Headlines

FG’s downstream sector subsidy, legal framework repel investments – LCCI

0

By Abiodun OBA

 

The federal government’s subsidy regime and legal framework are said to be responsible for the declining foreign direct investment (FDI) inflows into the oil and gas downstream sector.

The Lagos Chamber of Commerce and Industry (LCCI) President, Michael Olawale-Cole, who stated this maintained that it is the reason why the sector had the least FDIs compared to the midstream and upstream sectors.

Olawale-Cole stated this at the LCCI Petroleum Group Symposium tagged ‘regulations of the downstream oil and gas sector in the post subsidy environment’ in Lagos.

He pointed out that nearly 70 years after the discovery of crude oil in commercial quantities, the sector is yet to develop to the desired levels, despite the recent enactment of the Petroleum Industry Act (PIA).

The LCCI President said Nigeria’s oil and gas downstream market size is expected to grow from 1.1 million barrels per day (mbpd) in 2023 to 1.31 mbpd by 2028, at a compound annual growth rate of 3.5 during the forecast period (2023-2028).

However, Olawale-Cole bemoaned that the federal government has not shown a strong desire to have a well-established domestic refining industry that will drive the market during this forecast period.

He opined that the downstream sector needs full deregulation if it would attract more private investors, saying that the country’s growing population of 2.4 per cent in the last five years, has resulted in rising energy demand, underpinned industry output and has led to an annual growth rate of 5 per cent over the last five years.

“However, the effects of the Russia-Ukraine war, particularly its disruptive impact on the global supply of crude oil, have led to elevated oil prices. The removal of the petrol subsidy in Nigeria, which sparked a surge in pump prices to a current average of ₦568/litre from the previous ₦185/liter, is anticipated to lower demand from low and middle-income households in the short to medium-term.

“Nonetheless, we note the discontinuation of the subsidy regime (on paper) in June 2023 to be a positive game changer for the Nigerian economy, as it is estimated to save the government at least ₦6 trillion annually as well as allow for full deregulation of the oil and gas downstream sector,” he said.

He pointed out that a slew of issues, including volatile oil prices, pipeline vandalism, crude oil theft, disruptions in oil supplies and non-functional refineries have hampered the industry’s growth potential and caused it to operate sub-optimally.

“Nonetheless, the promise of the 650,000 bpd Dangote refinery in Lagos, the 200,000 barrels per day BUA refinery in Akwa Ibom, and other state-owned refineries with a combined refining capacity of 445,000 bpd suggests that the era of Nigeria importing refined oil may soon be over, and the industry can begin to enjoy a more stable supply of refined oil,” he said.

The Minister of State for Petroleum Resources (Gas), Ekperipe Ekpo, in his remarks tagged ‘CNG options, challenges and opportunities with its impact in Nigeria economy’ said for years, the government has heavily subsidized the price of premium motor spirit (PMS), providing affordable energy sources to the masses, but however, stated that the subsidy-driven approach has proven unsustainable, draining the nation’s national resources and impeding the development of a self-sufficient energy sector.

Ekpo, who was represented by his aide, said the deregulation has had a major ripple effect on the cost of goods and services, which has further highlighted the need for greater utilisation and deeper penetration of natural gas in various forms, to provide affordable and reliable energy for the country.

“One of the most promising alternative sources of energy is Compressed Natural Gas (CNG), which is a cleaner and more environmentally friendly fuel, offering significant benefits in terms of reduced emissions and improved air quality. Transitioning to CNG as a viable option in the downstream oil and gas sector can lead to a more sustainable and resilient economy.

“However, one of the challenges we face is the establishment of the necessary infrastructure for CNG distribution. These include the construction of refuelling stations and the conversion of vehicles to CNG compatibility while also ensuring that safety standards required for the storage and transportation of CNG are met, to achieve the above, requires significant investment and coordination between the government and private sector,” he said.

The Chief Executive of the Nigerian Midstream and Downstream, Petroleum Regulatory Agency (NMDPRA), Farouk Ahmed, said through the use of CNG, as a natural pipeline system, the gas infrastructural gap could be aggressively mitigated.

Represented by his Senior Technical Adviser, Agba Steve, he said there are major projects that have been undertaken to ensure the pipeline natural gas in a few years from now is optimally available across the country in such a manner that natural gas can continuously be used to either generate power or become the feedstock for gas-based industry.

“Due to the unavailability of pipelines, a lot of those opportunities have not been taken off optimally. But then the use of CNG can then be used to bridge the gap that we have in infrastructure deficiency,” he said.

 

© 2023, maritimemag. All rights reserved.

NPA supports oil industry – Bello-Koko

Previous article

US warship in Red Sea shoots down drone – officials

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.

More in Headlines