New vista of opportunities have been offered to players in the oil and gas industry especially to those in the downstream value chain, amidst recent enactment of Nigeria’s Petroleum Industry Act and global energy transition, but a major clog in the wheel of expected progress is uncertainties surrounding government’s reactions towards genuine implementation of all the industry legislation.
While so much has been said about what Africa stands to gain through energy mix and optimization of its existing oil and gas reserve and other enormous reserve natural resources , the continent seems to be on the fringes by stricter environmental regulations and political will.
These were some of the concerns of operators in the downstream sector at the just concluded 15th Oil Trading and Logistics (OTL) Africa Petroleum Downstream Week 2021, which took place in Lagos. They feel policy markers handling of the implementation of the new PIA and energy transition will determine how far operators can survive.
The conference was a high-level conversation on the insight on market and emerging opportunities in the downstream petroleum value-chain. It touched on a number of topics, including the Donwstream in transition: Getting set; Clean fuels and redefining standards in the age of zero carbon; What is changing in the fuel retail landscape; Safety and security in shipping petroleum products; The Nigeria fuels congress; Pricing, infrastructure and the growth of downstream gas and lubricants markets.
The first session “Clean Fuels and Refining Standards in the age of zerocarbon” explored issues relating to fuel standards in the context of a quickly evolving reality of energy transition. Panelists offered a vision of a zero-carbon future and how it may impact current markets and practices, including refining standards, automobile, and machinery design, and legal frameworks.
Dr. Emeka Akabogu, Chairman, OTL Africa Downstream Week 2021, in his address disclosed that African countries are confronted with issues bordering on cleanfuels, renewableenergy, electric vehicles and new downstream legislation. He noted that the factors are pushed by the global decarbonisation efforts.
Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari at the session confirmed that global energy transition influenced by campaign for zero-carbon emission, is responsible for fuel shortages and high prices of petroleum products for developed economies. The factor according to him is also cause of rising inflation and increased cost of living of developing nations like Nigeria.
He was hopeful that the PIA will create new opportunities across the spectrum of the oil and gas industry, leading the way for energy transition.
Corroborating the position of the NNPC GMD, Sir Billy Okoye, Group Executive Director, Ventures and Business Development, NNPC, revealed that the Corporation is advocating ‘Energy Justice’ – which is a concept that will allow every country progress at their own pace towards energy transition by 2050. Adding that natural gas development is the fastest and cheapest way for Nigeria to transit towards cleaner fuels. .
Mrs. Sheila Addo Abiemo – Director, Projects Monitoring and Evaluation, Ghana National Petroleum Authority noted that Africa is the lowest emitter, so should not be pushed to creating more energy crisis for itself through call for zero-carbon. She said land and agricultural activities are the leading causes of emissions in the continent as opposed to energy utilization in advanced economies.
Abiemo revealed that Ghana has achieved compliance with clean fuels through deliberate efforts in reduction of sulfur in petroleum products; promotion of LPG and Compressed Natural Gas (CNG) as autogas; introduction of biofuel into the energymix; promotion of EVs; and upgrades to storage and distribution facilities to handle new fuel specifications.
Dr. Samba Seye, Managing Director, TotalEnergies Marketing Nigeria Plc, in his presentation revealed that there is about 30 per cent increase in global demand for cleaner energy, adding that investment in fossil fuels production has significantly dropped.
According to him, TotalEnergies is investing more in production of Natural Gas, and has converted 120 retail outlets to run completely on solar power; promising to introduce two CNG stations to the country by first quarter 2022.
Seye said TE, plans to increase gas utlilization, grow renewables energy sources significantly, he therefore called on government to develop strategies that would drive down the cost of renewables, to pave the way for seamless switch from fossilfuels.
Mr. Femi Adeyemo, founder/CEO Arnergy, at that session cautioned African leaders to develop a deliberate roadmap towards energy transition. According to him, Africa might be left behind in the global energy transition.
He said utilization of renewables is very low in Nigeria, insisting that government must adopt short-term remedies by incorporating LPG, solarpower and wind energy into the energy mix.
He asked African leaders to put lithium battery development into national energy consciousness. He said, lithium and other metals of the future will determine the progression of energy transition.
‘What is changing in the Fuel Retail Landscape?
This session highlight impact of fuel demand on the downstream players going forward. The panelists identified emerging opportunities in adjacent value pools, and reflect on the impact of electric vehicles (EVs), biofuels, CNG and solar powered stations in the traditional paradigms of fuel retailing.
They also highlighted innovative options available for fuel retailers in order be relevant and optimize value in view of increasing logistic challenges and tightening margins.
Managing Director, Retail Division, NNPC, Mrs. Elizabeth Aliyuda, in her remark at that session revealed that the PIA will usher in a competitive market fostered by demand and supply dynamics, especially as it relates with investment in the fuel retail space.
According to her, development in that segment of the downstream sector has paved the way for an increase in digitalization, investment in automation and adoption of artificial Intelligence (AI) for service delivery.
She however noted that full deregulation will prompt inflation as fuel costs will increase, and lamented that lack of necessary infrastructure has slowed the adoption of electric vehicles for mobility in Africa.
