…Faults $1.5Bn P/Harcourt Refinery Rehabilitation
The Lagos Chamber of Commerce and Industry, LCCI, has restated its call on government to take bold steps in opening up the downstream sub sector of the oil and gas sector.
It also advised the government to rescind its decision to deploy scarce resources in the rehabilitation of the Port Harcourt refinery.
The Chamber during a holistic review of the state of the economy on Wednesday, maintained that total deregulation of downstream petroleum industry remains the most sustainable policy option for the sector.
President of the Chamber, Toki Mabogunje during the review session stated that the philosophy should be for the government to put the legislative and commercial framework in the market and allow the market to operate itself.
Mabogunje, said that there is need to transition to market-driven environment through policy-backed legislative and commercial frameworks, thereby enabling the sustainability of the sector.
Deregulation, according to the president, requires the creation of a competitive market environment and will guarantee the supply of products at commercial and market prices.
“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires strong regulator to enable transparency and fair competition among players, and not to regulate prices.
This is very crucial in attracting patient capital into the oil sector, promoting efficiency in the administration and utilisation of petroleum resources, and ensuring healthy competition among industry players.
It is important to expeditiously accelerate the passage of the Petroleum Industry Bill (PIB) as the delay has continued to worsen uncertainties in the sector.” she advised.
She stated that the argument of whether to retain or eliminate petrol subsidy is understandably a sensitive discourse given the plight of the average Nigerian,but however, pointed out that deregulation should take place concurrently with renewed commitment to stimulation of private investment in petroleum refinery, accelerated investment in mass transit transportation systems across the country [intercity and intracity rail system], accelerated program on the use of auto gas to reduce dependence on PMS and diesel; promote bullish investment in the power sector to reduce dependence on alternative sources of energy, especially PMS and Diesel electricity generating plants.
“Evidently, petroleum subsidy is unsustainable given government’s lean financial resources. Subsidy payment has for long constituted a huge burden on public finances and eliminating it would free up resources for investment in critical sectors of the economy. It is also characterised by enormous corruption and product diversion.” she said.
The Chamber also, faulted the Federal Executive Council approval of the sum of $1.5 billion for the rehabilitation of the Port-Harcourt Refinery, with plans to revamp Warri and Kaduna refineries.
While the Chamber appreciated government’s resolve in revamping these facilities, it considered the approval as not economically and fiscally expedient given the fact that billions of dollars have been expended on turnaround maintenance over the years with no tangible results.
The Chamber called for the concessioning of the assets to private investors with government taking a minority stake and the funds invested in critical infrastructural projects that would further stimulate economic development in the country.
A shift from a crude oil exporting country to crude oil full value realization through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from a net importer to a net exporter of refined petroleum products, she reasoned.