The downstream sector of the petroleum industry associated with sharp practices, which led to a probe by the House of Representatives Ad hoc Committee last year, is witnessing sanity following on-going reforms, writes EMEKA UGWUANYI Asst Editor (Energy).
Background
The probe in downstream sector of the petroleum industry carried out by the House of Representatives Ad hoc Committee on Fuel Subsidy regime last year unveiled the rot in the sector.
Some marketers were indicted and summoned by the Economic and Financial Crimes Commission (EFCC). While some of the indicted marketers have been cleared, others are still being interrogated by the anti-graft agency. Many marketers were said to have made claims from the petroleum subsidy fund without importing products.
The Petroleum Products Pricing Regulatory Agency (PPPRA), however, said the situation has changed as the sector operates in line with global best practices, adding that any marketer that doesn’t play by rule will be kicked out.
PPPRA’s initiative
The Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, told The Nation that the agency has done a lot by making sure that procedures are properly followed to ensure transparency and accountability.
He said: “Today, you cannot claim subsidy without proof that you have 80 per cent truck-out of the product out of your facility. This does not involve the importer reporting to us, because we have independent inspectors monitoring that system. There are numerous checks and balances that we have put in place that have actually brought clear sanity to the downstream sector.
“Also, you cannot discharge without an international independent inspector, which is among best practice anywhere in the world. The idea is working and it was introduced when I came in as the Executive Secretary. The Ministry of Finance also changed their auditors. We have Dafinone and Co., handling the final check before they (marketers) are paid, and we have Afemike and Co., at all the terminals also confirming that what our inspectors said came in and what the Navy and Customs confirmed are authenticated by their own inspectors.”
He said as a result of the reform and sanitisation, the number of marketers was reduced from 128 in 2011, to 39 by the end of last year. He explained that the number was reduced to 32, but because new filling stations were licensed as new participants were given permits to import fuel, the figure rose to 39. He noted that despite proposals from some quarters that 10 to 15 marketers can serve the country, he was not opposed to many players, but stated that they must abide by the rules of the game.
“I am also not averse to the number of players increasing, because people have suggested that we don’t need more than 15 companies to bring in products, but my stand on that is very clear. These are Nigerian entities and we are 100 percent local content.
“All those bringing in the products are Nigerian companies and in a country where unemployment is 23 per cent, if anybody decides to do the business, he will not run it alone, he will employ Nigerians. We are ready to welcome new entrants into the business as long as they are willing to play by the rules. The number of players can swell but that should be based on companies that have been verified and it can also go down, because we suffer no fool. Once we catch you on the other side, we take you out.
“The final thing we want to do, which I hope will be done by end of this month, is to publish the list of international suppliers into this market. That is ready, but I have to run it by my boss. Once it is ready, you cannot bring products into this country without those companies. The reason is that they are fully documented.
“What we have done here in the downstream, is to make sure that the companies are known accredited suppliers. And that is what we are taking to the international territory. Nigeria is not a place where any and every company can come and bring in product, because if you don’t have international reputation and there is any issue, you go underground.
“This initiative is important because before you come in, we bring you into Abuja, take you through the riot act and the rules of the game. We have documented the processes and procedure so that whoever comes after me doesn’t rewrite the genetic code, because if you deviate from it, you are inviting trouble.”
Achievements
Stanley said that as a result of the sanitisation of the downstream sector, PPPRA saved N1.09 trillion on fuel subsidies last year. He said that the stringent measures and controls being applied in the petroleum products marketing and distribution arm, helped the agency to contain subsidy payment to N1 trillion as against N2.09 trillion spent in 2011.
He said PPPRA as any other industry regulator, is the final arbiter when it comes to any of the sectors that are being regulated. He noted that although regulators are protected by immunity and cannot be sued, they are run by people with the highest level of integrity knowing that the decision they take are in the best interest of the citizenry.
He said: “The regulators have to protect investment and consumers; therefore, we cannot go away from a standard template that ensures transparency and creates a level playing field, which will boost the confidence of investors coming into the business.”
He said his appointment was the outcome of a comprehensive reorganisation of the downstream oil and gas sector, which was carried out to ensure greater transparency, accountability, effectiveness and efficiency as well as good governance, consistent with general public’s expectations, adding that companies must stick to these ideals at all times.
He said in view of the mandate given him by the government, he has carried out some restructuring in the agency, including staff redeployments and organisational structure realignment, proper tracking of vessels, personnel training in competency building courses and automation of operations, among others.
He explained that following the restructuring and strengthening of the rules, there is improved compliance to guidelines and policies by marketers and the Nigerian National Petroleum Corporation (NNPC). This development, he added, has resulted in the achievement of 67 per cent reduction in the number of participants in the subsidy scheme, from 128 marketers in 2011 to 39 by end of 2012.
He said the ultimate goal is to make the sector self-financing and self-sustaining to support a more robust national economy. “The maintenance of product supply stability in the last two years of my administration cannot be divorced from the wide industry networking capacity and expertise of the agency’s chief. The ground rules have been set, if any participant violates it, the person will be sent out.
“The refineries are not working as expected due to several problems and challenges. The refineries are not yet there, currently Warri and Port Harcourt refineries are down and Kaduna produces just about 1.2 million litres daily.”
On the performance of the refineries, the PPPRA assigned zero per cent to it, just to be on the safe side. “So, whatever the refineries produce in a day is regarded as a bonus to us. The refineries are still being bedevilled by lack of crude supplies, breakage of lines, equipment breakdown and until we do a thorough overhaul of the refineries, the supply of the refineries into the mix will probably not be more than 10 per cent.”
But the Nigerian National Petroleum Corporation (NNPC) said the Kaduna, Warri and Port Harcourt refineries produce at not less than 60 per cent each. The Group Executive Director, Refining and Petrochemicals (NNPC) Anthony Ogbuigwe, said Kaduna Refinery operates at 65 per cent, Warri Refinery at 63 per cent and Port Harcourt Refinery at 66 per cent of their installed capacities.
He said the three the refineries process 10.23 million litres of premium motor spirit (petrol), 5.53 million litres of dual purpose kerosene and 8.016 million litres of automotive gas oil (diesel) daily.
Ogbuigwe said: “I can tell you with every sense of responsibility that contrary to the news making the round, all our refineries are doing very well. The major components and various units of Fluid Catalytic Cracking Units, (FCCU), Crude Distillation Unit (VDU) and Vacuum Distillation Unit (DDU) of all the refineries are working well. In fact, these refineries have been running consistently for over three months now.”
He explained that the stability in supply of petroleum products is attributable to the performance of the refineries, adding that the scheduled turn around maintenance (TAM) of the refineries are on course. He said the Port Harcourt refinery has taken delivery of some of the components for its rehabilitation. “I can tell you that five shipments for the TAM of Port Harcourt Refining and Petrochemical Company have arrived,” he added.
He decried the incessant pipeline vandalism and crude oil theft, stressing that the menace is a big threat to the nation’s oil and gas industry. He called on stakeholders in the petroleum industry and Nigerians to team up with the NNPC in finding a lasting solution to the threat to enable the refineries to run without shutting down. The Federal Government allocates 445,000 barrels of crude daily to the three refineries.
