Mr. Tunji Oyebanji, The Executive Chairman, Major Oil Marketers Association of Nigeria (MOMAN) doubles as the Managing Director/ Chief Executive Officer of 11 PLC, formerly known as Mobil Oil Nigeria Plc. He joined Mobil in 1980 as Sales, Marketing and Planning officer, and has served the company in different capacity, including Exxon Mobil affiliates in Africa, Europe and USA; Director of Mobil Oil Nigeria plc between 2005 and March 2006. Having taken over the asset of the defunct Mobil Oil Plc, in October 2016 through acquisition, 11 Plc under the leadership of Oyebanji witnessed remarkable assets increase, expanding portfolio to include other critical sector of Nigerian economy. In this exclusive interview with EnergyDay media team, the MOMAN Chairman/11 Plc MD talks about the issues in the Nigeria downstream section. Excerpts .
President Muhammadu Buhari on Monday, signed the much awaited Petroleum Industry Bill (PIB) into an Act. Do you think this would impact on the downstream sector of the oil and gas industry?
We are thankful that the PIB with its long history of almost two decades has finally been signed. We have waited for a long time and thankful to see this come into fruition. MOMAN would like to seize this opportunity to congratulate President Muhammadu Buhari, the National Assembly and the Nigerian people for the audacious commitment towards ensuring that this become a law.
This is clearly beneficial to the business community and energy industry investors as the PIA will now give a set of guidelines and direction that can make for informed business decisions. A bill that will govern an industry will give investors assurance of how things would shape out in the industry. There is the likelihood that this would attract more investors who have a clear picture of how the industry is going to operate in the near future.
We think that it is going to be positive and going forward it would create more jobs for the unemployed. On the downstream side, in particular, we expect greater competition amongst the players. That would ultimately be to the benefit of the consumers because the companies involved will start making marketing efforts and other things that do not exist in the past. It is a positive step. like every law, it is not perfect, there are areas of the Act in which people would have different opinions, even stakeholders. That is what we have for now; we would like to see people working with the various regulatory agencies that have been created by the law to ensure that it is implemented smoothly with a level – playing field, to ensure that all players are treated equally and fairly. This would obviously augur well for the country, as a whole.”
MOMAN was reported to have expressed some dissatisfaction with some of aspects of the PIA, especially the monopolistic tendency given to oil refineries, in the area of importation of some petroleum products. Now that the bill has been assented to by the President, do you still maintain that position, and is there any hope?
“There is hope in the bill. It has been passed into law, and we still have to operate within the letter and spirit of the law until some of the contentious issues are amended. Of course, we made our opinion felt at the initial stage of drafting this law as it concerned the insertion of a clause that makes only local refineries eligible for importation of products. The final document which was passed may have, to an extent, ameliorated some of the concerns we raised in the past. Sometimes what is important in a law such as this is how it is administered and implemented.
Following some of these laws exactly how it is written in the area of implementation, may be cumbersome for the regulatory agencies. It now behooves on the regulator to look at practical means to make sure it works properly. For us, we rather look forward to making the law work as we have today. If there are certain areas that are difficult for us to operate, like every other law, we can now consider an amendment. No law is perfect -100 per cent – without any issue.
We are ready to work with the authority to make sure that implementations work well. We will work with all stakeholders to make things work.
One issue that has lingered for ages is that of petrol subsidy . What is your association’s position as it concerns government’s continued subsidizing of the product?
Well, it is unfortunate that we find ourselves in this situation. It is a bit of a catch-22 situation. As you know the government through various agencies over the years claimed that there is no more fuel subsidy. But yet the fact remains that there is an element of subsidy. This is because the price at which PMS is being sold is significantly below the landing cost of the product to the country.
So, it is obviously becoming a political hotcake which definitely is not good for Nigeria, and all the stakeholders need to agree that this is not sustainable for Nigeria. A situation where we have to continue to borrow at this level, yet it is almost as if we are borrowing to keep the price of PMS at less than economic level which is not sustainable. It is assumed that PMS subsidy for the year is between N1 trillion and N2 trillion. You can imagine what this can do for a country that is starved of revenues to fund its budget and fix its infrastructure? It looks as if we take revenues from crude oil on one hand and spend a good chunk on subsidy, on the other hand. Beside, we still go further to borrow from financial institutions to address the shortfalls in the budget. So our position is that this is not sustainable.
