Subsidy removal paves way for more liquid , competition for downstream oil, gas industry
By Ngozi Onyeakusi– The principal consultant drnl consult limited, Ronke Onadeko has said that removal of oil subsidy by the Federal Government will pave way for more competitive and liquid in the downstream oil and gas industry.
Consequently the government will have more money to fund critical infrastructure project such as education, health, roads, and many others, for the benefit of the ordinary man.
“We are going to see more value chain deepen”.
Onadeko, who spoke via Webinar workshop organised by the Facility for Oil Sector Transformation (FOSTER) in partnership with the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
Presently there is scarcity of refining capacity locally as none of Nigeria’s three refineries are working. “We are hearing they would do something about that,” Onadeko said believing that once the sector is fully deregulated, a lot of international and local companies would be coming together to invest in refining.
“If we had refineries in Nigeria, when the price of oil dropped internationally, we would have refined more of our products locally to supply to the rest of west Africa and Africa at large”.
Secondly, within the sector, there is going to be a lot of mergers and acquisitions and the smaller players are going to be thrown out.
“In the midst of this crisis we would get a good and competitive market out of it, the industry would develop more and even hire more people,” Onadeko said.
The industry is going to see a lot of policy changes and a push for the passage of the Petroleum industry bill.
“Yes we had gone back and forth in the past 10 years but it is eminent because once funds start to flow into the continent, we don’t want all the money to go in to Ghana, Kenya or Angola so Nigeria should be positioned to bring back the investments”.
On what should to be done to improve efficiency in the downstream sector, she said the pipeline system in Nigeria has been damaged over the years by vandalism and there is need to have dedicated rail lines that are taking petroleum across the country.
“We don’t need to put tankers on the roads to damaging the roads we can barely afford to maintain”.
“We also need modular refineries and when you look at the investment needed, the capital markets can’t handle it and local banks can’t handle it. It has to would have to be a combination of a lot of financial institutions coming together to do that. And this would make our system what it should be,” she said.
The government has announced that there is a deregulation. And what this means is that the government isn’t regulating the importation and the pricing of the sale of petroleum products.
However, “what we see is that Petroleum Products Pricing Regulatory Agency (PPPRA) is still the one telling us at the beginning of every month what price the petroleum products would be. My view is that we are going towards a deregulation but what we have right now is a liberalization,” she said.
Furthermore, she said: “They have relaxed the rules but what we would want is for government to tell us that we are in a liberalised state but we are going to look at how this can work in the next 12 months until we ease out completely”.