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Downstream Sector is Experiencing a Seismic Shift Amidst Push for Deregulation –Ogbechie

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The Chief Executive Officer of Rainoil Limited, Gabriel Ogbechie has said that the downstream oil and gas sector is experiencing what industry experts are calling a “seismic shift,” as fuel prices have surged significantly in recent weeks. The price of Premium Motor Spirit (PMS) has jumped up by 60 percent to approximately N1230 per litre, indicating the industry’s rapid movement towards full deregulation.

 

Ogbechie, however, wondered the extent of this deregulation, with some key players in the market suggesting that the jury is still out on whether the market is truly fully deregulated. “I mean beyond that map, or the entire downstream players, for years now, we’ve clamored for full deregulation where you know the market will be. Every player in the market will play to the maximum of their capacity. We can see the industry move seriously in that direction. As of today, unfortunately, NNPC stations are still selling well at about 858, naira per liter. That is still in a way below where the market should actually be. So do we say the market is now fully deregulated” he questioned.

 

In his contribution at the webinar organized by Major Energies Marketers Association of Nigeria {MEMAN), Ogbechie, who is also the Chairman of  Eterna Plc, said that despite recent declarations from Minister of State Petroleum, Heineken Lokpobiri, that the market is deregulated, the pricing at Nigerian National Petroleum Corporation (NNPC) stations, where PMS is still sold at about N858 per liter, suggests otherwise. According to him this discrepancy highlights ongoing challenges in achieving a fully deregulated market where all players can operate at full capacity without price controls.

 

He noted that the anticipated commencement of operations at the Dangote Refinery is expected to further impact the market dynamics. Adding that Industry observers are keenly watching to see whether the refinery will sell exclusively to the NNPC or open its sales to all marketers, potentially creating a more level playing field.

 

Pointing out that with fuel prices rising dramatically from around N600 to N1,000 per liter depending on location, there is now a growing call for alternative energy sources. He explained that Industry stakeholders are urging downstream players and the broader market to pivot towards electric vehicles (EVs) and the necessary infrastructure, such as charging ports at petrol stations, to support this transition.

 

However, he frowned at the slow uptake of EVs in Nigeria in contrasts to the sharp rapid growth seen in other markets, where electric cars are becoming increasingly common. “I mean, if you travel out of this country, I mean, in the last 10 years ago, if you go to a normal city in the US, maybe one out of every 10 cars that will pass will be a Tesla car or an EV vehicle. But now it’s like maybe one out of every four vehicles that pass is an EV vehicle.

 

“EV vehicles only require you to charge it. You don’t have to buy fuel. You don’t have to buy petrol periodically to power your vehicle. So the time has come for us to actually begin to invest in EV vehicles and begin to invest in petrol stations that can have charging ports. The main concern has always been if you’re going to drive from Lagos to Abuja, for example, do you have sufficient infrastructure along the way? Because if you charge your car, maybe at most the car can go 300 or 400 kilometers.

 

“If you leave Lagos, you’re going to drive to Abuja. Do you have locations along the way? You can actually stop and charge your vehicle. So I think, and I want to encourage every downstream player to begin to think along those lines. Let’s begin to invest in the in the infrastructure to support EV vehicles” Ogbechie said.

 

Furthermore, he said that there is a notable shift in demand within the gas sector.

 

“The other place I see opportunities is in gas up till 2013 to 2014 the product every single downstream player wanted was a product called dPK. But by 2015 we saw the demand for dPK go down and the demand for LPG pickup. By 2015 the national demand for LPG was about 300,000 tons per annum, but as at today, we are looking at about 1.3 million tons per annum and ramping up. I’m happy to say that today, a lot of the MEMAN members have invested massively in LPG storage. Rainoil Limited has an 8000 metric ton LPG storage in Ijebu” he said.

 

Ogbechie, pointed out that there is also a push towards Compressed Natural Gas (CNG) as a viable alternative, supported by government incentives even though the high cost of converting vehicles from petrol to CNG remains a barrier for many consumers.

 

He explained that as the industry continues to evolve, stakeholders are expected to explore new opportunities in LPG and CNG infrastructure, as well as to support government efforts to reduce the cost burden on consumers transitioning to these alternatives. Noting that the coming months are expected to bring further developments as the industry adjusts to these changing dynamics.

 

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