oil
Oil and Gas

Speech delivered by HON. JOSEPH IRANOLA AKINLAJA, Chairman House of Representatives Committee on Petroleum Resources Downstream at the 11th Edition of Oil Trading and Logistics (OTL) Africa Downstream Week in Oriental Hotel, Lekki-Epe Expressway, Victoria Island, Lagos.

Date Monday, October 23, 2017.

Time: 10 am

Protocols

I am extremely pleased to be present at this special purpose Oil Trading and Logistics Africa Downstream week; to the glory of God, today we honour its 11th edition. This platform is only getting better year-in, year-out, particularly in its positive approach to numerous issues affecting the downstream sector.

OTL is equally known for providing clear cut policy direction to all stakeholders in the relevant sectors of the petroleum downstream, whether it is for government, marketers, financial institutions, local and international investors, or any other industry practitioners that play significant roles in the value chain. Indeed and sincerely, I have the pleasure to say this is Africa’s leading downstream petroleum platform where ideas can be generated, discussed, harmonized and put to use for economic growth and prosperity.

Let me crave your indulgence distinguished participants to use a moment in appreciating the Speaker of the House of Representatives, Rt. Hon. Yakubu Dogara and the entire leadership of House of Representatives for the opportunity given me as the Chairman of Petroleum Resources Downstream Committee which is the reason why I have the grace and privilege to be with you esteemed dignitaries present here today.

Gentlemen and ladies, I feel so elated to participate at this important policy dialogue which is meant to address downstream sector where I have served for close to fifty-five years as a key stakeholder. I am also happy to see here present, seasoned professionals, leaders of businesses in the Petroleum Downstream Sector, top Public Sector Officials and relevant government agencies who would be making presentations which of course is the essence of this high profile gathering.

I have no doubt that this forum judging from its past records will accordingly unmask current business opportunities and the challenges plaguing the petroleum downstream sector, and to appraise current realities as Nigeria contends with unfriendly and unstable economic climate, occasioned by the persistent global oil price slump which has emasculated the revenue generation drive of most oil-producing nations including Nigeria.

Taking you down the memory lane, petroleum (oil) has claimed the top position in Nigeria’s export list, constituting a very fundamental change in the structure of the country’s international trade. Oil prospecting began in Nigeria as far back as 1908 but production and export started effectively in 1958 in Shell’s field located at Oloibiri. Other companies joined soon after independence and the number of oil producing and exporting companies keep increasing due to the lucrative nature of the business.

The share of oil in total export value rose from less than 1 per cent in 1958 to a peak of 97 per cent in 1984 and has not been less than 90 per cent since then. In the first half of 1990, it accounted for over 95 per cent of total exports and its share of GDP has ranged between 25 and 30 per cent in recent years.

There are significant investment opportunities in the downstream sector of the oil and gas industry in Nigeria. Statistics have it that there are over six thousand {6,000} independent petroleum products marketers and six {6} major marketers involved in the distributing and marketing of petroleum products across the country. To the best of my knowledge, there is a robust portfolio of planned projects aimed at increasing oil exploration and refining capacity. There are also evidences of Federal Government’s competitive bidding rounds for oil blocks licensing to strategically link developments in the upstream and downstream sectors.

Effectively, the opportunities in the Nigerian oil and gas sector could be divided into five distinct areas across the value chain; Upstream oil and gas development, Gas Infrastructure and Power plants, Refineries, Downstream, as well as Ventures and new businesses.

I have witnessed in Nigeria at some point when we were consuming an estimated sixty million {60,000,000} liters of refined petroleum products {PMS, DPK and AGO} per day and with population of over one hundred and sixty five million {165,000,000} people, growing at the rate of about 2.7% per annum with an estimated economic growth rate of 5.7% in the past five {5} years. The market for refined petroleum products in Nigeria, is established, growing notwithstanding that it has also witnessed some challenges one of which is the restiveness in the oil and gas host communities.

Recently NNPC has not gone into sleep mode to wait for investors; I think I can see the Corporation’s support for the Federal Government’s Seven Big-Wins initiatives on Gas Revolution, Refinery and Local Production, Business Environment and Investment drive, Niger Delta and Security, Stakeholder Management, Transparency and Efficiency, is being implemented through 12 key business areas. They are security, new business models, joint venture cash calls, reserve and production growth, Nigerian Production Development Company, gas development; and oil and gas infrastructure. Others are refinery upgrade and expansion; renewable energy and frontier exploration; ventures and common services; and staff welfare.

The Nigerian petroleum industry remains the largest and most vibrant in Sub-Saharan Africa with lots of potentials, especially in the deep water and untapped gas resources. There are unique opportunities for investors across the value chain from upstream to midstream to downstream, prospective investors should not therefore hesitate to partner with Nigeria. I have unreserved confidence to extend an open invitation to prospective investors around the world. Nigeria is the right investment destination where you can comfortably grow, sustain and recoup your investment within shortest possible time legitimately.

I am equally aware that there is commitment on the part of Nigerian government through NNPC to build modular refineries in oil producing states; plans to announce new investors for the nation’s refineries; withdrawal of idle refining licenses from investors; and $400m part- payment to IOCs to settle outstanding Joint-Venture cash call debts. The gas sector equally is experiencing a high demand underpinned by the growth of diverse demands (industrial, domestic, nuclear and power generation).

The sector is re-positioning Nigeria from being among the top gas flaring countries in the world to being the most aggressive in gas utilization growth. Robust growth in the last five years has delivered a rich gas sector portfolio that should generate significant income for the country in the future as well as fuel for the rapid industrialisation of the economy. I think these are progress that should be acknowledged.

