Don’t Depend On Kerosene, Says Ajumogobia

Worried by the ongoing scarcity of petroleum products across the country, resulting into long queues at filling stations our Abuja correspondent, Justus Awaji sought the views of the Hon. Minister of State for Petroleum Resources, Mr Odein Ajumogobia (SAN) on the development.

Mr Ajumogobia used the opportunity to shed light on plans by his ministry to sensitise the people on the domestic use of liquified petroleum gas (LPG) which he claims is produced in abundance in the Niger Delta, among other matters.

Long queues have returned to the filling stations again. What’s responsible for this latest queues and how is government tackling it?

 The queues you saw recently were not across the country, although I did see some media reports suggesting they were across the country. They arose out of a financial dispute between some members of the Petroleum Tankers Drivers’ Association and MTEL; and this led to an embargo of fuel into Abuja. But I am happy to say we were able to intervene and the embargo was lifted.

The resurgence of queues in the last few days has been due to hoarding and corrupt tendencies where products have been loaded for distribution into Abuja but have been diverted and not been sold at filling stations in Abuja. We discovered that the tankers often only off load part of their contents while holding on to the rest of it with a view to profiteering. I think it is absolutely related to the marketer’s expectation of the removal of the subsidy and the deregulation of the market.

People are, in anticipation of that, beginning to do what they often do at this time of the year which is to hoard and to try to make inordinate profit.

Some filling stations are already selling fuel between N90.00 and N 100.00 per litre. What’s government’s reaction to this?

 Well, I think this only highlights the point that I’ve tried to  make consistently since I became Minister of State for Petroleum. Which is that as long as we have distortion in the market as a result of a regulated regime, where the product has a greater value outside filling stations, we are going to have this sort of thing. Of course, it’s illegal and I directed the Department of Petroleum Resources (DPR) to shut down any station where this is prevalent.

And of course DPR is limited in its reach and capacity to deal with such irregularities; the limited number of operatives can not police the over 15,000 filling stations across the country. But any where that we find this happening, we will intervene. It however again highlights, what I said – the fact that people will pay for a product when they need it at a price they consider to be reasonable for themselves. That’s when you find some stations – as your question suggests – where people were buying it at N 80.00; some people were buying it at N 90.00; some people were buying at N 100.00. In a deregulated market such disparities would quickly disappear.

That is what a deregulated market does. It creates opportunities for wider chance and competition within the market place.

In view of the prevailing situation at filling stations, what’s the government doing this festive season to ensure that buyers don’t pay through their nose?

 What we are doing is to ensure that there is adequate supply. By supply I mean the volume of products that is being imported and distributed across the country. Unfortunately, and I say unfortunately with all sincerity, the refineries are not  functioning at the moment as a result of senseless vandalism.  Sadly, this now applies to all our refineries.

So we are now 100% dependent on importation. What government is doing is to issue licenses to major marketers under pre-existing arrangement to supplement NNPC’s guarantee of adequate supply. NNPC is doing its own bit to ensure supply but we have to appeal to those who market the product not to exploit their fellow citizens by taking advantage of the fact of this festive season when demand typically goes up as a result of lots of people travelling.  Because of the regulated nature of the market, only a few people have licenses to import so they control where their fuel goes and they can easily exploit the situation; government is doing its best to monitor and regulate. We will bring to book those who take advantage of their dominant position in the market place by terminating the privilege that a regulation policy confers on them.

But again, I think it highlights the stance of this government and our efforts to get Labour and all Stakeholders to partner with us in implementing the deregulation policy.

 So we should expect a hitch-free Christmas, in terms of availability and buying of the products?

Yes, we are working to make it hitch free. We are doing everything we can. I think, this is the third Christmas that I would have in the saddle and I think Nigerians will testify that this will be the third Christmas that has been hitch-free from the perspective of fuel supply despite the myriad challenges. Last year, we didn’t have queues at filling stations, the Christmas the year before – 2007 – the same. We hope that this year will also be the same.

 Kerosene scarcity and resultant hike in its price is adversely affecting the common people, especially in the local communities. Any reprieve in sight? When will this end in a nation that produces petroleum products?

The reason as I said is because the refineries are down so kerosene is suffering from the same malady as petrol: importation and exploitation but in short and medium term, what we hope to do is to roll out a plan for the use of LPG; this is one of my top priorities for 2010. We have a lot of LPG being produced in the country and there is no reason why people should be dependent on Kerosene and fire wood for cooking when we have gas in abundance. It’s a cheaper, cleaner fuel and we are in the process of rolling out plans to create bigger market for the use of LPG for our people.

