oil and gas

DANGOTE, PIA, NNPC AND OTHER MARKETERS-

October 4, 2021

The Petroleum Industry Act (PIA) is expected to open the Nigerian oil and gas industry to more opportunities and investment, especially for local players, regional, and international stakeholders. Many individuals and organizations will enjoy the new life PIA will offer, while some individuals and organizations will be knocked out of business.

One entity that may benefit most from the PIA is Aliko Dangote, with his 650,000 barrels per day integrated refinery, which is Africa’s biggest and the world’s biggest single-train facility. The refinery has 1,100 kilometers of pipeline to handle three billion Standard Cubic feet of gas per day. It has power plants with a combined capacity of about 400MW. Section 317 (8) of the Senate version of the Act, noted that petrol importation license will be restricted “only to companies with active local refining licenses”. This clause and the unmatched prowess occasioned by the refinery is a formidable edge for Dangote. Though, there are some reports that the federal government has reversed these exclusive petrol importation rights.

Dangote can have absolute control of both the downstream and the midstream sectors of the petroleum industry. How? Dangote can acquire the numerous idle fuel stations scattered nationwide or take over one of the established major retail marketers, though most of these idle stations are not strategically located. However, Dangote can revive and utilize them using the price advantage- by setting an unbeatable price, and a litre is a litre strategy, employment of the best domestic manpower in the downstream sector and optimizing modern technology for service delivery in these stations.

The petroleum retail industry is growing in Nigeria. The growing number of fuel stations across corners of the country is a proof of this. But there remain operational and logistical gaps in the blooming industry like bad roads coupled with the use of old trucks, poor remuneration of drivers, and lack of modern technology. Thus the industry is losing billions of Naira due to shortages when truck discharge petroleum products at fuel stations, and the rising disputes between drivers and station managers. Furthermore, some of the marketers have poor welfare systems for staff and they have not put in place some feasible plans for the realities that will accompany the arrival of the PIA. Many of them may end up operating in the dark. For any marketer to survive the new regime, they must set-up a PIA think-tank or a special unit in their R&D departments to ‘look’ at the future, opportunities and threats that PIA will come with.

With his current economic capacity, Dangote can exploit these lapses to implement backward integration in the petroleum industry. The $100 million Dangote-Sinotruck plant in Lagos will give Dangote an advantage in the logistics and operations sector. The plant assembles trucks and cars in Nigeria for local use and export; it is 65 percent owned by Dangote and 35 percent by Sinotruck. To have new petroleum-distribution trucks and well-trained and well-paid drivers will not be difficult for Dangote. The Dangote Refinery will give him the required volume of products and enough loading bay for trucks to load. The refinery covers 2,635 hectares of land, it is six times the size of Victoria Island, Lagos. Scarcity will not be a challenge for Dangote if he ventures into the retail business. Dangote can tap from the domestic manpower to employ the best hands in the downstream sector. With access to funding and resources, Dangote can deploy massive Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) skids at once in as many stations as possible to also prepare for the future.

As earlier mentioned, if Dangote acquires these thousands of idle fuel stations or any of the established major marketers, the brand can offer mouthwatering prices at these stations that can make customers travel even 5km just to purchase petroleum products at a Dangote station. Furthermore, these prices can knock many competitors out of the market. However, some of them can still survive as third-party partners to Dangote. However, the NNPC can take advantage of its $2.76billion stake in the Dangote Refinery and form a kind of partnership with Dangote to redevelop and expand the NNPC Retail business.

As it is now, Dangote has the advantage, anyone coming in will need the next 10 years to catch-up. The bigger, the more advantageous, it seems!

thisdaylive



Top News



oil and gas

Tigo Energy to Present Solutions for Gre...
October 13, 2021
Gadain Discusses challenges of energy wi...
October 12, 2021
Mitsubishi Expresses Desire to Invest in...
October 12, 2021