American Philosopher, journalist and poet, Henry David Thoreau (1817-1862) a transcendentalist in his book Walden; or, Life in the Woods, Economy published in 1854 wrote ‘’I have lived some thirty years on this planet, and I have yet to hear the first syllable of valuable or even earnest advice from my seniors’’. Would that be the situation of the Group Managing Director, GMD of Nigerian National Petroleum Corporation, NNPC Dr. Maikanti Baru who sought the counsel of former petroleum resources superintendents on the present state of the industry?
Present at the forum was the Minister of State for Petroleum Resources and immediate past GMD of NNPC Dr. Ibe Kachikwu represented by his senior technical assistant, Johnson Awoyomi. Others were HRM Dr. Edmund Daukoru; Chief Odoliyi Lolomar; Dr. Thomas MA John; Lawrence Amu; Dr. Jackson Gaius-Obaseki; Funsho Kupolokun; Dr. Abubakar Lawal Yar’Adua and Dr. Joseph Thlama Dawha.
The egg headed petroleum tzars who were posed with problems suggested to NNPC that the PMS cap price of N145 per litre was realistically incongruent with the liberalization policy of government especially with the foreign exchange rate and other price determining components such as crude cost, Nigeria Ports Authority, NPA charges, among others remaining uncapped.
We on the sidelines accepted as true but doubtful of last weekend’s Abuja meeting that rehearsed another drumbeat for petrol price increase. Going through the communiqué was Baru jolted that he got more than a bargain from his former bosses? It was unclear and difficult to understand the NNPC GMD whose office issued the viral statement. Again he had rebuttals after meeting with President Muhammadu Buhari. The story and stagecraft were indeed not future perfect.
It appeared translucent the manner the NNPC tested the price increase waters and our eminent petroleum managers becoming crybabies. The former petroleum resources managers became spokespersons of the NNPC, and later out rightly disowned. Were they proxies for importers of our petroleum products? Perhaps the former GMDs under whose respective tenures were comatose refineries that never refined a barrel of crude would have left the Nigerian remain captive as wailing wailer. We remind them that the Nigerian is still gasping for breath from the May 11, 2016 green monkey disease of almost 70 percent price increase of PMS in the modulation regime. They still remind us about crude cost from imported products when there is no cracking from any Nigerian refinery. From extensive works on petroleum economics we know what the FOB Amsterdam-Rotterdam-Antwerp (Platts) Futures PMS Data is up to 2017. Cracking margins (profit and loss) of a refinery are determined by the cost of crude, refining, taxes and distribution and marketing costs.
From the Petroleum Products Pricing Regulatory Agency’s Template of May 11, 2016 we are paying for a litre of PMS (petrol) Cost Freight N109.05; Lightering Expenses N4.56; NPA charge N0.84; NIMASA charge N0.22; Financing N2.51; Jetty through put charge N0.60; Storage charge N2.00; make up the landing cost of N119.78. With total margins (Retailers N6.00, Transporters Allowance N3.36, Dealers N2.36, Bridging Fund N6.20, Marine Transport Average N0.15, Admin Charge N0.30) of N18.37 adds up to N138.15 as total cost. The NNPC allocated a retail price band expected open market price (OMP) of N135-N145.
Observers believe it was ineptitude of the monetary and fiscal authorities to allow the May 2016 petroleum products price increase by 67 percent when they are imported. Again the currency was devalued and exchange rate floated between 52.28 and 77.66 when we cannot manufacture for export. The price increase which tended to be a boon for government to raise fund for the 2016 budget implementation however put the government in a desperate situation that the economy is sliding from recession to depression.
Until we stop importation Nigeria will continue to struggle to generate foreign exchange liquidity from low priced crude to purchase petroleum products in glutted markets. Applying the neo-liberal economic model in Nigeria’s petroleum without refining is dwelling in the past. What we need now is ingenuity to assist government with solutions and reduce Baru’s task. India liberalized her petroleum industry in 1991 after the end of the cold war. The government reorganized the National Oil Company into public limited companies; the Oil and Natural Gas Corporation (ONGC) and the Indian Oil Corporation (IOC). The ONGC holds about 77 percent of oil and 81 percent of gas production. It has acquired shares in exploration ventures in many countries including Nigeria where it has Blocks OPL 279, OPL 285 and Block-2. India has 11 of 23 India refineries with a combined refining capacity of almost 2.0million barrels per day. The NOC is ranked 17th of oil companies in the world. As a net importer of oil India still subsidised petroleum products in 2016.
Out of the 745 operable refineries in the world, the four in Nigeria with a combined refining capacity of 445,000 barrels per day are dead. The oldest in Port Harcourt was built in 1965 and the newest still in Port Harcourt was built in 1989. Warri and Kaduna refineries came on stream in 1978 and 1980 respectively; they have for almost two decades been down without maintenance. The wholly owned petrochemical plant built in 1990 was mismanaged and sold in August 2006. The investors that bought the facility only did turnaround maintenance and invited us to the commissioning on October 12, 2006. They now export Ethylene and Propylene. The world’s oldest refinery of 116 years in India is still refining products for Indians.
Our fairly new process plants (refineries and petrochemicals), the oldest of 51 years became aged infrastructure. President Muhammadu Buhari who was the first Chairman of the NNPC should not allow this to continue. Under his watch we still continued to dwell on crude export which was started in 1958 when the first ship laden with 5000 barrels of crude set sail for a refinery in Europe.
I will continue to drum it that there are up to 6000 byproducts and derivative when we refine a barrel of crude. Value additions in the industry are strategic for energy, technology and skills. The benefits of local refining are that we have many products, diversify the economy along vertical linkages, create wealth, induce savings and investments, create employment, increased GDP and increased revenue.
The law establishing the NNPC was enacted on the 1st of April 1977 by the then General Olusegun Obasanjo administration. NNPC was for refining, treating, processing and generally engaging in the handling of petroleum for the manufacture and production of petroleum products and its derivatives. The national oil company was reduced to a marketing company importing and distributing petroleum products. Our former petroleum chief’s advice would have been on downstream investments and strategic relationships with partners, refinery operations transformation and profitability rather than stoutly dwell on imported products price increases and NAPIMS control.
President Buhari needs assistance and we must all patriotically do so for Nigeria.
source:vanguard
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