In the meantime, we are trying to fix the crude lines to the refineries to ensure that we can continue to produce Kerosene at much lower price for the people of this country.

 In spite of government’s repeated meetings with Labour and attempt to explain its position (to Labour) on the planned deregulation of the down stream petroleum sector, Labour is still not shifting ground. What will government do at this stage?

Well, I think Labour has shifted ground – from a position where they were completely against the removal of subsidy and the deregulation of the down stream.

The arguments we have recently been hearing from the NLC in particular now is that government should remove some of the distortions from the market place, by fixing the refineries, fixing our pipelines, fixing our jetties and loading arms, fixing our roads so that the public are not paying for  some of these inefficiencies at exorbitant prices.

I think that is the departure – a shift from the traditional emotive position of a typical “No” to deregulation posture. We are working with them to make our point that the money that we realise from the removal of the subsidy will be used to do these things urgently. It seems to me that rather than paying subsidy to a small group of people who are clearly exploiting the situation, it’s more prudent to use those resources immediately to address the challenges in the down stream. Now, should we achieve perfection before we make progress? I think, not! We should make progress in order to attain perfection. I look forward to engaging the NLC in this new debate.

How will government tackle Labour in the course of a nationwide strike because already Labour has threatened to ground the nation if government goes ahead to implement its policy on deregulation, with its resultant hike in the prices of petroleum products?

 We are still in this important dialogue with Labour. That conversation has not stopped. There has been a shift in the stance, the usual hard-lined stance of Labour. They now appreciate the down side – if you like – of a regulated down stream. And they are now saying, what will government do to mitigate the difficulties that will arise from the immediate price hike that will follow deregulation? That is where our conversation with Labour is now so I don’t foresee that we will have an adversarial confrontation with Labour. Dialogue works.

Concerned Nigerians who spoke with this correspondent on the nagging issue agree with government that deregulation is good for the nation but advises that government should first put certain things in place like getting refineries work again. Will government heed this advice?

That is the point I made earlier that people have argued that refineries should be fixed first. Beyond fixing the refineries, as I said before, it’s also about the capacity of NNPC to run the refineries. They have retrenched a lot of people over the years that the refineries have not been working.  Therefore, I think it’s a little more than just fixing the refineries; it’s also about the manpower to run the refineries in a sustainable way. Its about giving the refineries managers the authority and resources to run these facilities.

Recently, I said when I gave one of the interviews to one of the newspapers (TIDE) that the repairs on the line feeding Kaduna refinery was almost completed. I came back (to the country from official engagement abroad) last week to hear that 46 new rupture powers have been discovered on the line! This was just in the last two weeks so this is a continuing challenge and of course, all these things have security implications.

And as long as we cannot get crude across to the refineries, we are going to have challenges with refined products. So in the short term, we should of course continue to try and put the refineries in order and ensure delivery of feed stock. We have also engaged the security agencies to police the pipelines. That’s all we can do to ensure the refineries actually work and to get them to work at maximum capacity to reduce the burden of importation.

The burden of importation remains because even working at full capacity, our power refineries can only produce enough to meet under 50% of our daily consumption.

 Your views on Kaduna refinery alluded to are contained in your last interview with THE TIDE?

 That’s right! I stand by those views.

As far as government is concerned, when exactly will deregulation take off?

 You can see already that there are queues (at some filling stations), on account of speculation as to when deregulation will take off. If I announce that deregulation will be implemented from a particular date, the queues will get longer immediately because people will take advantage of the situation. We are in a dialogue with all stakeholders to try and get a reasonable level of consensus but there will always be groups, even within Labour that will continue to disagree with government policy in this regard.

There are unreasonable hard line groups that say, ‘crude oil’ belongs to us all and therefore petrol should be given free by government. They cite examples of Libya and other countries. There are some hard liners like that but the leadership of Labour is very knowledgeable and understands the issues, sometimes even better than I do.

And I think the leadership of Labour movement is very well informed as far as the benefits of deregulation are concerned. Their argument is that they have repeatedly witnessed past governments make promises and not keeping their promises. So it’s a matter of trust. What we are trying to build is trust. Once we have their trust – let’s work together in this or that direction – I think the issue of strike and confrontation will be a thing of the past.

But we have gone even further: I say to them (Labour) ‘you don’t have to trust us (government) let’s set targets; lets work out modalities and targets’ – what are we going to do with these funds that are otherwise used to subscribe fuel. We can appropriate funds for specific things that we collectively agree that should be done as part of the measures to mitigate the difficulties that may arise from the initial escalation of price and we can monitor it so they can now challenge us to perform. The strike remains a viable tool to draw attention to our failures that affect their members.