Again, I must talk about the sustained strategic intervention of the Nigerian National Petroleum Corporation (NNPC) in the efficient supply and distribution petroleum products to private individuals, companies and corporate organizations. I have the privilege to say this because of my deep knowledge of its operations, being the Chairman of Downstream committee at the Federal parliament. Our committee is saddled with the responsibility of oversighting their affairs, therefore where they have fared well, the public needs to know, deservedly so.

It is on record commendably, that NNPC has also pegged the price of a litre of Premium Motor Spirit (PMS) otherwise known as petrol at N145 and assured that the price would block the drain through which government loses N16.5 billion monthly. This was based on foreign exchange conversion of naira to the dollar, the PPPRA put the calculations on its pricing template. A simple conversion of using foreign exchange at N305 per dollar, it is basically the secondary source that people buy foreign exchange from, versus the N360, which is the black market rate. If you convert it and throw it in, you will get about N141, N142 or N143. So there aren’t much of palliative elements left there for you to use. It is simply, ‘go out, find your product, your cost is covered, there is an opportunity for your efficiency to make money, come and deliver.

According to the PPPRA’s pricing template, the cost elements include cost/freight, N109.01; lightering expenses, N4.56; Nigerian Ports Authority (NPA) charges, N0.84; NIMASA charges, N0.22; financing, N2.51; jetty thru’put charges, N0.60 and storage charge, N2.00, which brings the landing cost to N119.74. The landing cost is added to distribution margins, which are retailers, N6.00; transporters allowance, N3.36; dealers, N2.36; bridging fund, N6.20; marine transport average, N0.15; and admin charges, N18.37, bringing the total distribution charges to N18.37. The addition of the landing cost of N119.74 to total distribution margins of N18.37 gives a total cost of N138.11 per litre, putting the price at between N135 and N145.

However, the reality is that the NNPC needs to be run as a business so they must begin to move the market to a point where private sector operators are more involved. If the country achieves that, everybody will compete and have a longer term view of the market from an investment standpoint. When 50 per cent or more of products are being brought in by marketers, there will be more activity in the sector, jobs will be created and more taxes will be paid to the government.
More importantly, the Nigerian National Petroleum Corporation, NNPC, and other key players in the petroleum downstream sector should see the interplay between them and that of members of the parliament as an indispensible element of the democratic process with potential positive spin-off effect on the oil and gas industry in the country.
The occasional struggles between the executive and legislature when handled with the interest of the Nigerian people at heart can be a healthy rivalry capable of unlocking the potentials of the nation for prosperity, good governance and democratic excellence. It is believed that a government business enterprise such as the NNPC, and by wider application, the oil and gas industry as a whole, will benefit from a constructive legislative-executive interplay that stimulates government agencies and parastatals to thrive and support our national and global aspirations, because Nigeria as most populous black nation forms part of the ‘books’ the entire world is reading in the petroleum sector.
Distinguished ladies and gentlemen, as I conclude, let me remind you that the world has become a global village in which accountability; shared responsibility and solidarity are the values shaping business, governance and policy formulation and implementation we must therefore continue to remain alive to these realities in order not to derail from our laudable socio-economic visions and aspirations.

As to be expected, a lot of kudos has gone to 8th Assembly, precisely THE SENATE for taking the initiative to pass the much talked about Petroleum Industry Governance Bill (PIGB) which is a part in whole of Petroleum Industry Bill (PIB) almost 17 years after the process commenced in April 2000; although, the House of Representatives has not passed the Bill yet. This is taking up the four Bills together as work in progress and would pass all within the next few months.

However, National Assembly should not be seen an author or purveyor of confusion, as some people may insinuate, because people must understand that this arm of government has its extant laws and rules biding it. The Senate has done its part in passing the Petroleum Industry Governance Bill whilst the House of Representatives is still working on the modification of the Petroleum Industry Bill (PIB). At the House of Representatives, if PIB is eventually passed it will open up the oil and gas sector to new local and international Investors for competitive growth and development in line with international best practices.

PIB, which is being considered in phases by the National Assembly, is set to overhaul the entire industry governance framework to fiscals and regulatory form of the oil and gas sector and address the various concerns of the host communities and other stakeholders. Rest assured the two chambers are working on the harmonization of this bill so as to have one unified working document which would be presented to Mr. President for final accent, by the grace of God that will be in the next few months from now.

However, one of the current challenges of the downstream sector of the oil industry is the need for all stakeholders to resolve the acute gridlock of traffic at the Oshodi-Apapa end of Lagos, instead of engaging in blame game all the time. Sadly, this situation has reduced petroleum products loading activities to about 30%. If it is not resolved, it might lead to the resurgence of petrol scarcity in Nigeria since Lagos accounts for about 60% of the supply and distribution of petroleum products in the country.

In closing, kindly grant me the grace to commend the brains behind OTL Downstream Africa for inviting me to this auspicious event. I assure you that the House of Representatives through our visionary Speaker, Rt. Hon Yakubu Dogara will continue to do our best to serve the interest of the citizens of this country especially in the downstream sector through appropriate and relevant business-friendly motions, bills and resolutions with the help of God and the continued assistance and cooperation from you all.

Let me also use this platform to make an open appeal to the organizers of this event that after the conclusion of this painstaking and meritorious exercise they shouldn’t hesitate to send to National Assembly a copy of communiqué which expectedly will help to set out the joint objectives being sought by all discussants and industry players.

Finally, I thank you for listening and wish you all prosperity in your individual and corporate endeavours as you journey further.

Have a wonderful and fruitful deliberation.

Thank you and God bless!

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