The ministry of petroleum affairs has identified price cap on petrol as a major set back on attracting investors to help rehabilitate the country’s ailing refineries.
As a result the aspiration of the country to privatise the Port Harcourt, Warri and Kaduna is facing challenges.
Special Adviser to the Minister of State for Petroleum Resources, Policy and Regulation, Mr.Tim Okon, gave the indications and the other problems challenging the country’s midstream sector at the All Convention Luncheon of the 36th Annual International Conference and Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos on Tuesday.
Speaking on the topic: Oil Price fluctautaions in a Developing Economy and the Recipe for Economic Growth, Okon explained that, Section 6 of the Petroleum Act, which empowers the Minister of Petroleum Resources to fix prices for petroleum product, remained a major factor why investors will not find the refineries attractive for business.
He lamented that a situation whereby a private investor strives to raise fund to rehabilitate the refineries and get it working and Government on the other hand fixes petroleum products prices is not a workable model.
He said that banks which provides funds for these investors would want a situation where they would have control over repayment schedule and terms and inflow, saying this would also include pricing for the product.
‘‘But the moment Banks discovers that you don’t have control over pricing, there are huge chances that they would withdraw from such transaction because the possibility of recovering their funds over a certain period of time is already threatened from the outset,’’ he said.
Okon disclosed that the structure of the 650,000 barrels per day Dangote refinery structure would only serve as an export refinery, saying after paid entities have exported the product, and it would now be imported back into the country.
‘‘The plan of the refinery is not to refine Premium Motor Spirit (PMS) popularly called petrol and now sell at Government regulated price. That will not happen under the private refinery structure,’’ he said.
Earlier in his conference opening remarks, the Keynote speaker and Managing Director of Seplat Petroleum Plc, Mr. Austin Avuru, who spoke on the topic; Oil Price Volatility: Challenges, Strategies and Opportunities said oil, coal and gas will still account for 40 per cent of the world energy mix.
He maintained that technology will continue to drive the future of oil, adding that supplementary volume of oil is coming on stream as a result of technology; else oil would have been about $200 per barrel.
Avuru explained that as a nation or company, what should be done during price volatility is that a line must be drawn on spending, especially in cash reserves in the balance sheet
On gas, he said a country’s economy is as large as the energy it consumes,saying gas should not be seen as a rental business but as an enabler for business.