Fuel crisis: Marketers demand transparency, fair competition

• Allow laissez faire to rule the market __Avuru
• MEMAN launches Nigerian fuel market benchmarks

Sopuruchi Onwuka

As controversies and altercations mark the changing downstream petroleum industry after the Dangote Refinery roars to life, players in the retail end of the market want all anti-competition instruments dismantled in order to create a balanced playing ground.

In taking a lead towards competitive environment, the Major Energy Marketers Association of Nigeria (MEMAN) has launched a pricing benchmark platform that provides private pricing templates for three key products: petrol, aviation fuel and diesel.

The move comes in addition to separate calls by industry analysts and players on regulators to ensure strict implementation of the provisions of the Petroleum Industry Act (PIA) in the management of competition in the domestic fuel market.

The concerns in the market stem from lingering altercations between the operators of Dangote Refinery and upstream producers in the country over terms of crude feedstock supply to the massive refinery which now stands in direct competition with the refineries under rehabilitation by the Nigerian National Petroleum Company (NNPC) Limited.

Both the Port Harcourt Refinery of the NNPC and the Dangote Refinery are scheduled to start producing premium fuels by next month. But whereas the national oil company sits on adequate volumes of crude oil feedstock, the Dangote Refinery appears struggling to secure feedstock deals at favourable terms.

The NNPC which pulled part of its equity investments in Dangote Refinery holds overriding stake in operations of producers in the upstream end of the industry where Dangote also holds operating license that permits it to produce its own feedstock.

And the visible paradox is that whereas the NNPC Limited currently has robust crude oil volumes and no available refining capacity; Dangote has robust refining capacity and no working feedstock supply deal.

Whereas MEMAN notes that fair competition and level playing ground can only be facilitated by enhanced transparency; eminent industry investor, Mr Austin Avuru, declares that the only route to fair practice is enthronement of complete laissez faire to allow willing buyer, willing seller scenario.

All voices call on the regulators of the industry to ensure that there is a solid, firm and equitable condition that guarantees all players in the refinery space access to feedstock under market controlled terms.

The call for enhanced competition in the market formed the main conclusion of the latest press webinar hosted by MEMAN to share insights into the situations that shape supply conditions and set prices in the market.

The Quarterly Press Webinar hosted by the market players on Wednesday featured presentations from the Chief Consultant at Adedipe Associates Limited, Dr Biodun Adedipe; former Chief Operating Officer in charge of Upstream at the defunct Nigerian National Petroleum Corporation (NNPC), Mr Bello Rabiu; and the Chairman of the Lubricant Committee of MEMAN, Mr Steve Ezendiokwere; and the Executive Secretary of MEMAN, Mr Clement Isong.

In their different presentations, the speakers highlighted the need for transparency in the management of supplies, pricing and competition in the retail of key fuel products that fire air and land transportation in the country.

In a separate chat with The Oracle Today, eminent industry thought leader and investor, Mr Austin Avuru, stated that the time has come for pricing of all commodities in the domestic petroleum market to be surrendered to market forces.

He said that while government maintains keen eyes on the industry on issues of standards and fair play, the commercial negotiations for supply and purchase should be surrendered to the forces of demand and supply.

The chorus of calls came after several issues about feedstock supply engaged the greenfield 600,000 barrels per day Dangote Refinery and local upstream producers in the country in bargain controversy.  

Dangote Refinery is expected to start producing premium motor spirit in the next 60 days, almost at the same time the Port Harcourt Refinery of the Nigerian National Petroleum Company (NNPC) Limited is also expected to return online after decades of lying moribund.

The early squabbles between Dangote and local crude oil producers over feedstock supplies erased the hopes that the new refinery would assist in crashing prevailing strong prices of fuel products in the country.

Current supplies of petrol and aviation fuel are import dependent, but about 60 percent of liquefied petroleum gas consumed in the country is locally produced; thanks to the Nigerian Liquefied Natural Gas (NLNG) Limited, Nedogas-NCDMB joint venture and Platform Petroleum.

Other local refineries operators in the country, including Aradel and Waltersmith, also displace significant import volumes with diesel from their modular plants. And despite rising public and industry indignation at their existence, unlicensed artisanal refiners in the Niger Delta contribute large volumes of diesel and kerosene to the local market. 

The NNPC Limited remains almost the sole importer of petrol in the country, leveraging monopoly of import license and foreign exchange proceeds from sale of significant 455,000 barrels of crude oil per day allocated to its inactive refineries located in Port Harcourt, Warri and Kaduna. 

Players and stakeholders in the market complain that acute foreign exchange squeeze in the economy, the Naira-dollar value mismatch, associated jumps in cost and limited access to foreign exchange limit and actually disable them from sourcing products from international markets.

The situation, according to MEMAN, has created monstrous monopoly in the domestic fuel market. And with the downbeat vibes emerging from Dangote Refinery, marketing groups warn sternly against transitioning the domestic supply from import monopoly to local refining monopoly.

Executive Secretary of MEMAN, Mr Clement Isong, stated in his speech at the webinar that the group continues to demand enhanced transparency in the market as the only path to fair competition.

He called on regulators to provide pan-industry dashboard for monitoring movement of products into the country to enable the marketers take positions along the demand side.

All speakers agreed that it is the common practice across the world for each country to mount dashboards that provide clear information on the supply situation in the market, stressing that prices should derive from the equilibrium between demand and supply.

Mr Isong declared that the group is launching a market information programme that would create visible pricing benchmarks for all products sold in the country. He said the service would churn out daily market statistics to enable all stakeholders harness business intelligence.

He pointed out that the initiative was neither raising appraisal on any government agency nor challenging any authority, adding that the service only seeks to generate market statistics for all stakeholders including the media.

He said the information service which would produce daily, weekly, monthly, quarterly and yearly market statistics on Nigeria would only serve as a stopgap until interested commercial players could emerge to raise more credible local benchmark platforms.   

In commenting on the response of the fuel market to domestic refining after decades of import culture, Mr Avuru noted that the justification for huge investments in local refining business is guarantee of commercial viability in the environment.

He pointed at non-necessity of the prevailing bickering over supply of feedstock, saying that there is a global template on how the business operates. He also dismissed the Naira-dollar mismatch issues as unserious, saying that those who buy in dollars and sell in Naira would always transact at the prevailing exchange rate.

He commended Dangote Industries on delivering the massive project, adding that Nigeria should be grateful that a single entrepreneur has been able to dump huge funds in the local economy to build the refinery which has potential to slightly cut prices by removing import cost elements.