A FORMER chairman of the Major Oil Marketers Association of Nigeria (MOMAN) and the chief executive officer of 11 PLC-formerly Mobil Nigeria PLC, Adetunji Oyebanji, in this exclusive interview with The ICIR, speaks on a wide range of issues affecting Nigeria’s oil and gas sector.
Excerpts:
The ICIR: Do you see the Dangote refinery emergence disrupting the market with the NNPCL price-control regime?
Adetunji Oyebanji: Dangote is a businessman, who has borrowed and invested money to build the refinery. He has to pay back the loans he has taken. He would also try to protect his interests. He’d be selling at the profit and commercial level needed to maximise his returns and liquidate the loans and investments that he has made.
What that translates to by way of pricing I cannot say for now. I can only speak for myself and my association. Business wise, whatever price we buy, would be reflected in the prices we sell at the pump.
The good thing is to know that with the Petroleum Industry Act (PIA), the price has been deregulated. We would sell according to what we buy.
On the Nigeria National Petroleum Company Limited-NNPCL, I won’t want to make any speculation, even though commercially, you look at the price they’re selling and you can judge whether it’s a price that makes economic sense.
The ICIR: Why is the NNPC seeking to borrow money when they could have gone listed and sourced the fund from the stock market?
Adetunji Oyebanji: Enlisting in the capital market is very important, that’s what I thought they said they wanted to do as spelt out by the Petroleum Industry Act (PIA).
The only thing I worry about in this development is that if local refineries are coming up more and more, and they’re doing crude-for-loan or crude-based loan swaps; then it means more and more of limited crude production in Nigeria.
The only thing I worry about in this development is that if local refineries are coming up more and more, and they’re doing crude-for-loan or crude-based loan swaps; then it means more and more of limited crude production in Nigeria.
It also means that more of our crude will be committed to more and more in servicing those loans at the expense of the refineries that are coming up.
Again, what I would say is that any refinery across the world knows that one of the fundamental things is securing long-term contracts for your crude.
So, these International Oil Companies-(IOCs) ) have long-term contracts that they’ve signed with various refineries across the world. Therefore, when anybody wants to establish a huge refinery in Nigeria, one of the things Perry must do is to secure a long-term contract for your crude supply.
This is because, if Nigeria is producing 1.2 million barrels per day and half of it has been committed by taking loans and using crude to settle such loans, the NNPCL and IoCs own some portion.
The crude is limited and if the IoCs have entered into contracts, they’re fulfilling those contracts and may not have available crude to give.
Commercially, anyone who builds a refinery would know that you have to make arrangements for your crude. That is why some refineries are situated close to the oil field so that they can guarantee their crude.
In Nigeria, we always want to do things based on emotions and that’s why we don’t always have positive results.
The other point you have to note is that across the world, there is a certain number of refineries that exist. Presently, there’s an overcapacity of refineries. Less we forget, some countries are now using electronic vehicles.
The long-term prospects of electronic vehicles are that demand for refined petroleum products in the next 20 years will significantly drop.
Also, as a result of these, many IoCs that based their long-term plans on data and research are downsizing and reducing their capacity so,15 years from now, they won’t be caught in the mix of clean energy.
People need to know all these things and be educated about them so that we’re not all driven by sentiment. We should also ask fundamental economic questions to form opinions about various situations.
Concerning your question, normally, a refinery will sign a 20-year contract to guarantee themselves a steady supply of crude.
Already, many of the IoCs have such contracts and sell their crude as it comes and what quantity the Nigerian state allows it to produce according to the commitments they have already made.
So, the result is that if we harass them, the few remaining in Nigeria could leave and our oil production will drop significantly.
It’s even because of the IoCs that are producing oil at a higher level that we’re able to produce 1.2 million barrels per day. We say it doesn’t matter when the IoCs leave, they left and indigenous people took over and our production is dwindling and this is the main source of our foreign exchange for Nigeria.
When there’s no dollar, nobody should ask where is the dollar because maximum oil production is the building block to make more dollars.
If for instance, we’re doing about 4 million barrels per day, the naira may be exchanging at N300/$. We are producing less and and it’s not helping our foreign exchange earnings. We have been deceiving ourselves for far too long now.
The ICIR: There are concerns that the PIA has not fully served its purpose of reviving the sector. Should it be reviewed?
Adetunji Oyebanji: No law can be perfect. Also, the laws are not always about itself, it’s about how it’s implemented.
The cardinal point that the law envisaged is that prices would be deregulated. So, it seems that we’re not able to achieve that at this point and that’s distorting lots of things.
No law can be perfect. Also, the laws are not always about itself, it’s about how it’s implemented.
