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The Nigerian National Petroleum Corporation (NNPC) has said there are ongoing discussions with refinery owners in the country to sell crude oil in local currency.
Chief Operating Officer, Refineries and Petrochemicals at the NNPC, Mr. Mustapha Yakubu, who spoke at the oil and gas conference in Abuja, recently, explained that the need to sell crude oil in naira was further necessitated by the scarcity of foreign exchange in the country.
He explained that some completed private refineries are yet to commence production because they were yet to conclude with the national oil company on the procurement of feedstock for their refineries.
Yakubu stated that ordinarily, crude oil is sold in foreign currency, but stressed that owing to the volatility of foreign exchange, NNPC has arranged to sell crude to private refineries in naira.
“Today, they have a challenge. Some of them constructed refineries today they cannot start because we are discussing how to allocate crude to them. We are asking them to pay in foreign exchange.
“You know what is happening to foreign exchange: volatility. So, we have to find a common ground so there is a discussion in that regard to allow them pay in local currency,” he said.
He added that the NNPC was collaborating with the private investors in the refining business because it is possible for the investors to build refineries without having feedstock, crude or condensate to refine, while the raw material belongs to the government.
“Whatever they do, they have to work within certain regulations. Refineries are not bakeries. I can go to Wuse market and buy flours. But for those refineries you need feedstock whether crude or condensate.
“This crude belongs to government, so there is need for collaboration. We need to support them. Because you can build refinery and there is no crude. What happens? Their partners (banks) will be running after them.
“Government needs to make money from this crude oil. A lot of sectors need money. The health sector needs money.
There should be that assurance that if I give you crude you have to pay for it and you need to also deliver the balance.
“The investors that are building refineries today we have to collaborate that is the way we can encourage them,” he added.
In his remarks, Chairman, Major Oil Marketers of Nigeria (MOMAN), Mr. Adetunji Oyebanji, maintained that private investors are reluctant to replicate the establishment of the Compressed Natural Gas (CNG) across the country because of the high cost of the equipment.
According to him, the sophisticated equipment that were required to operate the CNG plant are expensive and there were issues with availability and product pricing, arguing that investors would always go to where there is a return on their investment.
“Some entities have made significant investment in downstream. Nipco Plc, several years ago invested in seven CNG stations in Benin. The question is: Why has it not been replicated across the country. And why hasn’t it moved much faster?
“It always goes down to the economics of it. At the end of the day, anybody who is an investor needs returns on their investments. It is between the availability of the product, pricing all coming together because investment in CNG infrastructure is not cheap.
“It is not like coming up with a bakery. You need a lot of sophisticated equipment to compress the air. You need the pipelines system to move the gas. Obviously, there is a requirement for significant investment,” he noted.
Oyebanji urged the government to create the right environment for investors to come into the business, noting that it will be difficult to develop the sector with the current impediments.
The Group Managing Director, NNPC, Malam Mele Kyari, had stressed the need for Nigeria to develop a framework on energy security in order to have diversified sources of petroleum products supply and to secure all the sources.
According to him, the massive population of Nigeria, where 70 per cent of the people is predominantly youths, poses a challenge to the energy security of the nation.
Kyari, while fielding questions on The Morning Show, the flagship breakfast programme on ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, had also defended the federal government’s interest in acquiring a 20 per cent stake in Dangote Refinery, worth about $3.8 billion.
He stated that if the deal is consummated, NNPC could recoup its investment in five years.
He said: “For example, when there is a minor scarcity of petrol, it affects several things and several people because of our large population size and shortage in the supply chain of petroleum products.”
