HOW BACKWARD INTEGRATION IN NIGERIA’S DOWNSTREAM SECTOR CAN DRIVE GROWTH

Nigeria can take advantage of the opportunity to play regional dominance in the West African market if it embraces backward integration policy in its downstream sector of the petroleum industry, industry players say.

According to experts on Tuesday at this year’s Oil Trading and Logistics (OTL) Africa Petroleum Downstream Expo (ongoing on Friday) in Lagos, Nigeria stands a very good chance of benefiting from the current bullish run in international crude oil prices if managers of its economy, especially those in the oil and gas sector, take a holistic view to see opportunities in the West African market.

They note that the West African downstream market is largely underdeveloped and is mostly under the control of governments, which has often led to inefficiencies, leading to most countries depending heavily on imports to fulfil their requirements for petroleum products. In his speech, Mele Kyari, group managing director, NNPC, said Nigeria must look in the direction of backward integration to attract the right kind of investments in the country’s downstream sector.

“With the right incentive already in place with the signing of the PIA, backward integration policy in Nigeria’s downstream sector will encourage the right investment in local refining,” Kyari, who was represented by Adetunji Adeyemi, group executive director, NNPC’s downstream, said.

Backward integration has what it takes to make Nigeria’s downstream sector act as an enabler to other critical industries such as petrochemical, construction, agricultural and other industrial sectors, he noted. Also at the event, TotalEnergies Nigeria announced plans of setting up two Compressed Natural Gas (CNG) stations in Abuja and Lagos, which will be operational in the first half of 2022.

Samba Seye, the company’s managing director, who was represented by his advisor, Charles Atiomo, said the move was part of TotalEnergies commitment to global transition with a target of net-zero carbon emissions by 2050. He said the company’s production and sales mix would change significantly by 2030.

“By 2050, the mix would be 40 percent renewable power, 40 percent gas and 20 percent liquid products,” Seye said, saying the company was also in support of the auto-gas scheme of the Federal Government, inaugurated to convert vehicle engines in the country from petrol and diesel to CNG”. He said the company was optimistic that more CNG stations would be set up if the government continued to initiate policies to deepen gas utilisation and profitability.

In his address, Emeka Akabogu, chairman, OTL Africa Downstream, said the COVID-19 pandemic and global energy transition had changed the dynamics of the petroleum sector. Nigeria and other African countries have no option but to rise to these realities by implementing fiscal changes and policies that would enable the country to surmount the challenges, Akabogu said.

“The West African market holds significant potential as refineries such as Ivory Coast, Gabon and Senegal cannot meet current demand for refined products in the region, estimated at 39 billion litres. There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available,” multinational professional services network with headquarters in London, PricewaterhouseCoopers (PwC), said in a report titled Nigeria Refining Revolution.

PwC noted that this shift would see Nigeria become a net exporter of refined products and the refining hub of West Africa by the start of the next decade. The advent of the Dangote Refinery, which is set to produce 650,000bpd of refined products, and other modular refineries, will significantly impact the current landscape in the downstream sector.

Read more at: https://businessday.ng/energy/oilandgas/article/how-backward-integration-in-nigerias-downstream-sector-can-drive-growth/

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