Why Dangote Refinery & NNPC Are Fingered The Major Gainers, If Petroleum Industry Bill Is Passed In Current Form

Dangote Refinery has been fingered as one of the two major gainers if the Petroleum Industry Bill (PIB) is passed in its current form.

Dangote Refinery is promoted by Africa’s richest Alhaji Aliko Dangote.

Dangote Refinery according to emerging details would be the only private entity able to fulfill conditions that allow the importation of petroleum products in Nigeria.

The Other entity would be the Nigeria National Petroleum Corporation Limited.

The stipulations in the PIB in its current form rule out other players in the petroleum industry, especially Molecular Refiners.

According to a report monitored by saharareporters.com “the Senate version of the Petroleum Industry Bill will only permit two entities to import petroleum products into Nigeria: those who own active refining licenses and the Nigeria National Petroleum Corporation Limited…

By the time the bill becomes law, the Dangote refinery, which has a 650,000-barrel per day refining capacity, would be in operation, making him the only license holder that would be able to import any substantial amount of petrol.’

The report explained that Molecular Refiners are knocked out of contention because the if passed in its current form, “the law makes it impossible for even modular refiners like Walter Smith to import the product, as a clause in the concerned section provides that licenses be given based on the refining record of the permit holder.”

Providing further insight into the PIB in its current form, the report by Saharareporters.com explained that “The law also provides for the continuation of the NNPC’s Direct Sale Direct Purchase contract, which experts have questioned for being fraught with inconsistencies.

Having provided for the introduction of a free market in Section 205 a, the Senate version of the PIB goes ahead to contradict this stance in Section 317h.

The first subsection says, “The Authority shall apply the Backward Integration Policy in the downstream petroleum sector to encourage investment in local refining.”

Backward integration primarily refers to a move by companies to source materials they imported prior locally.

Within the context of this bill, however, the Senate states what it considers as backward integration;

“To support this, license to import any product shortfalls shall be assigned only to companies with active local refining licenses.”

The law further goes ahead to rule out small players.

“Import volume to be allocated between participants based on their respective production in the preceding quarter.”

Experts feel modular refinery license holders are excluded from importing like the rest of the country with this clause.”

The report, however, provided a glimpse into what could be tag a better deal for stakeholders in the petroleum industry, especially the small players in the latter part which reads “However, the source, close to the workings of the Senate, asked the National assembly to consider allowing the downstream regulatory authority, which will be created when the bill comes into law, to create impartial regulations to guide any future importation of petrol.

“I think the provisions above will create a duopoly in a price deregulated environment, thereby destroying the Nigerian downstream industry as we know it today,” the source said.

“The law and the authorities should protect the market (other players including Nigerian entrepreneurs) and the consumers rather than encourage monopoly/duopoly by locking out competition.”