The Nigerian National Petroleum Corporation, NNPC, in a bid to ensure transparency in the oil sector, has adopted a major recommendation listed in the communique issued by the downstream petroleum industry at the last OTL Africa Downstream Week. The decision by NNPC to do away with offshore processing agreements and replace them with direct sale of crude to and direct purchase of petroleum products from credible international refineries is a welcome development to industry stakeholders.
Other issues in the communique, signed by Reginald Stanley, Advisory Board Chairman and the Convener Emeka Akabogu, focus on the prioritisation of local refining by . It advocated a National Refining Policy which will define the framework for encouraging investment in petroleum refining in Nigeria.
The unabridged communique is published below:
As a contribution to policy definition and implementation in Nigeria as the host country, the following resolutions were agreed by the industry at the 9th Oil Trading and Logistics (OTL) Africa Downstream Week:
1. Petroleum products subsidy is a disincentive to supply chain infrastructure investment, market innovation and consumer value. In view of current realities of low crude oil price and devalued naira, the country can no longer afford the burden of subsidies. The government is strongly advised to remove all petroleum products subsidies as a matter of immediate urgency and fully deregulate the downstream petroleum industry.
2. Deregulation of the industry will attract appropriate investments, promote optimal efficiency, healthy competition, ensure efficient supply of petroleum products to the country and improve the infrastructures in the downstream sector.
3. Local refining of petroleum products should be prioritized by the country and a deliberate shift initiated from importing products to building refineries. There is a need for a National Refining Policy which defines the framework for encouraging investment in petroleum refining in Nigeria to facilitate increased national revenue and infrastructure development.
4. In view of the significant number of jobs accounted for by the downstream sector of oil and gas, the private sector should be encouraged to drive the growth of the industry through institution of appropriate policies.
5. The legal framework on which the downstream petroleum sector is anchored, including the Petroleum Industry Bill needs to be clarified and enacted with a view to ensuring legal certainty and promoting efficiency and competitiveness.
6. The Central Bank of Nigeria (CBN) should make it easier in the interim, for importers of petroleum products to have access to Foreign Exchange while a transparent system for setting and publishing gasoline prices should be put in place.
7. Crude for product swaps is a short-term solution for ensuring availability of petroleum products in Nigeria if managed transparently. Nigeria should move towards a collateralized crude for product swap which is more transparent and avoid off-shore processing agreement that is grossly abused world-wide.
8. That downstream expansion of our natural gas utilization, with regulated gas price for domestic sales, governance limitation and institutional deficiency constitute both a challenge and opportunity for gas supply.
9. To stimulate investment in LPG, multiple taxes and high tariffs should be reduced while development of infrastructure and distribution channels such as, local Cylinder manufacturing, Storage facilities, Filling plants, Bob-tail trucks, gas pipeline for residential consumption, automobiles and petrochemical plants should be encouraged to enable the growth of LPG.
Subsidy on kerosene should also be removed to encourage the growth of LPG consumption in Nigeria.
10. Oil companies are encouraged to undertake good corporate social responsibility to preserve the communities where they operate and to create a form of investment through job creation; thereby reducing threats of piracy and sea robbery.
11. To encourage the development of the lubricants and base oils market in Nigeria; regulators, operators and consumers need to work together to stop the importation of substandard lubricants as well as the activities of illegal blenders while research and development should be ongoing for production of base oil in Nigeria.
12. We need to have a strong advocacy group to work with the regulatory body, to drive home the point that a good standard of quality of lubricants must be maintained.
13. There is need to commercialise the pipelines by concessioning or outright sale, for an efficient distribution of the products.
14. It is prudent to invest in an oil spill surveillance technology to monitor oil spillage through pipeline vandalism.
15. There is need for Government to ensure our roads are fixed and reactivate the rail system either by itself or through Public-Private Partnership (PPP), to enable the trucks move the products safely and promptly to the storage facilities while the rail assists the road networks.
16. Truck drivers should be enjoined to undertake trainings to improve their driving skills, for their safety and safety of the community.
17. That the introduction of the BRV (Road Tanker) tracking and the Petroleum Products Marking Systems, is advisable to reduce or eradicate malpractices which are counter-productive and mars the growth of the downstream sector.
18. There is need for a robust Regulatory body with a clear and defined policy on its roles, to sustain a healthy competition to grow the downstream sector.
19. That implementation of all our relevant policies and strategies is vital to fuelling economic growth via the downstream sector.
20. Biofuels industry should be encouraged, as long as it does not impact on the food chain.
This Communique is issued as a definitive position of Nigeria’s downstream petroleum industry and its contribution towards long-term sustainability and development of downstream petroleum markets and operations.
DATED THIS 29TH DAY OF OCTOBER, 2015.
Mr. Reginald Stanley
Chairman Advisory Board, OTL Africa Downstream WeekMr. Emeka Akabogu, Esq. Chairman, OTL Africa Downstream