The Federal Government has been told to suspend its plans to sell down its stakes in Joint Venture oil assets until situation in the international crude oil market and global economy improves. Addressing newsmen in Abuja on its forthcoming 2020 Oloibiri Lecture and Energy Forum Series, Chairman of the Society of Petroleum Engineers, SPE, Nigerian Council, Mr. Joe Nwakwue, disclosed that the decision of the government to sell its joint venture stakes was the right one, noting, however, that it should not proceed with the sale until a future date.
According to him, with the current declining price of crude oil in the international market, the government would not get the fair value from the assets if it chooses to proceed with the sale within this period of high volatility in the crude oil market. In addition, Nwakwue called for clear policy from the Federal Government as it relates to the oil and gas sector, as this is critical to attracting the much-needed investment in the petroleum industry. For instance, he blamed the divestment of international oil companies from the Nigerian downstream petroleum industry on lack of clarity in policies and on government’s participation in the sector.
According to him, the reason why asset disposal is rampant in the downstream sector was because it is impossible for a private sector player to compete against a state-owned entity. He, however, noted that the international oil companies’ divestment from the downstream sector was not a signal of loss of confidence in the sector, noting that if the role of the Nigerian National Petroleum Corporation, NNPC was reduced in the market today, a number of multinationals would return to the sector. Nwakwue said, “The disposal from the downstream sector is because it is difficult to compete against a state-owned entity. So why would you create a situation where the NNPC becomes a major supplier of the market and you expect those entities to exist and continue to compete with an NNPC? It does not. “No sensible investor goes to compete against a state-owned entity, because you will not win. This is because the state-owned entity has all the power and strength of the state behind it. You cannot win. Your best bet is to partner with the entity.” He further disclosed that the inability of the country to fix its refineries was more as a result of institutional challenges than technical challenges. He noted that the fact that the country was unable to revamp the refineries after several years of dilapidation, was a reflection of the failure of the state to effectively manage its assets. Nwakwue explained that the refineries can be revamped, adding that the problems of the facilities were not technical but institutional. He said, “Running refineries is not rocket science. Refineries are run everywhere in the world. I had worked in a company whose refinery built in 1932, was still running till today. “That we cannot run the refineries here have more to do with institutional challenges than technical challenges. We can see that private refineries are coming and they would be run. It is not that we cannot run refineries, Nigeria can run refineries. “It talks to a deeper issue; the failure of the state to do what needed to be done. I believe that the move towards private sector refining is the answer. The refineries are not working not because running refineries is rocket science, but because we have not put our house in order.”