How deregulation curbs wastage in fuel consumption

The Federal Government has confirmed that deregulation of the downstream sector has resulted into reduction in fuel consumption by Nigerians.

Speaking at the handing over ceremony to the new Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr Maikanti Baru, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu stated that “We undertook deregulation at the time nobody thought it was possible and if there’s anything we leave for this industry, it must be the legacy of that deregulation.

“Today our consumption of fuel has gone down by 30 per cent, we have no queues at the filling stations, we have one and a half months of self-sufficiency, we have strategic reserves in place that we are putting together and we have a funding scheme to enable the downstream to be able to adequately fund itself.”

Recently, Nigerian Tribune had exclusively reported that marketers have decried drop in sales due to reduction in fuel consumption. This has also led to some marketers selling below N145 per litre and sell between N135-N143 per litre to attract customers.

Furthermore, Kachikwu argued that “We have succeeded in removing subsidy and saving over N1.4 trillion for this country on a yearly basis. We have reduced upstream contracting period from the average of between two and half years to between six and nine months and we have started a massive commercialisation of every aspect of our business.”

Kachikwu said the NNPC has been able to cut operational cost by 30 per cent, adding that Nigerian refineries had started working for the first time in about 10 years, “but still not at the capacity that we want.”

“We need to find a structure, and we have started, in which private funds will come into the refineries and we will be able to rebuild our refineries to 90 or 100 per cent capacity, he added.

“I’ve already made a commitment that by 2018, 60 per cent of refined products importation will stop and by 2019, we must become a net exporter of refined petroleum products. I am happy to announce that in our May results, for the first time in the history of this company, the NNPC made a profit of N270 million.”

On JV cash call funding, he said this had been one major challenge, the minister said, “We are still in the process of covering that gap and paying the arrears of over $6 billion and covering up the year-to-year demands of close to about $5 million to $6 million. We are at the thresholds of finalising negotiations on that and I think we should be almost at the point of sign-off in the next one week.

“This will fundamentally change the upstream business in terms of providing funds and it will remove the delays we’ve had in terms of being able to get upstream developments. And hopefully, it will inject 100 per cent performance in upstream and hopefully increase your barrels from present 2.3 million barrels to upward trajectory of three million barrels over the next few years.”

He said the corporation was able to contribute 100 per cent to FAAC two months ago, up from about 60/70 per cent, adding that the NNPC was able to pay for the first time, 100 percent cash call contributions last month.

Kachikwu, who described the Niger Delta issues as ‘a big elephant in the room,’ stated that the government was trying to de

vise a model that would address the challenge in the region once and for all.

“We are trying to find a model that works finally for this country on the Niger Delta issue. The work is for everybody, it is not just solely mine, but it is on my doorstep and we need to find those solutions so that we can have peace. It is important that we get all the stakeholders in the region, in order to ensure development.”

While speaking on discussion with militants in the region on the sidelines of the event, the  minister said, “We are working on it and I need to meet with Mr President, because I just returned and obviously there’s a lot more engagement that is required. There are gaps that seem to have developed and I need to understand what issues warranted that. But we will work towards closing those gaps.”

Kachikwu also assured that by end of July, the Forcados crude trunk line would become operational.

Kachikwu promised to work with the new GMD and thanked President Mohammadu Buhari for the opportunity given him to manage the corporation.

“It is surprising that in the past 11 months, I’ve managed to serve as GMD of NNPC, as Minister of State for Petroleum Resources, as OPEC President, as the President of APPA and I’ve just been appointed the Chairman of NNPC board; all in 11 months. There are not many people in the world that would have those opportunities within that time frame or be given that opportunity by a leader. So we all have the President to be very thankful,” he said.

On his future role as minister, he said he would work on the Petroleum Industry Bill, gas terms, restructuring of other parastatals and the country’s upstream business.

He also said that he would look at the regulatory overhaul of the entire sector, as many regulations in the industry were outdated.

The minister also informed that under his watch $80 billion MoU with Chinese investors was recently secured.

The newly appointed Group Managing Director of the state-run Nigerian National Petroleum Corporation, Maikanti Kacalla Baru unfolded his 12-point agenda to include: Creating an all-inclusive internal advisory council on security comprising representatives from NNPC, the IOCs, the Unions and Security Operatives to brainstorm and address host community agitations to complement efforts of the Government Security Team; implementing the new business models and grant the needed autonomy to the strategic business units and autonomous business units; providing relevant directions and control that would ensure their growth and profitability, continuing to explore ways of relieving government from the burden of cash calls obligation as well as address and defray the agreed cash call arrears of the IOCs and restore oil and gas production and grow the reserve portfolio.

He promised increasing crude oil production by the Nigerian Petroleum Development Company (NPDC), reviewing all weak contractual agreements and terminate bad ones as appropriate, leveraging on equity positions to cause the development of key gas assets for both domestic and export as well as pursuing the expansion of gas network across the country, repairing and restoring oil and gas pipeline infrastructure as well as providing robust security system for both detection and deterrent in conjunction with the existing security arrangement.

He said he would ensure improved refining efficiency of the four existing refineries to pave the way for future expansion, pursue diversification of businesses by refocusing on the implementation of Renewable Energy Programmes and Frontier Exploration Services, continue with the drive to make the venture businesses profitable and ensure service delivery, entrench the culture of professionalism by doing the right things at all times through transparency, accountability, and respect for all, ensure adequate staff welfare and motivation, training.

While pledging to continue with the ongoing comprehensive restructuring exercise of the NNPC which he said has become inevitable, Baru promised to exploit the immense experience of NNPC staff to maximise output.

“Engagement of staff in major restructuring exercise is a key success factor that I will pay attention to while continuing with the restructuring effort,” he said.