Full deregulation in phases is marketers’ recommendation on subsidy removal – Adeosun

Olumide Adeosun, Chief Executive Officer, Ardova Plc, an integrated energy company in Nigeria’s downstream oil and gas sector, and Chairman, Major Oil Marketers Association of Nigeria (MOMAN), speaks to BusinessDay about innovations by the association to support the government and members in driving a profitable downstream sector and the organisation’s views on petrol subsidy on the occasion of his one-year anniversary.

It’s been one year since you became MOMAN Chairman, what have been some innovations you have brought into the association?

MOMAN’s key role is in stakeholder engagement and management on behalf of its members. We identify all stakeholders who have an impact on our operating environment and could influence the success and sustainability of the downstream petroleum industry and engage with them to stimulate positive outcomes. We have been very fortunate to benefit from the positive personal engagement by the Authority and GMD with our association on industry concerns and other matters.

Recall that the PIA 2021 was signed in August 2021 and the new regulatory authorities were set up soon thereafter. We enhanced our engagement model via structured and sustained quarterly engagements with the NMDPRA, our downstream regulator. MOMAN has also had several engagements with visits and presentations made to NNPC Limited, The Ministry of Finance, The Ministry of Petroleum Resources, the Federal Competition & Consumer Protection Commission (FCCPC), and the NASS, to name a few.
These engagements have all been in a bid to ensure that downstream positions and our customers’ interests are well articulated and documented. The goal has always been to develop good working relationships with the regulator and positively impact the petroleum downstream sector.
MOMAN believes that under-investment arising from years of operation under the subsidy regime has led to a degradation of equipment, industry knowledge, and practices.
In response, we have established regional collaborations with other industry associations across Africa. We share best practices and collaborate on various fronts. We have therefore pooled our resources and recently published compendiums of best practices on four key subjects for the downstream industry in Nigeria: 1) Retail safe operations, 2) Retail stations construction, equipment & safety standards 3) Hydrocarbon depot equipment & operations, 4) Fuel transportation management. A compendium of best practices on Competition & Consumer Protection is in the works.
In this first year, MOMAN developed a logistics dashboard that will be published weekly from Q4-2022 to drive logistics optimisation and provide clarity for industry operators and other stakeholders impacted by joint and individual operations by MOMAN and its members. This dashboard is being finalised as we speak and will be available to the industry and public shortly.
MOMAN contributed to the efforts to raise awareness on the impacts of subsidy and its removal to the average citizen as part of the PIA implementation steps. MOMAN engaged PR consultants to conduct a nationwide perception study on what petrol subsidy means and how it should be responsibly removed. The goal of the study was to bridge the gap between the decision to deregulate petrol pump prices and its implementation. The result of the study has been shared with key stakeholders in the public space to help the Government in the implementation of this key policy initiative.
During this period, MOMAN has adapted its press engagement strategy and organized 3 energy correspondents’ workshops since Q1 2022 to better explain the stakes in the current Government policy to the public. We plan to have at least one each quarter going forward to improve energy correspondents’ knowledge, understanding, and quality of reportage of the petroleum downstream sector.
To close the year, in December 2022, MOMAN shall organize the MOMAN safety week. The theme is “Sustaining the Petroleum Downstream Industry in Nigeria Through HSE Practice and Culture”. The safety week shall feature the now yearly MOMAN/NARTO workshop. The workshop theme is “Petroleum Product Distribution Challenges: Identifying the Way Forward”. The week will round off with a Driver enlightenment campaign at Suleja depot and a visit on the final day to TotalEnergies training & truck inspection center in Ibadan.

In terms of sourcing for the supply of products for members especially the scarcity witnessed in early 2022, what has been MOMAN’s response?

Our approach to sourcing is structured along three phases:
Optimizing current state: MOMAN has continually engaged with the NNPC hierarchy and PPMC management to ensure adequate supply. We have during this period focused on accurately analyzing our supply needs and optimizing our distribution channels with PPMC, our primary supplier, and with NARTO/PTD, our key partner in distribution by road.

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Future state readiness: The MOMAN CEOs met with the Dangote refinery team and visited the refinery in 2021. MOMAN continues to engage with Dangote refinery on future supply collaborations. MOMAN has also visited and engaged with some modular refineries to expand our supply options as we journey towards deregulation.
Proactive risk management: Regarding product scarcity caused by quality issues experienced across the industry in March 2022, MOMAN participated fully in the technical committee set up by the NMDPRA for the withdrawal, clean-up, recertification, and replacement of bad fuel along the supply chain and thereafter created a subcommittee “MOMAN CHEMISTS” which now analyses, reviews and pre-approves quality results from the quality inspector before receipt of any product. In addition, going forward MOMAN cargoes will be tested using 2017 oxygenates rather than the NIS: 2008 to further ensure the quality of products we supply to our customers.
The world is moving towards energy transition and renewables. How is MOMAN keying into this transition?

Many of our members are committed to the energy transition and the sustainable decarbonisation of our respective businesses. As a collective, we have embarked on several impactful initiatives and projects that signal that commitment to cleaner energy.
Alignment with Decade of Gas and NGEP: MOMAN has been engaged with the NGEP to drive the expansion of the use of gas in Nigeria and has recently reviewed the contents of the Federal Government’s Autogas policy and has sent in a memorandum with the Association’s input to the policy. My members are ready to move as long there is regulatory and policy clarity.
Deep investments in LPG blending and storage: One of our members, Ardova Plc – which I serve as Chief Executive is increasing the total LPG storage capacity with the construction of a propane rated – 20,000 MT facility in Ijora. This new capacity which will come onstream in 2023 will enable economies of scale for coastal gas delivery and help deepen the adoption of LPG as the cooking fuel of choice nationwide.

What measures have MOMAN under your administration put in place to monitor, control, regulate and sanction members?

MOMAN believes in self-regulation and has consequently deployed processes and procedures to ensure members meet MOMAN’s minimum standards. Some of the initiatives we have deployed include regular audits for MOMAN depots, Yearly integrity checks for MOMAN retail outlets, and NPSC Apapa jetty audit: NPSC Apapa jetty was audited in June 2021. MOMAN has constantly followed up with the closing of the audit gaps. MOMAN has reviewed all eight draft regulations issued by NMDPRA and submitted a memorandum.
Safety is a critical part of the oil and gas industry, how have you been able to deepen the capacity of members?

Topical operational training and workshops are a regular part of MOMAN’s annual industry engagement program. Over the past year, MOMAN has organized eight training workshops for the industry most of which were conducted at MOMAN’s training facility in Victoria Island, Lagos. We have also undertaken tours of critical downstream assets such as Apapa Jetty with senior members of NMDPRA and NNPC, with a view to addressing safety
Some of the training focus on consumer protection, safety in road transportation of petroleum products, and safety training among others.

It is reported that the subsidy on petrol may rise to between 5 trillion to 6 trillion Naira by the end of 2022. What’s your advice for the Government?

We have tabled our recommendations to the Government on our considered view on subsidy removal approach. It can best be summarized as full deregulation in phases. These huge subsidy payments are simply not sustainable. The Government should focus on palliatives for Nigerians e.g., Mass transit, improving power supply, agriculture, education, etc.
The government may subsidize sectors that would stimulate sustainable economic growth. Overwhelmingly the right course of action is a clear trajectory towards full implementation of the PIA 2021 as it is a very well thought out legislation that would ultimately cause the petroleum industry in Nigeria to grow.