Downstream oligopoly strives against PIB

Sopuruchi Onwuka

The ancient demon that causes scare in government’s failing attempts at commercial deregulation of the domestic fuel market appears to have crept in the Petroleum Industry Bill (PIB); the omniscient legislation conceived to resolve all fiscal, regulatory and commercial blunders that upset local oil and gas industry operations.

Whereas a weary industry that has remained in quandary for over a decade is getting upbeat over the advances in the legislative activity on the PIB, smiles are drying out from the lips of private players that have staked huge investments in petroleum products holding and distribution.

Group Managing Director of NNPC, Mallam Mele Kyari

Allegations are high in the air that a version of the PIB undergoing works at the Senate Chambers of the National Assembly hosts a provision that confers exclusive fuel supply rights, including import rights, on local refiners only. The provision, according to sources that claim to have read the clauses, would not allow private traders and marketers to import petroleum products into the country even after full deregulation and liberalization of the market.

The deregulation programme of the government which gained intense momentum in 2005 was sold to the public on the promise that it would dismantle supply monopoly, liberalize participation, deregulate products prices and also allow government to end traditional subsidy on petrol consumed in the country.

The policy which was stoutly supported by different market groups in the country was also vehemently opposed by the masses who were mobilized and led by the nation’s labour groups in protest marches.

However, the present administration of the government has made moves to address public concerns about market fixing and price manipulation by revamping local refining and weeding out importation costs as ways of ensuring low deregulated price regime.

See also  Ecobank Nigeria re-launches credit card variants

From rehabilitation of existing refineries of the Nigerian National Petroleum Corporation (NNPC) through licensing of private refineries and midstream joint ventures, government has laid foundation for massive local refining capacity; and sufficiently dispelled fears of import based deregulation.

The emerging petroleum is thus envisaged to provide the necessary laws that would reset the domestic downstream industry for a liberalized market driven competition.

That was the popular assumption before the key investors in the domestic petroleum market raised a flag over discovery of dodgy insertion of privileges for fuel importation in the emerging PIB, warning that the mysterious appearance of the concessional rights would work against the objectives of the law.

According to leaders of investor groups that control private downstream products storage and distribution facilities and infrastructure, one of the versions of the PIB undergoing legislative processes at the Senate confers exclusive right to importation of all refined petroleum products to local refining operators.

The NNPC currently holds exclusive right to import petrol into the country, a situation other players in the market decry as anti-competition and imposition of state monopoly in the whole market. Most of the marketers in the country either hold stock for NNPC or play in niche areas like aviation, bunkering, lubricant blending, et cetera in order to cover costs.

By the alleged provision, only the NNPC and Dangote Refinery would dominate fuel supplies to the domestic market, while other marginal refiners that currently operate small plants would just make up numbers.

The Oracle Today reports that under the emerging market scenario, NNPC which currently processes rehabilitation contracts for its 445,000 barrels per day brownfield refineries, and Dangote Refinery which is working towards completion and commissioning of its 650,000 barrels per day greenfield refinery will hold combined capacity for 1.095 million barrels per day refining capacity by 2023. All the other refineries in view will collectively hold less than 100,000 barrels per day refining capacity by the same time.

See also  ASI rise by 0.81%, despite negative indices performance in Tuesday’s trading at NGX

Besides, some of the modular refineries that would come on stream between after the PIB takes effect are primarily niche producers whose operations are basically premised on exigencies of upstream operations rather than commercial plans for midstream operations. Outputs from the modular plants are limited in product specification, and thus would not be in contention for market share.

Besides, the competition line between Dangote Refinery and NNPC refineries is being collapsed with plans by NNPC to take equity stake in Dangote Refinery in exchange for crude oil feedstock.

Group Managing Director of NNPC, Mallam Mele Kyari, declared that the corporation would escalate its equity holdings to cover all refineries in the country that hold processing capacity of 50,000 barrels per day and above.

According to a joint statement issued in response to alleged clause in the PIB, the major Oil Marketers Association of Nigeria (MOMAN) and the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) “a late insertion in the Senate version of the Petroleum Industry Bill (PIB)…specifically restricts the license to import all refined products into the country to a very small number of local refiners. This restriction extends to products that have long been deregulated such as Diesel, Kerosene (HHK and ATK), LPG and Base Oils.”

The groups warned against limiting import licenses, saying that it poses a monopoly risk that must be avoided.

See also  Plant breeder seeks quick implementation of plant protection law

“It is imperative that a level playing field is set for all operators across the valuechain. Anti-competition and monopolistic overtures and breaches must be avoided. Any provision that does not guarantee a free and open market will give room to price inefficiencies and eventually kill off small businesses in the downstream sector.

“This provision will stifle price competition and leave pricing to be solely dictated by a few local refiners. If Nigerians are to pay higher international prices at the pump, we should also benefit when the prices go down internationally–this is not guaranteed unless there is healthy competition.

“We position that price must be kept competitive at the pump for the benefit of the average Nigerian whose income is constantly being eroded by inflation.

“Allowing imports by major players across the supply chain will protect consumers by ensuring that local pump prices are not higher than regional or international prices.”

Leaders of both chambers of the National Assembly, Senator Ahmed Lawan, and Rt Hon. Femi Gbajabiamila, have pledged that consultation would be robust on resolving all conflicts in the PIB in order to pave way for speedy concurrence and passage.

Vice President Yomi Osinbajo, pledged at a conference in Abuja that the PIB would receive accelerated assent at the Presidency upon arrival from the National Assembly.

The Oracle Today reports that the current version of the PIB sweeping through the National Assembly after 15 year of initial introduction is an executive bill.

Leave a Reply

Your email address will not be published. Required fields are marked *