Speakers discuss moves towards a deregulated downstream at NOG

Gates of Oil reifnery in Port HarcourtA gradual process of downstream sector deregulation and increased private sector involvement was discussed on the second day of conference proceedings at Nigeria Oil & Gas (NOG), held in Abuja this week

In his introductory address as moderator, Alexander Ogedegbe, former managing director, Port Harcourt and Kaduna refineries, NNPC, offered the historic context for the current situation with the Nigerian downstream sector. After Nigeria started shipping crude oil in commercial quantities in 1960, he cited an early BP-Shell joint venture refinery which "worked for many years", expanding from a capacity of 30,000 bpd to 60,00 bpd. However, by 1978, all refineries were operated by the government.

"This is one of our problems ... one of many reasons for where we are today," Mr Ogedegbe said. He urged a "flexible ownership structure" for maintenance, expansion, and production so the private sector can help meet the energy and fuel demands of the public.

"There is no country in the world where the government owns 100 per cent of the refineries except Nigeria," he told NOG delegates.

The session heard from speakers representing the private sector as well as the NNPC.

Ewariez Useh, managing director of Aiteo Downstream asked the panel what incentives exist for private investment when refineries generally run at around 20 per cent capacity. He said to "create a proper environment" for investment, the government needs to "go back to basics [with] proper regulation".

Mr Useh said he is confident the Petroleum Industry Bill (PIB) will go through this year and this optimism was shared by the other speakers.

"When the market is deregulated, when there is a free market, an open market, we will be more efficient," he said.

Olaposi Williams, acting CEO, OVH Energy (licensee of Oando's retail brand), said it is essential for the downstream sector that refineries are working at full capacity.

"It is a very simple structure - we get the product, we store it, we distribute it," she said of OVH Energy's operations.

Mrs Williams expressed frustration at Nigeria's reliance on imports when LPG refineries are not working at full capacity and there are dry, retail forecourts and empty depots.

"It is displeasing that with so much crude capacity, we take it out of the country to refine it and then bring it back to be consumed - what efficiency is that?" she asked. However, she welcomed the assurances from the NNPC speakers that by 2020, Nigeria would no longer be dependent on imports.

Dayo Adeshima, president of the Nigeria LPG Association, said the country's LPG story "has been a very sad one" with supplies diminishing in 2006 and 207. But he added that he is hopeful that gas will play a bigger role in the Nigerian energy mix, particularly for cooking and autogas.

"NNPC is looking at doing something with refineries and I hope LPG is a big part of that as it is a game-changer for the country," Mr Adeshima said.

He cited the example of Ghana as a market that has moved ahead with LPG as an automotive fuel, as well as a growing LPG-to-power sector.

"It's versatile, it's clean, it saves the country a lot of money," Mr Adeshima said of LPG.

Delegates who asked questions from the floor were strongly supportive of deregulation and more private sector involvement.

Anibor Kragha, chief operating officer, refineries, NNPC, said the PIB would get through in 2017 "ensuring the right law at the right time to ensure operators work in a disciplined market."

Mr Kragha said this should achieve greater efficiencies in the downstream sector.

"I think this will happen very quickly," he told delegates.

Henry Ikem Obih, chief operating officer, downstream, NNPC, painted a rosier picture of Nigerian downstream operations, saying all four refineries were running for all of January 2017 and that LPG is being produced every day.

Mr Obih said a three-step "preparation-financing-execution" strategy is in place to create a positive environment for private sector investment, with NNPC having a "focus on the bottom line".

Mr Kragha said that NNPC has "almost put together a road map for a deregulated market". He added that with past moves towards downstream deregulation "we jumped the gun and then had to correct mistakes".

"We'll get there, it's a journey ... the PIB will pass," he said.

Summing up the session, Mr Ogedegbe said: "We want an efficient system that pays for itself."

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