The Chairman, Major Oil Marketers Association of Nigeria (MOMAN), Olumide Adeosun, has stated that the Federal Government’s suspension of the Petroleum Industry Act (PIA) would create more uncertainties in the nation’s downstream sector.
Adeosun stated this on the sidelines of MOMAN’s subsidy workshop for journalists.
He urged the present administration to be consistent with formulating policies so as not to send wrong signals to potential local and foreign investors.
According to him, the suspension of the PIA came as a surprise to the association, but stated that MOMAN is yet to consult with the Federal Government formally as to why the decision was made, maintaining that two senior level meetings would be held during the week to discuss a way forward with the Federal Government.
He added that the association is currently seeking to consult with the Ministry of Petroleum Resources, the Nigerian Midstream and Downstream Petroleum Regulatory Authority and other industry stakeholders to understand how the decision would impact the other provisions in the PIA as well as market operations.
In his words: “The impact is obviously the delay because the reality of the matter is that we had not really started to implement the element of the plan so we are not really operating in a deregulated world even though the bill has been signed. The impact creates more uncertainties and it does not do much in terms of investor confidence in this sector as a destination of choice.
“This should not be a setback actually, but a platform for change. We must use this opportunity to come up with a plan. We now have an 18-month run and we are assuming it is the worst case scenario, but we must come up with a plan that allows us to manage this change with the degree of gravity, seriousness and focus that it requires.
“Although, we are seeing some new investment inflows into the downstream sector on the back of the PIA coming into law. Although, there will be some knocks or challenges in terms of people’s perception on the rule of law, it will pass like most things.
“The most important thing is that we are continuing to see interest in gas and we continue to see that the government is focused on driving its gas agenda and I think that should give investors some comfort, but it is absolutely critical that we do not make it a habit of this policy inconsistency because it is sending some wrong signals.”
Also speaking, an Economist and Chief Consultant, BAA Consult, Dr. Biodun Adedipe, while delivering his presentation on economics of subsidy and the pathway to achieving industry reforms in the petroleum downstream industry, said only six sectors contributed about 86 per cent to the nation’s Gross Domestic Product (GDP), stressing that despite the oil economy generating bulk of the nation’s foreign exchange earnings, its contribution to the GDP is yet to be felt.
He said subsidy is designed to address market failures conceptually, saying the essence of subsidy is to provide support for a weak segment.
He, however, stated that the Dangote refinery scheduled to come on stream in 2023 would provide enough supply to meet local demand for petroleum, but would need to repay the fund borrowed to build the refinery.
He said the price the refinery would sell would also reflect the cost, production and capital used in building the refinery.
A Non-Executive Director at Seplat Energy Plc, Bello Rabiu, said local refineries must achieve at least 60 to 80 per cent capacity utilisation to compete with importation, stressing that local refineries have never reached this level for over 20 years.
“The highest record so far was 30 per cent recorded 20 years ago. The country is currently spending N11 billion monthly on non operational refineries and another N11 billion on ineffective gas pipeline infrastructure,” he lamented