With expected increase in the cost of fuels, Aliyuda, envisaged increased car-pooling, sharp decline in unnecessary travels, and inclination towards alternative energy such as LPG, CNG and biogas.
Mr. Vishal Premlall, Director, South African Petroleum Retailers Association (SAPRA) in his review of the retail landscape between South Africa and Nigeria, charged stakeholders to become early change adopters and resilience to impact of energy transition.
He said, “It is inevitable, that fuel retail industry is changing and we must be ready to meet dynamic expectations of customers. Demand for white fuel will continue to drop, so effort should be given to innovative approach in retail stations’ offerings.
He revealed that the growing middle class and millennium would play a major role in African energy transition. He challenged players to evolve cost saving mechanism in their approach to customers.
According to him, energy transition space in Africa context will continue to witness low penetration of EVs, but CNG adoption would be faster. So retailers should adopt comprehensive strategy and dedicate investment to become retailer of CNG.
He also noted that brand new EVs are expensive for Africans, this according to him is a great incentive to CNG and fossil fuel adding that, second handed cars will still be relevant for a long time in the continent.
Mr. Emmanuel Omuojine PMP, CSSGB, ACA, Group Head, Strategy & Business Development, Rainoil Limited, said the PIA has influenced a wave of mergers & acquisitions; introduction of gas and renewable; proliferation of EVs; early take off of Dangote refinery; and adoption of AI.
He observed that investment in fuel retail space will be driven by financial performance, return on capital, customer value, environmental societal value, availability, affordability, accuracy and convenience, safety, and sustainability.
Mr. Tony Ejinkeonye, National Vice President, Petroleum Products Owners Retail Outlets Association of Nigeria (PETROAN), identified poor infrastructure and inadequate refining capacity as major factors affecting fuel retail operations across the Africa.
He insisted that at the short term, white fuel demand will be stable across African countries , urging government to rehabilitate pipelines and invest more in deport infrastructure.
He noted that parallel market in the retail of petroleum product is influenced by price regulations, adding that when price of fuel is fixed , black marketers will take advantage of the retail space by reaping super normal margins.
He therefore charged government to deal with product black marketers who according to him provide fuels for bandits and kidnappers.
Chief Executive Officer, OVH Energy – Oando Licensee, Mr. Huub Stokman revealed that customers expectations at retail spaces under an energy transition dispensation is becoming high and dynamic. He said the customers expect station attendants to be trust-worthy in terms of quantity and quality of petroleum products.
He said, “Customers need special service in terms of speed and expect the pump attendants to treat them fairly. They want convenient epayment facility, well maintained and lit stations; and other value added services.
He noted that full deregulation of the petroleum products will promote competition and transparency in the retail space. Alhaji Yusuf Othman, National President, National Association of Road Transport Owners, NARTO, said that the PIA will significantly impact the activities of the downstream petroleum sector in many ways.
He said that transporters are apprehensive about the future of bridging activities and the effects that it will have on the supply and distribution of petroleum products throughout the country.
The panelists at that session however concluded that the petroleum product retail landscape ,in the next few years, will witness significant transition to non-fuel retail activities, as decline for fossil fuel continue rises.
They charged players in the sector to invest in other lines of business at the retail space, some of which includes Automated Teller Machine, restaurants, parcel pick-up points, autogas, solar powered station and other digital driven activities.
‘Safety and Security in Shipping Petroleum Products’,
Admiral Dele Ezeoba (Rtd.) at this third session, said that safety is the building block that provides the enabling environment for petroleum products shipment. According to him, safety is significant key to efficient movement of petroleum products by sea.
He added that piracy is a fundamental cost of the inadequacies of government, stakeholders and individuals on land. He appealed for right governance framework to tackle poverty and socio-economic inequalities influencing criminality.
Chief of Naval Staff, Nigerian Navy, Vice Admiral Awwal Zubairu Gambo, while identifying piracy and searobbery as the major threats in maritime sector disclosed the Nigerian Navy has sustained presence at sea, with three ships and 45 patrol boats.This strategy according to him is responsible for the reduction in vessel attacks and hijacking incidents in the Gulf of Guinea.
Agada commended the judiciary for landmark rulings against convicted pirates adding impetus to the Navy’s efforts and emphasized the Navy’s commitment to provide security, safety services and maritime safety information to IOCs and cabotage operators.
Executive Director, Business Development and Strategy, Loyz Energy and Logistics Services Limited, Ms. Bassey Alorye Adie said “lack of funds, limited access to information, obsolete technology, nonexistent infrastructure and absence of vital platforms have hindered efficient in the maritime operations in Nigeria.”
According to her, Nigeria is listed as a high-risk area by P&I Clubs, excess of $600,000 monthly, insurance premiums is slammed on vessels and cargoes transiting the gulf of Guinea. This is because the country’s water is categorised of as a war risk.
She further suggested the establishment of proper and effective maritime coordinating centre for all maritime stakeholders to collaborate. She also advocated information sharing and gathering among stakeholders and called for proper maintenance of infrastructure and other key assets.
