sector is highly regulated and not investment friendly.
“We are currently tied to a margin which is fixed and we cannot adjust. If my input cost is going up and exchange rate is going up it affects our business, pump price has to do with exchange rate, so we have to understand the economics.”, he said.
The Executive Secretary of MOMAN, Mr Clement Isong, said so far MOMAN members have received about N237 billion in the form of promissory note, and the association is engaging the commercial banks on other issues especially on how the notes can become cash.
Isong, however, expressed the hope that a second tranche of the payment would be made by government soon.
Meanwhile, Mr Adetunji Oyebanji is the new Chairman of MOMAN, he took over from Mr Andrew Gbodume of MRS.
It would be recalled that the PPPRA, recently in a statement insinuated that Nigerians should expect to pay less for premium motor spirit (PMS) also called petrol with the recent plunge in the price of crude oil in the international market.
According to the agency the reduction in the price of crude oil has led to the price of petrol falling below the government approved pump price of N145/litre.
In addition, the agency said it expects NNPC to start recording over-recovery instead of the under-recovery as has been posting if the trend continues.
It also expressed confidence the situation will enable other marketers commence importation of PMS (Petrol).
The General Manager, Corporate Services Department, PPPRA, Apollo Kimchi in the statement issued in Abuja, penultimate week said, “With the recent plunge in the price of crude oil in the international market, the Agency has observed a downward trend in the Expected Open Market Price of PMS, below the government approved pump price of N145/litre.
“It is expected that over-recovery could be witnessed and if this trend continues, thus will enable other marketers commence importation of PMS (Petrol),” he said.
