Deregulation: Stakeholders demand local refining, energy diversification

Sopuruchi Onwuka

Thought leaders in the Nigerian petroleum industry hold strongly that the prevailing debate on the best ways to shape the local fuel market under the new Petroleum Industry Act is to totally domesticate production and liberalize the market.

Panelists comprising labour leaders, key players in the domestic fuel market and investors in new energy forms agree that import dependency would spell economic catastrophe for a highly challenged economy like Nigeria. They advised government to accelerate action on building local refining capacity ahead of subsidy removal.

While agreeing on the need for commercial deregulation of the local fuel market as basis for enhanced commercial investments, they also called of diversification of fuel options from refinery products, pointing out that Nigeria must begin early to position for energy transition.

Chief Strategy Officer at Axxela Limited, Mr Olufisayo Duduyemi, argued during the panel discussions that deregulation of the downstream petroleum industry must be driven by local refining as primary basis to capture the full economic benefits of full industry chain.

In pressing home his argument for total displacement of import with locally produced fuel products, Mr Duduyemi called for deliberate policy incentives for strategic investments that would develop the midstream petroleum industry as critical engine of growth in the industry.

All panelists agree that the highly celebrated successes of the Nigerian Content Policy in the industry would not be complete if the midstream industry remains weak, fragile and low in capacity.

In his presentation, President of Petroleum and Natural Gas Association of Nigeria (PENGASSAN), Comrade Festus Osifo, declared that deregulating the fuel market under the prevailing reliance on imported products would transfer the consequences of government inefficiencies on the poor Nigerian masses.

He said the prevailing import reliance remains the major reason while the organized labour has been opposed to hasty deregulation of the local fuel market. He pointed out that local refineries have been left to rot while government officials assigned to manage the national petroleum assets preferred to patronize foreign refineries.

He said retaining thousands of underutilized workers at moribund refineries across decades is gross inefficiency, adding that mass importation of petroleum products accounts for the huge losses declared by government in meeting domestic fuel demand.

From use of scarce foreign exchange, freight costs, maritime insurance, port charges and many more import associated expenses, Comrade Osifo pointed out, importation accounts for high cost of fuel in the country. He argued that it would be wrong for government to transfer the cost of inefficiency on the masses that currently bear the full brunt of Nigeria’s overall economic depression.

He said local refining would crash the pump price of petroleum products because, according to him, cost of production would be denominated in naira while crude oil could also be arranged to be delivered to refiners in any currency.

He said what the organized labour told the government is that fix the refineries, when the refineries are working we would support you to deregulate, that what they don’t want is import drive deregulation. But it should be based on local production.

He also pointed out that trust deficit that has existed between the government and the people over the years.

Comrade Osifo also took a swipe at the privatization programme that, according to him, saw the Nigerian electricity assets grossly undervalued and sold to cronies of government. He attributed to failure of the privatized power sector to muster capacity to process inefficiency.

“If the privatization of the power sector has been done in Germany, or South Africa, it would have been successful, but since they sold them to their friends the exercise has been a failure. And after selling the Gencos and Discos to their friends they ended up lending them the taxpayer’s money to run this enterprise,” he lamented.

He said deregulating the local fuel market without first ensuring local production would be a worse blunder than power sector privatization.

The panel discussants also pointed at the need for diversification of energy sources in the country in order to reduce demand pressure on petroleum products and also address associated issues by default.

The recommended natural gas and its products like compressed natural gas (CNG) and liquefied petroleum gas (LPG) as ready alternatives to liquid fuels, adding that significant use of natural gas as household, transportation and industrial fuel would divert significant demand for petrol and fuel oils.

The Axxela chief argued that gas is cheaper, abundant, cleaner and readily fits into the fuel options of the future. He pointed out that stated that use of natural gas that would address most of the dreaded impacts of full deregulation of the local fuel market.

“Let us put gas into our processes and industries. By so doing cost of production would reduce, cost of commodities would drastically reduce and would become more available to the masses, this is the role natural gas is playing now and in the future,” he said.

Panelists also advised government to incentivize development of renewable energy in the country and align Nigeria with the prevailing trends in energy transition.

Chief Executive Officer of All On, a renewable energy company, Mr Wiebe Boer, urged Nigeria to begin early in building renewable energy capacity for the future. He pointed out that Nigeria should be thinking beyond deregulation of local petroleum market and instead focus in developing and diversifying its energy sources to capture a wider range of options.

He made it clear that the world energy demand is deliberately transiting from petroleum fuels. He also pointed out that Nigeria might trail behind the world if it does not embrace new energy in good time.

With the passage of the Petroleum Industry Act, he said, deregulation has become inevitable. He pointed out that the debate should now focus on best systems and processes for deregulation, diversification and liberalization of the Nigerian energy market.

He called for development of a market environment that enables players to integrate full range od energy services, including renewables. He pointed at some petrol stations in Nigeria that are already developing sales outlets for solar lamps, LPG and CNG.

He called on investors to stake funds in developing off-grid solutions to the Nigerian power impasse, adding that upon deregulation government should also invest part the recovered subsidies in providing more homes with off-grid electricity that could be generated from solar, wind and hydro so that rural Nigerian could be powered up.

Industry journalist, Mr Adeola Yusuf, advised policy drivers to touch base with stakeholders on the issues arising from deregulation to avoid hitches.

He observed that government’s prevailing information management systems have failed to address trust issues that lead to disagreement and opposition to deregulation. He called for a more efficient communication strategy that generated public feedback on government policies and programmes.