LAGOS— THE Nigerian National Petroleum Corporation (NNPC) says there is no alternative to a liberalised fuel market and that fuel imports will continue even after the four refineries owned by it (NNPC) resume production optimally in August this year.
The corporation has also identified reasons for the quantum leap in petroleum products prices, blaming it on international events.
Already, Nigeria Labour Congress (NLC) which declared a nationwide strike last week to protest the last rise in fuel prices has directed all its state councils to monitor the fuel situation and report to the National Administrative Council (NAC) next week.
Mr. Funsho Kupolokun, NNPC Group Managing Director, on a visit to Vanguard yesterday in Lagos explained that the nation’s daily petrol consumption was currently 30 million litres and that by the time all the Fluid Catalytic Cracking units in all the refineries began working, the refineries would only be able to produce between 15 to 18 million litres per day.
Said he: “Therefore, there will still be the need to import some 13 million litres per day. As at today, there is partial deregulation. Since October that we started this process, what has happened is that in China, there are more cars, strong gasoline demand, etc. The world underestimated the demand in China. In the US, refining capacity for gasoline is limited. In Iraq, there is uncertainty because of the fighting that is going on there. There is also freight cost increase due to double hull requirements and shut-in of vessels within the Atlantic basin. The resultant effects of the combination of all these factors is that crude oil prices have moved from where we started in October to a point where it was as high as over $40 recently, in terms of products pricing."
He described liberalisation as entailing identification and segregation of markets into autonomous business unit, promoting efficiency and competition and ensuring cost recovery and reasonable margin for each business units and ensuring all clear transaction between the business units. I do not want anybody to profiteer. We must respond to changes in the market, we must include fair margins, and it must be transparent and easy to administer. It must also be accompanied by a regulatory framework that replicates the workings of the free market. To limit potential abuse in areas where competition is minimal and allow for reasonable reward and rewarding competition,” he said.
He said for the process of liberalisation to work, there is the need to have a level playing field to allow everybody to participate.
On the quantum leap in petrol prices since the liberalisation of the sector, Mr. Kupolokun said that in October 2003, one metric tonne of petrol was sold for $295 and then jumped to $454 per metric tonne by May 2004.
“We started with $295 per tonne in October 2003 compared to $454 per tonne in May. You could see the sharp rise. So, when people say anything that goes up in Nigeria never goes down, they are not being fair. Look at it, if crude oil prices are favourable, at what point were we down and it was not reflected here? These are facts,” he explained.
On the state of the Port Harcourt refinery, he said that Turn Around Maintenance (TAM) contract was awarded to Chrome in 1998, and that this was not done by the present administration.
“Chrome could not perform and the contract was terminated. And we are about to continue work on the FCC and that should be ready by July of 2004."
He also said the TAM in respect of the Warri refinery was awarded to Entropose Delapie Belzone in 2002 and that the work there had turned out very well, “and today the refinery is streaming in.”
According to him, the TAM for the Kaduna refinery was not awarded by the present administration but added that the work there was completed in 2000.
“It’s important that we go down the memory lane. We need to know where we are. Pre-1999, in the down stream there was a problem of under-funding, inadequate maintenance, no commercial incentives, no competitive performance standards, high energy consumption, capacity utilisation was low, as low as 36 per cent when this government came in, now it’s over 60 per cent.
“Pipelines and depots were unable to meet market requirements, chaos was the order of the day then. Structural inadequacy for cover expenditure, no cost recovery, pipeline ruptures and vandalisation and all sorts of sharp practices was the order of the day then. The result and effects of all these were rampant inadequacies and the collapsing downstream sector. That was where we were by May 1999.”
The corporation’s helmsman also pointed out that so far the present administration had committed a total of $750 million to the rehabilitation of facilities in the downstream sector from May 1999 to date.
— NLC orders state councils to monitor
Meanwhile, Nigeria Labour Congress (NLC) has directed all its state councils to monitor the fuel situation in their states and report back to its National Administrative Council (NAC) by next week after the expiration of the seven days ultimatum issued government and oil marketers.
National Union of Petroleum and Natural Gas Workers (NUPENG) has, however, warned that the nation would continue to witness a cycle of petroleum products price hike until the nation’s refineries are repaired to work optimally.
Specifically, the state councils are to go round filling stations in their states and observe whether the oil marketers are selling at the pre-fuel tax prices and are not creating artificial scarcity.
Vice-President of the NLC, Mr. Onikoalese Irabor told Vanguard yesterday in Lagos that, this directive was one of the decisions of labour before the strike was suspended last Friday.
Already, Delta and Rivers State councils began the monitoring yesterday, while Lagos state will this morning begin its own monitoring.
Mr. Irabor noted that reports on the monitoring from the states would be submitted to the NAC of the NLC which would in turn report to both the Central Working Committee (CWC) and National Executive Council (NEC).
He said: “The seven days ultimatum will expire next week, not this week. It is seven work days. Until after the expiration, there is nothing we can do. For your information, the state councils of NLC nationwide have been empowered to move round their states and monitor the fuel situation and report back to Congress next week when the ultimatum would have expired. They are to observe compliance by marketers with the pre-fuel tax prices on which basis the strike was suspended. In addition, they are also to monitor whether the marketers are hoarding products to create artificial scarcity whereever they are not selling. They are expected to report back to NAC of Congress, while the NAC will on its part report back to CWC and NEC of the Congress. The report will determine our next line of action.”
Meanwhile, National Union of Petroleum and Natural Gas Workers (NUPENG) has warned that the nation would continue to witness a cycle of price hike in the pump prices of petroleum products and labour strike until the nation’s refineries are put in proper shape.
President of NUPENG, Comrade Peter Akpatason, told Vanguard yesterday in Lagos that Nigerians should insist that the refineries were repaired if they wanted to end the cycle of price hike and labour reaction to it.
He said: “We have warned government against import dependent deregulation. They refused to listen. Why have the refineries not been repaired since the advent of this government? All they have been saying about efforts to repair the refineries are just cosmetic. In as much as the government continues to depend on importation of products, and with the fluctuation in the international market, so will the prices continue to rise and we as labour will continue to fight it. Nigerians should ask why our refineries have refused to work and insist that they be made to work. NUPENG and our Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) have been drumming this for long and we are meeting on this on the 24th this month to take a final look at the matter. From there we will know the next stage of the struggle. It was May 31 they gave us, the month has passed, so we will meet to look into the matter and take appropriate action.”
