Govt insists on fuel subsidy removal

Tuesday, 28 October 2014 22:51 Written by Roseline Okere

• Says downstream sector needs N3.2tr yearly investment
• Reps to pass PIB by May 2015

WORRIED about the slow growth of the downstream oil and gas sector due to what it considered as a result of the regulated regime in the industry, the Federal Government yesterday stressed the need to eliminate price subsidy and stimulate competition.

Besides, the country’s downstream sector requires investments of about $20 billion (N3.2 trillion) yearly to support the sector.

This came as the House of Representatives assured stakeholders that the long-awaited Petroleum Industry Bill (PIB) would be passed into law before May 2015.

The Minister of Petroleum Resources, Diezani Alison-Madueke, who spoke at the ongoing eighth oil trading expo in Lagos, said that to provide a competitive market environment and sustain supply, the downstream sector should be fully deregulated.

According to her, more investments in the sector will only be made possible if the industry is fully deregulated.

Alison-Madueke, who was represented by the Deputy Director, Gas, Department of Petroleum Resources, Oliver Okparaojiako, noted that the private sector’s participation was crucial to attracting additional funding at all levels.

She stated: “The stunted growth of the downstream sector is attributable to the distortion introduced to the market as a direct result of the regulated regime in some of the sub-Saharan Africa countries and there is the need to eliminate this convoluted price subsidy and stimulate competition across the value chain.

“The issue of subsidy cannot be over-flogged. According to the World Bank, subsidy on petroleum products in Nigeria and other oil-producing African countries would be unsustainable in the medium term.

“The truth is that heavy subsidy is an unsustainable expenditure even in the long term. It generally promotes energy inefficiency and imprudent consumption. Over the last 10 years Nigeria has taken important steps towards a more deregulated downstream. To provide a competitive market environment and sustain supply, the downstream should be fully deregulated. This is one of our proposals in the PIB awaiting passage by the National Assembly.”

She disclosed that the Federal Government had put in place two crude delivery pipeline networks to the refineries.

She said that the government had also constructed 5,120 kilometres of pipeline network for the distribution of petroleum products from the four refineries with a capacity of 445,000 barrels of crude/day to storage depots across the country.

“There is also one import terminal at Atlas Cove linked to the products pipeline network and the Bonny Export Terminal which was meant to export excess products from the Port Harcourt Refinery. The internal storage depots were designed to hold 1.45 trillion litres of white products and 9 LPG depots with a capacity of 8,000 metric tonnes each.”

Also on the occasion, the Speaker of the House of Representatives, Alhaji Waziri Tambuwal, said that the PIB would now be passed before May next year.

Earlier promises made by various arms of government including the executive and the legislature were that the bill would be passed before the end of this year.

The Chairman, House Committee on Petroleum Downstream, Dakoko Peterside, who represented the speaker stated: “We are working on the bill and we are conscious of the fact that it is very critical to the economy of Nigeria, and so we are not taking it lightly. I want to reassure you again that we are taking the PIB very seriously and I’m very optimistic that the bill would be passed before 2015.”

Reiterating the importance of the bill, Tambuwal said the PIB was critical to the survival and growth of the oil and gas sector and the economy at large.

It was in recognition of this fact that he noted that “there was no single dissenting opinion, everybody agreed that the PIB is critical to the survival and growth of the oil and gas industry in the country.”

According to him, there will not be meaningful investment in refining until the sector is deregulated. “There are many challenges confronting the downstream sector, such as the issue of funding, insecurity and most especially, deregulation”, he said.

Also at the event, the Executive Secretary, Petroleum Products Pricing Regulatory Agency (PPPRA), Farouk Ahmed, said that the agency had decided to further strengthen its regulation in order to forestall a repeat of unwholesome acts, which if not quickly nipped in the bud, could lead to extreme lawlessness.

He disclosed that the agency had introduced double-one-two inspection system; monitoring of truck-out of Premium Motor Spirit from the depots by nominated surveyors; submission and verification of notice of arrival and notice of readiness and vessel-import financing documents; restricted participation of marketers under the Petroleum Support Fund Scheme to owners of coastal discharge/depot facilities and ban on the use of bills for collection and unconfirmed letters of credits, as financing instruments for petroleum products imports.

Others, he added, were the rejection of homogenised cargo from multiple vessels with no defined origins; total ban on cargoes procured from floating storages in the West African coasts; introduction and enforcement of the submission of bill of laden, certificate of origin, affirmation letter from supplier and complete family tree of transaction.

Ahmed noted that these informed initiatives had led to improved fuel availability nationwide and at regulated price; entrenchment of transparency; and elimination of petroleum products wastages, scarcity and malpractices in the supply chain.

He stated: “Our efforts have continued to facilitate a net inflow of investment in the downstream sub-sector in excess of N60 billion, generating thousands of employments opportunities for Nigerians. We are committed to sustaining the tempo of these initiatives for the benefit of all people.”