We understand the sensitivities around the subsidy removal, but we believe there are other ways that government explore to ameliorate the subsidy impact on the people, rather than keeping subsidy in place. So, there is now hope that the Petroleum Industry Act is going to be effective which guarantees true deregulation of the entire sector, where prices are determined by market forces.
But again, like everything, this would take a lot of time and we would obviously have a process where we can move on from where we are to a market-driven situation. Again, this would take time and there must be a process whereby we have to work out the final details which would be incorporated with the government’s effort to reach that goal.
Recently the government approved the rehabilitation of the country’s refineries. How would that move affect your association’s operations? Do you agree with the plan to privatise them at the completion of the rehabilitation exercise?
We have gone through many cycles of privatisation of refineries with attempts to rehabilitate. Up till this point, they have not been successful because, for the past two or three years, those refineries hardly produced a drop of petrol.
Hopefully, this time round it would work and the intention of the government will be fulfilled. If the refineries come back on stream, certainly, it would mean a lot as it would improve supply into the system. When the production in the refineries are restored optimally and that is added to the production of the Dangote Refinery, obviously we believe that local requirement will be sufficiently met, and Nigeria will now become a net exporter of Petroleum products.
That would only be positive for Nigeria because, instead of becoming a huge consumer of foreign exchange, all petroleum products are currently being imported into the country thereby requiring so much forex to be able to do it. We have a situation where we would be generating forex through sales of refined products. I personally would have loved to see the privatisation programme initiated a long time ago, where government obviously was focused on regulation, allowing the private sector to drive the process completely. Then, we are all for it. For me, instead of using the government’s scarce revenue to repair the refineries and sell much later on. I would have prefer we sell at a much lesser price and allow the private sector to fix it.
What’s your association’s position on the issue of deregulation of the downstream sector?
We have always clamoured for deregulation which would ultimately allow investments and certainty. We are private-sector driven, we believe deregulation would allow for competition, attract investments and ensure market stability.
Investors do not like uncertainty, when you import a product into the country and the regulator is determining the price, inventors would continue to incur huge losses because market realities are not at par with regulations. This is because those people making decisions as regulators have never run a business before; they are obviously, in many instances, civil servants who do not understand the intricacies of business environment.
Some of their considerations are generally more political than economic. They don’t always take decisions that are favourable to business people. They are not used to giving account to shareholders at the end of the year on their performances. For us as investors, deregulation is a welcome development but I want to state clearly that deregulation does not mean that there should be no regulation.
What then is your understanding of Deregulation?
The investors in the oil and gas Industry deal with highly volatile products, therefore there must be safety, quality and standard regulations that should solely be the responsibility of the government agencies. This means that, rather than being involved in running the businesses as they are doing today, we want them to see deregulation in terms of focusing on pricing and supply of the product.
We do not always like a situation where government officials would wake up from their sleep and decide on the price that we should sell our products. In reality, for various reasons, government doesn’t want to be adjusting prices arbitrarily. They usually fix prices when international prices of these products go up. When this happens, the government is always under pressure to subsidize so as not to alter the prevailing price. This becomes a drain on government’s revenue and it is unbearable and unsustainable. By the time government finally takes decisions, the junk is so significant that always affect the prices we are made to sell the same product. But, if the market forces have been allowed to determine the price , any time prices change in the international market, competition and income level would play their role.
Secondly, in a deregulated market, areas and income level will determine prices at which some of these products are sold. Prices of PMS cant be sold in suburbs as in the cities. All these things usually play out in a deregulated market. There used to be a time Nigeria had different grades of Petrol (Regular and Super) those grades were there for those who can afford them at that time, as they could make choices. Deregulations would bring about choices, as there would be investors who would only cater for upper class especially those who use luxury cars including roll-royce, while others would cater for lower price.
Sometimes I see people driving rolls-royce using lower grade of petrol which often are not the quality of PMS meant for cars like that. Deregulation is not about no regulations or no standard but it is about freeing up of the market for all to play, freeing up supply and pricing. That interaction and competition would make product and choices available and keep prices for customers at lowest possible cost. I used this words guidedly, and careful as not to say we should not deregulate.