Adie further advanced public and private sector operators partnership to on hardware investment,she also seek updated database of all assets operating in Nigeria’s maritime domain including surveillance and tracking.
Dr. Mkgeorge Onyung, MD., National President, Ship Owners Association of Nigeria (SOAN) revealed that indigenous ship owners have been given opportunities by the Nigerian National Petroleum Corporation (NNPC) to involve in the shipment of petroleum products. This according to him is a relief to cabotage and indigenous players.
Principal Partner, TRK Solicitors, Mr. Temisan Omatseye identified limited marine assets as a major factor that has made it difficult to patrol Nigerian waters effectively.
He also noted that the cost of lightering a mother vessel offshore Lagos could cost as much as moving the entire cargo from Europe to West Africa.
While commending the Navy and Nigerian Maritime Administration and Safety Agency for the Deep Blue Project, Omatseye advocated the creation of transit corridors across the maritime domain for vessels calling Nigerian waters.
“This will concentrate our security services, reduce response time and inadvertently lead to segmentation of the priority areas of security.
He also reiterated the urgent need for all Nigerian seafarers to be captured by their biometrics and create a database as a deterrent for idle mariners to engage in criminal activities on sea.
The Nigeria Fuel Congress
This high-powered session featured a cross section of public and private stakeholders in the downstream sector. It gives a guideline on how new regulatory bodies will transit to their new roles. The panelists spoke about the role that international oil traders will play in the new dispensation and expectations of investors and stakeholders in the new PIA regime.
However the private players revealed that the Nigerian government has not shown enough commitment and political will to ending subsidy on PMS by 2022, despite the accent given to PIA.
According to them, the political consideration ahead of 2023 general election, will influence government’s decision in the petroleum sector.
However Mr Isiyaku Abdullahi, Managing Director of Petroleum Product Marketing Company (PPMC) and Mr Adeyemi Adetunji,Group Executive Director, Nigerian National Petroleum Corporation, NNPC Downstream, differed, they urged operators in the downstream sector to take advantage of the PIA and explore opportunities in the African regional market.
Ishaku said, it is not sustainable for the country to continue to incur N8.3 billion daily as under-recovery on PMS, warning that the amount could escalate to N3million annually if not curtailed.
He said, “At 80 dollars crude oil, 60 million litres daily consumption and N411 per $, under-recovery also known as petrol subsidy, per litre of petro will be N138 per litre, when landing cost is N302, when the product is being dispensed at between N162 and N163 per litre respectively.
Mr Adeyemi Adetunji,GED, NNPC Downstream, noted the PIA through deregulation of PMS, will promote economic growth through investments in the midstream gas infrastructure with the aim of increasing gas to power and industries.
He said that the PIA is a gas-friendly law, while adding that the Nigerian petroleum products market is expanding in view of emerging gas market opportunities and urged investors to seize the opportunity to create values.
The Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Clement Isong, said that it is not sustainable for PMS to be dispensed at NGN162 per litre, with a landing cost of N302 per litres as at October 2021. According to him, market forces must be allowed to determine the price and marketers must be given the free hand to sell at a competitive price.
Isong insisted that leadership is required from the Government to provide direction industry. Mr. Tunji Oyebanji, Managing Director, 11 PLC , on his part insisted that until when market forces are allowed to dictate the prices of petroleum products, especially PMS, Nigeria will be mortgaging its future.
He noted that lack of political will, inefficiencies and policy inconsistency are some of the factors that would take the shine away from the recently passed Petroleum Industry Act (PIA)
Dr. Muda Yusuf, Immediate Past Director , Lagos Chamber of Commerce and Industry, warned that full deregulation would not happen in the life of this administration due to inconsistency in the way issues of Petrol subsidy and other critical industry decisions are made by the Government.
He said, “Political considerations, especially as 2023 general elections draw near, the stance of labour and the activities of the entrenched interests profiting from the subsidy arrangement are still strong variables in the reform equation.”
He therefore warned industry stakeholder to the cautious of optimism around the PIA, adding that over the years, Nigerian has seen a wide gap between the rhetoric of reforms and the reality of it.
Mr. Stilian Mitakev, Group Managing Director, Swift Oil Limited/ Assistant Secretary Depot and Petroleum Products Marketers Association of Nigeria, claimed that the Federal Government is not genuine and can’t be trusted with the planned removal of the petrol subsidy .
According to him, from rhetoric of Minister of Finance, Budget and National Planning, Zainab Ahmed over the plan to end petrol subsidy by June 2022, there is fear that the Government is not serious about ending the subsidy regime.
He said, “ This is not the first time that the present administration will be promising to remove subsidy. There have been several failed attempts in time past by the present administration.
“The subsidy on PMS is likely to escalate to N3 trillion before the end of the year, which is about 44 percent of the 2022 proposed budget. This is the same amount needed to fix education, provide infrastructure ,develop the health sector and deal with other critical national development initiatives.
The Assistant Secretary of DAPPMAN claimed that the inclusion of the Petroleum Equilisation Fund (PEF) in the recently passed PIA will continue to enshrine arbitrage and round tripping in the downstream sector.