By Adewale Sanyaolu
An operator in the petroleum industry downstream has disclosed that beyond foreign exchange volatility, distribution hiccups across the value chain are among the factors driving up the price of Premium Motor Spirit (PMS), popularly called petrol.
Managing Director of Rainoil Logistics, Jude Nwaulune, disclosed this during a panel session at the Oil Trading and Logistics (OTL) Africa Week 2023 which ended in Lagos last week with the theme,’ Africa Fuels update -overview of trends and market development’.
Nwaulune said the landing cost of the product according to the company’s current estimate stands at about N580 towards the Calabar end.
He said: “The realities have been affirmed that sourcing can only be achieved from the parallel market, which most marketers are forced to do. “Taking a look at our operational bases, landing PMS in Lagos is around N565. When we take it towards Oghara end, it’s about N570 and towards the Calabar end, it’s within the N580 range.”
The Rainoil’s boss said that independent marketers are now having difficulties breaking even in their operations since the removal of fuel subsidy and the challenge of foreign exchange resurfaced in the downstream sector.
“You find a situation where it’s unrealistic for independent marketers to land petrol and distribute petrol at the current price to the pump. In this chain, the independents are beginning to be edged out of the chain.
So, it’s huge cost conveying petroleum product from the depot end to the filling stations”.
As we speak, most independents can’t afford the product. At the moment there seems to shortage in supply of petrol along the value chain.You will observe a sharp rise in the cost of transportation occasioned by rising diesel cost which is now N1,000 per liter
On energy transition, he called for more investments in CNG and other cleaner fuel as the country has adopted Gas as its transition fuel.
He said with the proven enormous gas reserve, this is huge enough for stakeholders to make more investment that can catalyze the economy.
He called on the government to ensure the challenges confronting the country such as insecurity, asset vandalisation and community unrest is well handled, adding the Petroleum Industry Bill (PIA) is addressing some aspects of the highlighted challenges
He noted that sanctity of contract is another issue bedeviling the industry and hampering investors, thereby calling on Government to ensure that Nigeria is seen as an investment destination where sanctity of contract, virile fiscal and commercial framework to unlock its gas industry are sacrosant
“We have to unlock the supply side and create sustainable supply and demand that make the gas sector works.”
He canvassed that Government should ensure that all local transaction that are being priced in Dollars must be paid for in local currency, assuring that such policy will help the industry grow ,especially in the face of current economic realities.
Earlier in the month, it was observed that many petroleum product depots have been deserted due to lack of supplies caused by the currency volatility.
Oil marketers indicated that filling stations were closing down in huge numbers on a daily basis because the industry was getting increasingly difficult to maintain. According to them, this could lead to widespread petrol scarcity in the coming months.
Other speakers on the panel included; Adenike Labinjo, COO Pinnacle oil and Gas, Lawal Sade ,MD NNPC Trading Limited, James Gooder, Vice president, Argus Media, Maryro mendez, Refining and Refined Products Senior Research Analyst, at Vitol, among others.