No investors would price himself out of the market.
The transportation of petroleum products across the country remains a challenge as trucks owned by your members continue to get involved in accidents. What are you doing to help reduce the rate of these incidents by your members’ truck?
Most of us do not own trucks , we contract them out to professionals in the transport sector to manage. Although we may have had our companies names on most of the trucks , we no longer own them. However, I think the pertinent issue is to consider how to ensure that truck and product delivery safety in Nigeria is improved and guaranteed by markets. As cases of accidents and other road mishaps are very high. We have at various times taken actions, some of which includes close collaboration with Federal Road Safety Corps(FRSC), as we held a joint seminar with them last year in Abuja, in conjunction with various stakeholders in the sector.
We addressed all the issues on safety at that seminar and initiated some programmes that included drafting the FRSC officers to most of the terminals across the country to jointly inspect trucks when they come to load to ensure that they have the minimum safety standards required to move on the highways.
MOMAN has also embarked on training of some of our tanker drivers (Hauler) who move products for us. Infact, one of our members , TotalEnergies has established Truck Drivers Training School and Inspection Centre in Ibadan, Oyo state to deal with issues of this magnitude and teach them on how to handle and manoeuvre the trucks that we have. That is available for all our members to train their drivers.
One of the areas that MOMAN has complained about in the past on the subject of deregulation is that margin we earn on a litre PMS which was fixed by Government, as the authority also fixes the pump price of the products. The amount oil marketers and the transporters made on every litre of PMS is fixed by fiat. Sometimes the cost of main scaling at the terminals or trucks and other has gone much higher than what government allowed on the templates.
This in fact, is often higher than the true cost we incur on these products. If Government fixes N2, for instance, on transportation of the product whereas the real cost is N2,50K. This means that some of the cost is often not sufficient for other important cost including maintenance, repair and procurement of new truck. First and foremost, investment in haulage department is generally old equipment like 35 and 40 year old trucks. We would need to extract the cost of new trucks from the fixed amount of the Government. So when we see all these incidents of truck having accident, one would have to trace it back to the fact that the margin is fixed.
All these things are interwoven . We hope that with the signing of PIB into an Act and transition into a completely liberalised economy, we would have a better operational environment that would give room for efficiency and quality. At that time mediocre would give way for only those who are efficient would be active in the industry. This will augur well for the country eventually.
At the just concluded Offshore Technology Conference 2021, operators said oil and gas is key to energy transition. What is your perspective on the Nigerian energy industry?
As you know, we have been a crude oil nation since 1950s, but over time , we have come to realise that rather than being an oil -dependent nation that has some gas, we are now realising that we are a gas nation that actually has some oil.
So I think we can put ourselves in a situation where we will say we are in transition from focusing wholly on crude oil exploitation and production to getting more investments in the area of gas , and I expect to see more of that in years to come.
As you know, the Minister for Petroleum has declared this year ‘a decade for Gas’, so the expectation is that we are going to see a lot more investments in the gas sector , in fact the vision is to see that a large numbers of vehicles being used in the country are powered by gas. I am sure that efforts are being put in place by the NNPC , CBN and other stakeholders to make sure this comes into fruition. Having said that we need to understand that crude oil will not just phase out completely. For very many more years , crude oil will still be a significant part of the energy mix. As the years go by, the only thing is that there will be gradual increase in the utilisation and investments in other energy resources including renewable apart from gas.
More investment in solar energy and other areas. It would take many more years for them to be at the level of petroleum resources.”
In what way have you improved on better operational environment for members under your leadership?
We believe that self- regulation is the best form of regulation. In the last two years since my administration was inaugurated, we have initiated some programmes to maintain global best standards. Periodically, for instance, we get an external body to round all the filling stations of our members to check the pumps to ensure that they are dispensing the right amounts of fuel to customers. So instead of waiting for the Department of Petroleum Resources (DPR) or Ministry of Trade Officials to monitor our activities, we do this ourselves and ensure that standards are complied with, and we are able to identify and take up with individual companies when we feel something maybe lacking. Also we carry out similar inspections on our depots and terminals, with a bid to verifying their data and that
they are delivering the appropriate quantities and making sure that safety standards are maintained by all in all these facilities.
