Nigeria incurs a loss of $1,000 on every barrel of crude oil it exports, the Institute for Energy and Extractive Industry Law revealed.
Media report quoted energy policy expert Henry Adigun during a one-day roundtable held in Lagos over the weekend, emphasizing that the $1,000 per barrel loss is no longer sustainable. He attributed this loss to the country’s failure to capitalize on its crude oil through local refining and value addition.
Adigun highlighted that while the Nigerian Government supports local refinery operators, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) lacks the statutory empowerment to support a monopoly in fuel supply and distribution.
Supporting this view, Mr. Taiwo Ogunleye, another expert from the Institute, noted that regulatory issues are crucial for creating efficiency and transparency in the value chain. Ogunleye pointed out that the Petroleum Industry Act (PIA) stipulates that no single person or institution should own and control more than 40 percent of the fuel supply and distribution stake in Nigeria, except for the Nigerian National Petroleum Company Limited (NNPCL), designated as the supplier of last resort.
Ogunleye stressed the significant role of petroleum products in the global economy and the energy mix, underscoring their essential function in fueling vehicles, generating electricity, and producing a wide range of everyday products. He explained that the petroleum industry operates through a value chain encompassing upstream, midstream, and downstream sectors.
Citing a report from the Oil, Gas, and Mining Policy Division of the World Bank, Ogunleye argued that inadequate regulation and enforcement could harm fuel supply efficiency. He noted that outdated sector regulations might deter the entry of experienced operators adhering to high standards.
Ogunleye emphasized that an efficient legal framework for the downstream petroleum sector requires legislation that clearly defines the government’s role, limits undue interference, and establishes principles and rules for private and public participants to promote fair competition.
The World Bank report further stated that an efficiently managed downstream oil sector could benefit all economic sectors by delivering petroleum products at the required quantity, quality, and least cost. Ogunleye explained that the end-user prices of petroleum products, net of taxes, are influenced by market size, economies of scale, transportation mode, and pricing policies.
Discussing energy security, Ogunleye defined it as the continuous availability of energy in various forms, in sufficient quantities, and at reasonable prices. He elaborated that energy security encompasses availability, affordability, accessibility, and acceptability, ensuring that energy supplies are sufficient, prices are low, infrastructure is reliable, and environmental impacts are minimized.
