The deregulation of Nigeria’s downstream oil sector will not be effective in the absence of functional refineries, oil marketers have said.
According to them, this had been one of the reasons why the price of petrol in Nigeria had not been reflective of the fluctuations in the cost of crude oil in the international market.
They, however, endorsed moves by the Federal Government to extend the rehabilitation exercise on refineries to oil refining facilities in Kaduna and Warri, while speaking with our correspondent in Abuja on Friday.
On Tuesday, the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, stated that NNPC had put in place a transparent process for the rehabilitation of the Warri and Kaduna refineries.
He said the engineering, procurement, construction, installation and commissioning services contracts of the two refineries would be awarded in June 2021.
Kyari disclosed this while speaking on the already signed $1.5bn rehabilitation exercise contract of the Port Harcourt Refining Company.
Nigeria’s three refineries in Kaduna, Port Harcourt and Warri had been dormant for years, as the country had depended solely on NNPC for the importation of refined petroleum products despite the huge subsidy costs incurred by the corporation.
Commenting on moves to get the dormant refineries functional, oil marketers told our correspondent that without functional refineries there would not be effective deregulation of the downstream oil industry as being pushed by the Federal Government.
“The rehabilitation will further prepare the downstream sector for proper deregulation,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, said.
He added, “This is because you cannot effectively deregulate the downstream sector when the local refineries are not working.
“If the local refineries are working, it will help in controlling the pricing of refined products and you will see an open economy where investors can come in. So the local refineries must work as a control channel.”
Ukadike said the country must stop spending billions of dollars on petroleum products subsidy, stressing that oil marketers welcomed the plan to rehabilitate refineries despite the opposition in some quarters.
The IPMAN official said, “Since we cannot be fully dependent on the importation of petroleum products, we should try as much as possible to fix our local refineries. We cannot continue paying huge subsidy on petroleum products.
“There is no way you can carry out full blown deregulation without ensuring that the three existing refineries are working. So we welcome the initiative.”
On other benefits of getting the refineries functional, Ukadike said, “It can also help in terms of reducing transportation and haulage on our roads.
“This is because some marketers move all the way from Kaduna, Katsina, Sokoto to Apapa in Lagos and Warri to buy petroleum products and the Federal Government is paying a lot of money for this through PEF (Petroleum Equalisation Fund).”
He stated that if Kaduna and Warri refineries were producing, issues of wear and tear of vehicles, transportation cost and payments by PEF would also reduce.
“So you can’t have full deregulation without these refineries working, as well as other private sector refineries and the modular refinery projects. This is what helps the economy,” Ukadike stated.
Also, the President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, said the rehabilitation exercise should be encouraged but noted that the right contractors must be allowed to handle the projects.
“It is something that should be encouraged but we should be cautious with the investments we make in them. We must engage investors that will bring results,” he stated.
Gillis-Harry further corroborated the position of his IPMAN counterpart, as he stressed that deregulation of the downstream sector had yet to work effectively due to lack of functional refineries in Nigeria.