If a market is to work efficiently, it means that the real prices have to be reflected. For now, the price is pegged and not the real market price. If we say that prices will be too high and we choose to go the route that we’re going, then we cannot run away from the implications of not following through with the law.
The PIA can always be improved and updated, I know that of a certainty, some people are pushing for amendment now. However, for me, part of the problem was that the PIA was envisaged to work in a particular way, but we’ve not implemented it according to the letters of the law.
What you mentioned about the NNPCL going for an initial public offer at the capital market was part of what was envisaged in the PIA.
Again, I can’t speak on behalf of the NNPCL, they know their internal workings and it could be that there are challenges and they’re working on it.
However, if you pass a law and it’s expected to work in a particular way and that’s not happening, the results you get are not what you’re expecting because you can’t plant beans and expect plantain.
The ICIR: How can the NNPCL leverage its opportunities to enable the oil sector maximise gains?
Adetunji Oyebanji: The first step for me is to implement the PIA, even if it means a slight amendment.
The big deal is that when you make an organisation like NNPCL fully commercial, then it’s the shareholders that will determine what happens. They will be having an annual general meeting, get approval from the board for certain key decisions and run like a business corporation.
The implication of that in our environment is that it doesn’t become an avenue for political appointments. It’s purely based on competence and commercial purposes.
As I said, if we don’t follow those principles, we shouldn’t expect good results.I think the first thing is to implement the law that we have passed fully. All these ‘no more subsidy’ and yet there is a subsidy from the backdoor doesn’t help us.
Let’s discuss with stakeholders and do whatever is necessary to ensure that labour and other parties are carried along so that the system is not disrupted.
It took 20 years to pass that law; all because of politics. The regulators are trying the best they can under some circumstances and we have our constraints as a country.
The ICIR: The IOCs are leaving, what does it mean for our budget since we’re not meeting our quota?
Adetunji Oyebanji: We must bear in mind that the investor, whether IOCs or indigenous firm have their strategy and choice of investing their money.It is like choosing a supermarket or a petrol station to buy your products.
If you go to a particular supermarket and the cashier there is not behaving well, won’t you carry your business and go elsewhere?
All these interactions with agencies and not getting things done unless you push it with some corruption fund are not helping us.
One key fact is that the IoCs are always very keen on cash-call obligations fulfilment with the NNPCL. If they do business in 2022 and don’t get the money now from NNPCL, they may have to go to another country where they will get their returns quickly and with better fiscal incentives for their business.
The ICIR: Why do the IoCs keep leaving divesting?
Adetunji Oyebanji: Some of the IoCs are leaving because of of the defaults and the way we are implementing the PIA.
Some of the IoCs are leaving because of of the defaults and the way we are implementing the PIA.
The indigenous operators are trying but the requirements for upstream activities are humongous. Even our banks don’t have the necessary wherewithal. The only people that our banks are willing to give billions of dollars to are the IoCs that have huge assets and operations globally.
The IoCs when they’re leaving, the indigenous people don’t have the capacity either by manpower or by resources to be able to operate those oil fields at the optimum level like the IoCs- hence production in some cases is falling.
Some of our best indigenous people are doing 50,000, 20 000 barrels per day. However, when you compare them with IoCs running billions of dollars worth of investments, you know that there is no comparison.
Countries that want to partner with such IoCs must make fiscal terms and tax regimes favourable such that big IoCs will be attracted to them.
All these are simple economic and business realities, but in Nigeria, our own is to say God will do everything.
The ICIR: Are there other concerns that you have about crude-for-loan-swap deals?
Adetunji Oyebanji: Well, the more such swap deals, the more you’ve encumbrances and commitments of the crude oil in one way or the other. Most of these things are not also open, we need not also to be speculative in matters like this. I rarely can’t say much because I don’t know the current status.
The ICIR: What are the key benefits of the government facilitating the transition to Compressed Natural Gas-CNG as alternative to PMS?
Adetunji Oyebanji: I think a lot of positive things are happening and NNPCL has used a unique model while working with partners to build the CNG facilities.
You saw recently where several facilities were launched in Abuja and some in Lagos. I think that is a step in the right direction.
A lot still has to be done and we’re still scratching the surface because you have to make the products available at reasonably competitive prices. We started well and the NNPCL needs to continue reading the bar to the level that it becomes a viable alternative to petrol so that people will have an alternative usage from petrol.
The ICIR: Any end in sight to the queues currently being witnessed in several parts of the country?
Adetunji Oyebanji: Based on what we receive from NNPCL, we are doing our best. We can only sell what we receive and we’re doing our best to pump it out. I hope in the coming days, things can normalise. If there are other entities involved in the process, this question of logistics being mentioned every day may not affect all players. Since NNPC is the sole importer, we the marketers are giving what is available.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.