- As Independent marketers seek outright deregulation of oil sector
With the declaration of force majeure on Bonny Light exports by Shell Petroleum Development Company of Nigeria Limited, about 400,000 barrels per day of Nigeria’s production has now been shut in.
Force majeure is a legal clause that allows an oil firm to stop shipments without breaching contracts.
The oil major said in a statement signed by its spokesperson, Mr. Bamidele Odugbesan, on Wednesday that the force majeure took effect from Tuesday, May 10, 2016.
It said the decision came as a result of a leak that led to the closure of the Nembe Creek Trunk line for repairs by the operator, Aiteo Eastern E & P Company Limited.
The SPDC did not disclose the cause of the leak in the statement.
Shell had in February declared force majeure on liftings from the Forcados export terminal following the disruption in production caused by the spill on its subsea crude export pipeline.
A group named Niger Delta Avengers claimed responsibility for the attack on the Shell oil pipeline, which shut down the 250,000bpd export terminal.
Commissioned in 2010, the 100-km NCT feeds the Bonny export terminal, and the disruption will affect the loading of seven cargoes, representing a combined volume 217,000 bpd. It has a capacity of 600,000 bpd, according to Shell’s website.
The halt in Bonny Light loadings comes less than a week after Chevron said 35,000 bpd of its Nigerian net crude production had been halted by an attack on its offshore Okan facility, and three months after Shell suspended production at Forcados.
If all Bonny Light production is cut, it will bring output to below 1.5 million bpd for the first time since September 1994, according to Energy Information Administration data. Nigeria exports almost all its production.
In the meantime, the Independent Petroleum Marketers Association of Nigeria (IPMAN) yesterday advised the Federal Government to deregulate the pump price of the Premium Motor Spirit (PMS).
Outright deregulation of the product, said the association, would have been preferable to increase of pump price to N145 per litre.
This is coming on the heels of the yesterday announcement of the new pump price with immediate effect.
Speaking with The Nation on phone, its Vice Chairman, Alhaji Abubakar Maigandi Dankigari said the new price would breed corruption in the sale of the product.
According to him, had government deregulated the price, some marketers could have sold it below the new price but with the announcement of N145 per litre, some marketers would still sell the above new pump price.
He submitted that “the best solution is that they should deregulate the sector. They should allow the prevailing market forces. Those who want to sell N145 per litre can sell. Those who can sell N130 can sell. But immediately the government gave that directive that the marketers should sell at that rate, it is what is causing corruption.
“So, if the government will take the decision of deregulating the petrol price and allow the market prevailing rate, the price will not even reach N145. But now the price will likely exceed that N145 because of the monopoly of the terminals.”
Ekiti State Governor Ayo Fayose last night accused the Federal Government of insensitivity to the plight of Nigerians with the latest increase in the pump price of the Premium Motor Spirit (PMS) otherwise known as petrol.
Fayose said the hike was a “demonstration of the level of hatred the President Muhammadu Buhari-led All Progressives Congress (APC) government had for Nigerians.”
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said the decision was inevitable given the acute resource constraint. He said: “The overregulation of the sector and the subsidy regime had put enormous pressure on government finances and on our foreign reserves. It was evident that the policy choice was not sustainable. The review is in the long term interest of the economy and the people.
“Petroleum subsidy management has been characterised by serious transparency issues for several decades. There are two components of the subsidy phenomenon. The first is the actual subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second [and more disturbing component] is the blatant corruption inherent in the fuel subsidy regime.
“For several years, the Nigerian economy suffered severe bleeding from this phenomenon; with subsidy payments in the one trillion naira threshold, and even more. In an economy with huge deficit in economic and social infrastructures, it was simply scandalous. It is in the overall interest of the economy and citizens for it to be discontinued.
“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficiency in all of these infrastructure areas is phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.
It will boost private investment in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as foreign reserves.
It will eliminate the rampant patronage, rent seeking activities and corruption that currently characterise the downstream oil sector.
It will improve product availability and eliminate fuel queues
It will create more jobs for the teeming youth of the country in the downstream oil sector as investment in the sector improves.”
But, the Nigeria Labour Congress said it would resist the increase in the price of petrol describing it as the height of insensibility and impunity.
In a statement by the General Secretary, Dr. Peter Ozo-Eson, the congress said: “The unilateral increase in prices of petroleum products today by government represents the height of insensitivity and impunity and shall be resisted by the Nigeria Labour Congress and its civil society allies.
“With the imposition on the citizenry of criminal and unjustifiable electricity tariff and resultant darkness and other economic challenges brought on by the devaluation of the Naira and spiraling inflation, the least one had expected at this point in time was another policy measure that would further make life more miserable for the ordinary Nigerian
“The latest increase is the most audacious and cruel in the history of product price increase as It represents not only about 80 per cent increase but it is tied to the black market exchange rate.
“Furthermore, the process through which government arrived at this is both illogical and illegal as the board of the PPPRA is not duly constituted.
“The allusion to the fact that the this increase was arrived at after due consultation with stake holders is not only ridiculous and fallacious, it goes to show that the brief meeting held today during which government was advised shelve the idea until at least it meets with the appropriate organs of the Congress was in bad faith.”
Punch with additional report from Nation