Hardly can you see any unexpected safety and fire incidences in any of our facilities. So the third area is the trucking, although , they are mostly not owned by us, but we are working with the marketers and transporters to train their staff. In some cases, some of our members have been supporting the haulers by providing investment funds for them to ensure that they are actually acquiring new equipment for the operations. These are things that we have done to improve professionalism.
The aim of MOMAN is to make our group the focal point in terms of maintenance of industry best standards, and giving direction that the industry should go and we have done a lot good job in setting these standards.
What strategic role has MOMAN played in the advancement of the industry standards, and how has this impacted on the outlook of the downstream sector?
Beside what I have said earlier, we try to work with DPR to help improve capacity through leveraging on the international connections of some of our members. We use their expertise in terms of standard of trucking, retail outlets construction to mention but a few. We will continue to do that along with other global best practices in the downstream sector.
There are serious clamours to decarbonise emissions in the energy sector, what is the contribution of MOMAN in this new energy transition ?
“This is definitely a topical issue in the global energy sector. This issue has to be domesticated in terms of rules and regulations of the petroleum Industry Act, in which we are going to operate with, going forward. I am aware that the PIA talks about a minimum standard of the amount of carbon and Sulphur content in some of our petroleum products agreed by African Refineries Association (Afri 5). This is a standard for us . Others may have moved on, from that limit but it is a good way to start. At least, for us at MOMAN, we are working with the Federal Government and the relevant agencies to ensure that the limit is maintained and the standard of Afri 5 is complied with. If all our domestic refined products are going to come from Dangote Refinery, we are already sure that this would be complied with, because the refinery is being built to that standard. What that means is that if any investor is building any refinery , the carbon and Sulphur standard would be adhered strictly to. The starting point is PIA under which we operate.”
As the MD/CEO of 11 Plc, take us through the journey so far?
“As you know, we used to be known as Mobil Nigeria Plc, in 2017, the association has been a subsidiary of Exxon Mobil Group ended with the sales of the share of Exxon Mobil Oil Nigeria to NIPCO investment Ltd. So our journey of over 100 years ago up to 2017 was under the banner of Exxon Mobil. We were originally Mobil and it merged to become Exxon Mobil in 1999. What we have seen and done is to make significant investments in the last few years.
We have extended our capacity for various white products. We have constructed brand new Liquefied Petroleum Gas facilities where we have 8000 metric tonnes LPG storage. We had left the Aviation Business, but in these last three years, we have returned to now become one of the major players of the Aviation fuel, in the marketing space .
We have built increased capacity in the lubrication industry. We have doubled our storage capacity for finished lubricants. We have done our own bit in all these sectors , and hoping to do much more investments in the sector so that we will be well positioned for whatever PIA will introduce to the industry.”
How do you access the impact of the pandemic on your company’s overall performance ?
“It was a big challenge for us at 11 Plc. Obviously, when things started getting very heavy around February 2020, we immediately complied with all government’s protocols and regulations . We adhered strictly to limiting the capacity of staff in the office to about 60/65 per cent, which means some people had to work from home.
And of course, not all the staff can work from home , you can not load trucks from home, no matter how enthusiastic you are. You have to be where the trucks and products are to achieve this.
Last year came with the lockdown and restriction – that obviously impacted our business in terms of sales and so on. We are beginning to stabilize a bit. We are only worried about the surge in the rate of Delta-variant of the pandemic.
We also donated N250million along with other MOMAN members to the Covid-19 palliatives, and that was done in conjunction with the NNPC to invest in medical facilities in preparation for Covid-19.
Despite the direct impact of Covid-19 on your company’s net profit for 2020. 11 Plc total assets increased by N91.18bn in 2019 to N95.45bn in 2020, what’s the secret? Aside the relative decline in the mid-2020, your company’s share price sustained an upward trend; increasing at a stable rate towards the end of 2020, and has remained fixed through Q1 2021, how did you achieve this?
We have been making massive investment like the brand new 8000mt LPG storage facility. We have built three new tanks for storage of white products. All these have improved on investments in our asset. In addition, last year, we acquired the Lagos Continental Hotel as a subsidiary company, and all these have built our asset base to much higher level , and the whole thing is to make our company resilient, to be able to withstand the various cycles that sometimes take place in the oil industry. It is also to make sure if one is not doing well the other will take care of the shortfall.