Labour can continue to play that role of a watch dog to protect workers, and to ensure we do what we say we’ll do. We agree that “things are not well”. That’s why government is anxious to implement policies that will make things better in the shortest time.

  What exactly do the masses stand to benefit from deregulation because many out there are still confused about this policy of government since there are conflicting opinions on it?

 For a start, jobs! A more robust market, a huge market that is to be created as a result of deregulation of the down stream. Today we export jobs. Refineries abroad are operating with our crude oil!

Today, no new refineries are being built because the investor cannot see how he can recover his investment in the market place where the government fixes the price of the product. The subsidy arrangement where government pays the difference between what they are compelled to sell at,  and what their cost of production and margin is, favours importation. Even then, it takes time, sometimes six months before importers get paid. No serious investor will source the money that is required to build refining capacity in this setting. So if we deregulate there will be substantial new investment in the down stream, which will create new jobs and other economic opportunities for our people.

Every new refinery will have its own impact in the community that it will serve in terms of services that it will provide in and around that environment. That’s the truth. And many other businesses will be established to serve workers in the refinery e.g. food vendors, artisans, suppliers etc. I think that the most important thing about deregulation (of the down stream) is that it will create wealth; it will create new opportunities for job creation in the economy; it will create opportunities for new businesses; it will create opportunities for people to exploit their creative talents

I think that is what people cannot see at this point in time. People just imagine that if we deregulate there will be higher price (of petroleum products). They don’t see that at the end of the day, what we all pray for: that is, that there should be more money in our pockets (will be realised). So even if there is higher price, we can afford that higher price. That’s the truth about it.

Government has announced a 10% Equity share to oil producing communities. Government policies are often encumbered by implementation, how do we intend ensuring that the 10% actually gets to the communities, and not hijacked or abused by some powerful individuals or group?

 I think what Mr. President announced is a policy that is designed to give a direct stake holding to the oil producing communities in the oil producing sector. That has been at the heart of the conflict in the Niger Delta; simply put these are communities that are oil–bearing; the oil is extracted from our community lands and the revenue that is derived thereof is used to develop other places. The area where the oil comes from has suffered as usual, neglect. If we give a direct ownership stake in the companies exploiting these resources, then benefits will accrue to those who come from those communities.

I think that’s the thrust of the idea of the 10% (Equity). The modalities, of course, are a lot more complicated, in terms of defining who the communities are. What defines a community? What shape will the grassroot organisations that will hold this Equity take? How do you ensure that revenue accruing from this arrangement is fairly and equitably distributed or purposefully utilized. How do we cater for those yet unborn? Who will the trustees be? The communities will have to select those who will manage these trusts and so on.

These are the modalities that a committee has been setup to investigate and to advice on. I think the concept is good; The concept is what the President (Umaru Musa Yar’adua) is passionate about in ensuring that those of us who come from the region have a direct stake in oil business in the region.

 What parameter will the government use in disbursing the 10% Equity share? What of communities that don’t produce oil but have pipelines run through their lands and creeks and have also had their own share of hazards arising from pipelines explosion, will they benefit?

A lot of work  needs to be done both at the Federal, State, Local government and community levels; the traditional rulers and youth leaders too must be involved. We need to determine those parameters; for example – there are some communities that  host flow stations; there are others that don’t have anything other than a pipeline running through them, there are some communities that don’t have a pipeline running through them, what they have is a right of way  and you can’t get to the oil facilities without passing through their communities. So if they say nobody can pass through their community, this would be a potiential source of conflict. If not defined properly and reasonably it could be self defeating.

How do we treat these various categories? Those are some of the issues that make it complicated. The issues have to be addressed in conjunction and collaboration with the host communities themselves through their representatives.

 

 

 

 

 

 

The issue of Equity as in shareholding is a legal one – it’s a legal concept that basically defines having a share of a business. Now a share of a business means you share both in the plus and in the minus so if the business is doing well, you get dividends; if the business is not so doing well, as badly you don’t get dividends and if the business need more money to expand then the Shareholders, the Equity holders must contribute in equal proportion to the business – for you to expand the business.

That’s the part of equity that a lot of people don’t appreciate; when they do, the host communities themselves may feel: ‘we don’t want to be part of the minus, we want to be part of the plus’ – in which case that would no longer be equity or shareholding. That’s why I say once the process has been discussed and people (have been) educated and enlightened on what government is proposing, they’ll have there own input.

Certainly for me, and I come from the region, I’m not sure that I’ll be necessarily happy with a situation where I may not derive any income even though I own equity. I prefer a situation where I’m guaranteed a certain income or revenue as a result of the activities that’s taking place in my area.

