The ministry of petroleum affairs said price cap on petrol is a major setback on attracting investors in refineries rehabilitation plan. As a result the aspiration of the country to privatise the Port Harcourt, Warri and Kaduna is facing challenges.
Special adviser to the Minister of State for Petroleum Resources, Policy and Regulation, Mr. Tim Okon, gave the indications and the other problems challenging the country’s midstream sector at the All Convention Luncheon of the 36th Annual International Conference and Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos.
Speaking on the topic: Oil Price Fluctuations in a Developing Economy and the Recipe for Economic Growth,” Okon explained that, Section 6 of the Petroleum Act, which empowers the minister of petroleum resources to fix prices for petroleum product, remained a major factor why investors would not find the refineries attractive for business.
He lamented that a situation whereby a private investor strives to raise fund to rehabilitate the refineries and get it working and government on the other hand fixes petroleum products prices is not a workable model.
He said that banks which provides funds for these investors would want a situation where they would have control over repayment schedule and terms and inflow, saying this would also include pricing for the product.
‘‘But the moment banks discovers that you don’t have control over pricing, there are huge chances that they would withdraw from such transaction because the possibility of recovering their funds over a certain period of time is already threatened from the outset,’’ he said.
Okon disclosed that the structure of the 650,000 barrels per day Dangote refinery structure would only serve as an export refinery, saying after paid entities have exported the product, and it would now be imported back into the country.
Earlier in his conference opening remarks, the keynote speaker and managing director of Seplat Petroleum Plc, Mr. Austin Avuru, who spoke on the topic; Oil Price Volatility: Challenges, Strategies and Opportunities,” said oil, coal and gas would still account for 40 per cent of the world energy mix.
He maintained that technology would continue to drive the future of oil, adding that supplementary volume of oil is coming on stream as a result of technology; else oil would have been about $200 per barrel.