Private sector remains indispensable in unlocking downstream sector potentials

The role of the private sector is vital in addressing issues militating against the investment potentials of Nigeria’s downstream sector, operators have said.

The downstream sector of the Nigerian petroleum industry has over the years been enmeshed in controversy, attracting little or no investment.

The sector, unlike what obtains in other countries where oil and gas activity is virtually run by the private sector, has continuously remained under government’s stranglehold.

“The private sector needs to play a more efficient role, we have spent too much time dependent on government, who is currently doing too much,” Doyin Salami, chairman, Nigeria’s Economic Advisory Council (EAC), said.

Salami explained that in order to achieve the potentials of the downstream sector, there must be clarity of philosophical framework which must be in line with modern realities.

“The government cannot be the regulator and operator in the same business, it’s not ideal,” Salami said at a webinar titled ‘Reflections on Governance in the Nigerian Downstream Oil Sector’.

On the role government should play, Salami said the regulator must ensure a level playing field for every private firm in the sector.

Wilson Opuwei, an oil and gas entrepreneur with business interests in exploration and CEO of Dateline Energy Services Ltd, said most of challenges operators face revolve around the politicisation of the downstream sector with fewer private companies’ participation.

“Downstream regulations must be less stringent for the private sector to operate in,” Opuwei said at the event.

Other stakeholders at the event says the challenges facing Nigeria’s downstream sector ranges from poor governance and management of refining assets, to low operating margin for operators leading, low Return On Equity (ROE), huge debts/receivables on account of unpaid accumulated subsidy and unpaid interest and foreign exchange differentials on product importation.

On quick wins needed to address challenges facing the sector, stakeholders recommend the government needs to create the necessary business environment through price liberalization and strong independent regulation while challenges surrounding pipeline infrastructure, technology, supply consistency and capital needs to be addressed.

Nigeria’s inability to refine adequate petroleum products domestically in order to meet local demand has continued to render the downstream sector vulnerable to foreign exchange volatility particularly for petroleum independent marketers.

The advent of Dangote refinery – which is set to produce 650,000 bpd of refined products – and other modular refineries will significantly impact the current landscape in the downstream sector which upon completion will exceed domestic consumption levels and subsequently export excess refined products to neighbouring African countries.

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