‘Financial constraints, regulated downstream sector make private refineries unviable’

The Managing Director and Chairman, Relentech Specialist Nigeria Limited, Sergius Ogun, in this interview with SULAIMON SALAU, harps on the need to urgently overhaul the nation’s petroleum sector. Excerpts. 

With the emergence of the present administration. What are your expectations for the oil and gas industry? The expectations are actually high.

But the first thing to considered should be the immediate passage of the Petroleum Industry Bill (PIB), which clearly defines the fiscal terms for entrants into the oil and gas industry, enables clear transparency and defined governance of the industry with updated legislation. Besides, we need to diversify the economy.

Nigeria needs to think beyond oil. As long as the world cannot control its appetite for oil, there will be boom, burst, downturn and meltdown.

No modern economy can rely on one commodity as its source of revenue, not to talk of the most populous black nation with over 180 million people of which 60 per cent are young people. The seventh National Assembly hurriedly passed the PIB at their last sitting among others. What do you think are likely to be the implications of the action? I think the bill has lapsed by virtue of the fact that it was passed by the House of Representatives alone and not passed by the senate.

The process might have to start all over again in the House of Representatives, I do not know if the conference committee can harmonize the passed version of the bill with that of the Senate. One recommendation that quickly comes to mind will be the adjustment for rates, which should be removed from bill to allow for update by regulation when required.

It is a shame that the seventh assembly could not give this country the PIB, the consequences of this delay are grave because the International Oil Companies (IOCs) are gradually moving their businesses to the neighbouring countries and other emerging oil producing countries in Africa.

The subsidy issue has recently been generating a lot of controversies. What is your take on the matter with particular reference to the fuel import saga? Given the twin factors of declining oil price and its effect on the country’s foreign reserve as well as the pressure on the exchange stability in an import dependent economy, there is an urgent need to encourage local refining given the over N4 trillion expended on importation as part of the country’s energy security strategy to stop the subsidy henceforth.

The local refining has a multiplier effect on the economy through feed stock for fertilizer, power, manufacturing, and petrochemical industry among others.

The distortion created by paying about 30 individuals over N4 trillion who do not create quantum value to the local economy and populace must stop now. We should be utilizing the foreign reserve for manufacturing, processing and ancillary services.

What are your views about the much-touted corruption in the oil and gas industry? Where do you think things started to go wrong and how can the rot in the sector be addressed? Strategic reforms shall be recommended in the sector through tenured appointment of young technocrats within the system with considerable career life.

This is to steer the ship aright bearing in mind that the consequence of non-performance leads to early retirement. Independent boards should be appointed in line with CAMA (Companies and Allied Matters Act) to reduce interference. The nation’s refining capacity remains at the lowest ebb.

How best do you think Nigeria can pursue the private refinery option? The private refinery option has already been approved long ago. However, the issue of accessing capital from financial institutions in a regulated environment and effects on the cash flow projections for cost recovery makes the project un-bankable.

The government should ensure that on the short term, the governance and marketing model for the current refineries should be like the Nigerian Liquefied Natural Gas (NLNG) model in order to be optimally utilised. Being one of the indigenous operator, how will you describe your company’s impact on the achievement of local content? Local content created a level playing field for the indigenous companies.

There were services the local companies would never have been able to bid for, but with the Act, the IOCs were compelled to advertise these services, the indigenous companies that did not have capacity decided to collaborate with companies outside the shores of this country by so doing there was quick transfer of technology.

However, it is not yet uhuru, and the Nigerian Content Development and Monitoring Board (NCDMB) should be encouraged to provide more support to the indigenous companies.