Downstream Oil Sector; Stakeholders Advocate Open Market Operations

Image result for Department of Petroleum Resources, DPRYemisi Izuora

The Department of Petroleum Resources, DPR alongside other stakeholders in the downstream sector of the petroleum industry have called for full deregulation of the downstream industry to broaden investment in the sector.

They argued that a shift from regulated regime to open market operations would guarantee energy availability for national development.

In his key note address at a Breakfast Roundtable with the theme, “Repositioning Nigeria’s Downstream Sector organised by the energy institute in collaboration with OVH Energy in Lagos today, the Director of the DPR Mordecai Ladan said the sector presents huge opportunities but is greatly challenged by factors ranging from under capacity utilisation, inappropriate business model, infrastructure gap among others.

Ladan, represented by Mrs. Dorothy Bassey, head Public Affairs, said that for the sector to be competitive, operators should be compliant to operational policies.

He said, “We have extensive resource base, indigenous participation, infrastructure in key areas and regional market” adding that some of the critical challenges have been in the area of business model, reliability, FOREX issues and vandalisation of pipelines.

The Director that the sectors distribution chain is poor while price regulation and subsidy has caused government enormous resources and completely waned  investors confidence.

“We want a shift to open market operations for product availability, make funds available for the sector to ensure regional and global competitiveness” he said.

In his submission, Dapo Abiodun, managing director and chief executive officer of Heyden petroleum declared that marketers are not given adequate incentive to play key role in the sector.

Abiodun, said that operators had expected a full regulation of the industry to attract investment and boost the sector.

He noted that pricing of products have been a major issue affecting marketers, adding that operators have been exposed to FOREX issues and the inability of government settling subsidy claims further caused their indebtedness to banks to rise.

“Today, we cannot import products based on the present template of the PPPRA. What it means is that the NNPC which is the supplier of the last resort would continue to bring in products.
But again, the NNPC imports on 20 percent of product demand.
We appreciate government intervention in making FOREX available through the International Oil Companies, but now we have the dollar but the price of crude has changed and the landing cost is high.

If deregulation is complete marketers will source FOREX and buy and sell at market price, but again we don’t have to advocate for another price increase” Abiodun explained.

In her remarks, Mrs. Olapon williams of OVH energy also complained that the cost of landing a cargo of petrol cannot guarantee return in investment for operators.

Williams, appreciated government FOREX intervention to marketers but argued that crude price volatility remained a major challenge adding that the situation is becoming too bad for investors especially tank farm owners who cannot source product to put the facilities into use.

The operators unanimously called on government to take quick steps in deregulating the industry to entrench competition, attract investment and boost capacity development.

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