The President sets up a committee to look at the modalities and see what is the best way to deal with the issue of host community stake holding in the revenue stream from oil business. That’s how I see it as a member of host community myself.

What should Nigerians expect from your Ministry in the remaining week(s)?

We’ll try and make sure  that there are no queues at the filling stations that people became used to several years ago; that resulted in people having a very bleak Christmas because instead of spending time with your family, you are spending time queuing at the filling station.

We are doing everything in time to ensure that there is adequate supply of fuel. We are also doing what we can to ensure that people sell the product until such time as the market is deregulated at the price that government has indicated and with the hope that we in meantime will build the necessary stakeholder consensus on deregulation

In the circumstance, what’s your Christmas message to the people – marketers and consumers of the product?

I think the message of Christmas is good will to each other. And that means we should not exploit each other, especially the marketers. My message is peace and goodwill to all my compatriots.

What kind of budget are you proposing for next year, bearing in mind the leading role your ministry plays in moving the economy to greater heights?

The budget next year (2010) is to try and consolidate on the gains of this year (2009) and some of the things we talked about – monitoring the crude output, ensuring that we get products across the country at a reasonable price – building the infrastructure that is required to do that; working on ending gas flaring, we are determined to ensure that there is no flaring at the end of the first term of this administration. We have already reduced it considerably.

To do that, we have to build significant infrastructure to be able to take the gas from its source to where it is going to be utilized. I intend to role out a robust LPG utilization plan. So the budget – the critical parts of the budget are to deal with the issues of regulating the industry and building the infrastructure that is necessary to realize the aspirations and electoral processes of government.

House of Representative’s committee on petroleum resources on a recent tour of oil installations in the South West berated the Federal Government for what it calls ‘insincerity’ in making the refineries work and calls for privatization of the refineries. What’s your reaction? What’s government’s position on privatization/commercialization of refineries?

Under the reform of the oil and gas industry,  Nigeria National Petroleum Corporation (NNPC) will be reconstituted as limited liability company – private company own by the government, but a limited liability; now required to think and act like any other limited liability companies in responsibility to its shareholders. In that scenario, NNPC will have to make some very important decisions with regard to its business units, which include the refineries at the moment, as to how to ensure that they are running effectively. Privatization will be one of the mechanisms that they may engage in, in terms of having the right to sell off a business, if they feel they cannot run it profitably and they will make more gain by doing so.

So I don’t want to pre-empt what the NNPC Management in that reform context will do. I personally believe that government is best left to creating policies and implementing policies – providing an enabling environment for business to thrive. NNPC hitherto has been like a government parastatal – in the way that government is effectively running the refineries and I think, that is partly why things have not worsened; where NNPC is required to ensure that it carries out its operations for profit we will see a difference and of course, that’s without prejudice to the management deciding that they should sell off parts or all of their refining capacity.

Finally, you are a member of Federal Executive Council (FEC). Chairman of FEC and the Nation’s President, Umaru Musa Yar’adua has been out of the country to Saudi Arabia on medical ground for some weeks now, Nigerians have variously expressed concern over his health condition and long absence. In particular, the Nigerian Bar Association (NBA) has recently called on the President to write the National Assembly on the appointment of Vice President, Goodluck Jonathan as ‘Acting President’, especially since his doctors are not definite as to when he will return to the country. How would you react to this?

I think unfortunately, politicians, especially politicians from the opposition are playing politics with the health of the President. The President is the president of all Nigerians, including the opposition politicians. He is indeed in many respect an embodiment of the nation and all should join hands to pray for his speedy recovery and return to Nigeria. I have faith that that will happen soon.

I don’t personally believe all the statements credited the NBA President. I know him very well and he is a very responsible and mature leader. I must say I am very disappointed by some of the statements made and credited by some prominent NBA members. But I think the calls made by these NBA members are out of place, irresponsible and should be seen as such. I think a responsible organization like NBA should pro-actively explain the legal imperatives and processes to the public rather than joining opposition politicians to play politics with the issue.

Under our constitution, the President may in his discretion assign to the Vice President or any Minister responsibility for any business of the government. When the president is away he is presumed by law to have done so. That’s why I and all my cabinet colleagues are working on anything under this delegated authority requiring higher approval. We refer to the Vice President or FEC in the usual way under the same delegated authority. There is no crisis. It’s all politics. No vacuum. But it’s irresponsible politics.

This is not the first time that the President has been out of the country on health ground. The government continues to function effectively and there is therefore no reason for one to be concerned in the way that some of the statements made in the media mischievously suggest.