The Federal Government of Nigeria has revealed that investors have been shunning investment in the nation’s downstream oil sector because the cost of petroleum products were not market driven.
According to the government at the centre, this reality would remain until the regime of subsidy is over in the country.
This was disclosed by the Minister of State for Petroleum Resources, Chief Timipre Sylva, while speaking in Abuja at the scorecard series (2015-2023) of the President Muhammadu Buhari-led administration.
Sylva said it was unfortunate that the country is still operating petrol subsidy regime, declaring that it is evident to anyone that subsidy is not sustainable and should be discarded.
The minister noted that investors would keep ignoring woos to invest in the nation’s downstream sector until the price of petroleum products were market driven.
While wondering how possible is it for investors to invest in a nation with subsidized regime, Sylva opined that refinery would not also make profit under the same subsidy period.
He maintained that with a market-driven condition in the downstream oil sector, scores of investors would throng the country to invest, thereby improving the economy.
Canvassing for more refineries in the country, the minister noted that difficulty in accessing petroleum products would be over.
He also emphasised that the Nigerian National Petroleum Company Limited has been selling petrol without gain owing to PMS subsidy.
Recall that had oil marketers stated that the supply hitches in the downstream oil sector that often leads to fuel scarcity, might persist till June, based on the government’s plan to end petrol subsidy in that month.
Last week, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said the Federal Government had budgeted about N3.6tn for fuel subsidy till June 2023.
Sylva, while speaking in Abuja on Monday, insisted that subsidy had been a burden, but stressed that it was a mandate on NNPC which had made the oil firm to continue selling PMS at a loss.
He said the cost of the commodity in Nigeria was not as high as what was obtained in other countries, but stressed that the current national consensus was that subsidy on petrol was no longer sustainable.
Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns
Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.
Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.
The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.
This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.
While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.
Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.
Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.
Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.
Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.
Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm
The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.
Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.
The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.
However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.
Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.
He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.
Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.
The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.
Oil Prices Surge as Brent Approaches $83, WTI Nears $78 Amidst Refinery Buying Activity
Oil prices surged as Brent crude oil approached the $83 price level while West Texas Intermediate (WTI) neared $78 as refineries in the United States and China increased purchases.
Brent crude oil, against which Nigerian oil is priced, gained 1.1% on Monday, signaling a bullish trend in the oil market.
The recent uptick in oil prices comes amidst signs of heightened demand from refineries, particularly in key markets like the US and China.
This surge in demand has contributed to the strengthening of timespreads, indicating tighter conditions in the near term.
Market observers are closely monitoring the International Energy Week in London, where industry leaders are convening to discuss the outlook for the global energy market.
Scheduled speakers include Russell Hardy, the CEO of Vitol Group, a major player in the energy sector.
While tensions in the Middle East and production cuts by the OPEC+ alliance have supported crude prices, increased production from non-OPEC+ countries, notably the US, has capped potential gains.
Analysts predict that oil prices may continue to trade within a range, with Brent crude expected to hover around $83, while WTI remains near the $78 mark, barring significant shifts in market dynamics.
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