By Abisola THOMPSON
An Energy Analyst, Mr Jubril Kareem, on Thursday urged President Muhammadu Buhari to focus more on reforming the Nigerian National Petroleum Corporation (NNPC) for more effective performance in the next four years.
Kareem said in Lagos that it became imperative for the Buhari-led administration to restructure the operations of the corporation to boost the nation’s economic growth.
According to him, some of the key expectations from the Buhari administration in the next four years are to ensure effective reform of the NNPC and passage of the Petroleum Industry and Governance Bill (PIGB) into law.
“Other key expectations include resolving the pricing of petroleum products and making a key decision about the three refineries.
“The need to continue spending significantly on the refineries as we expect the Dangote refinery is counter-intuitive.
“The indecision about the PIGB and necessary reform of NNPC continue to hinder investment in the upstream space,’’ said Kareem, who was a former Head of the Energy Desk at Ecobank.
Kareem said that several projects stuck in planning stages were unable to progress to Final Investment Decision ( FID) as investors continue to weigh the impact of expected change to industry regulations when eventually the PIGB becomes law.
On deregulation and downstream challenges, he said the main issue still remained petroleum product pricing, the lack of flexibility in Premium Motor Spirit (PMS) while pricing would continue to result in higher subsidy expenses for the NNPC as crude oil price continues to recover.
“ We need to allow for a new pricing mechanism where price of PMS can better reflect the international price and cost of import, and reduce the burden on NNPC and by extension increase government revenue.
“PMS remains an inappropriate product to subsidise if the aim is to benefit the low income masses,” the analyst stressed.
The oil and gas expert said that the sector had been relatively stable after recovering from issues related to Niger Delta militants in 2015/2016, adding that however, it had also remained stagnant with little progress on key reforms that were anticipated.
He said that the Buhari-led administration had done well in putting in place a system to deal with outstanding cash calls from NNPC’s Joint Ventures (JV’s).
Kareem said that the NNPC still remained an opaque company with poor transparency despite the administration’s supposed low tolerance for corruption
“The issues surrounding petroleum product subsidy still remain unresolved and NNPC continues to incur significant subsidy expenses which are now even more shrouded in opaqueness more severe than the previous administration.
“We simply cannot quantify how much NNPC is spending on petroleum subsidy under the current administration.
“ Also despite significant expenses, the nation’s three refineries are still operating at abysmal capacity utilisation below 20 per cent.
“The poor operation level of the refineries does not justify the capital expenses on renovation attempts.
“Looking forward, the private petroleum product marketers and depot owners need to start preparing for commencement of Dangote refinery and how to realign their operation to receive products from the refinery as against import,’’ Kareem said.
