Monday, November 22, 2010

Oil operators seek $900bn lifeline to avert downstream chaos

… Products scarcity loom
Clara Nwachukwu
To avert downstream chaos and recurrent petroleum products scarcity, industry operators are asking for $900bn bailout from the Federal Government.
The lifeline is expected to assist operators to retool their operations while also renegotiating their exposures to the banks.
Operators are seeking the bailout as a last resort, pending when government eventually gets round to fully deregulating downstream operations, which would help them recover costs without undue interference by government.
Addressing newsmen in Lagos on Monday, the Jetty and Petroleum Tank Farm Owners of Nigeria, JEPTFON, warned of dire consequences with regard to petroleum products supply and distribution in the country, seeing as the private sector accounts for more than 70 per cent of products availability in the country.
Fear of takeover
The JEPTFON alarm is coming against the backdrop of possible takeover of member companies by the newly established Asset Management Corporation of Nigeria, AMCON, set up by the Central Bank of Nigeria, CBN, to buy up toxic loans to banks, which plunged the industry into its current distress.
They said, “We are now at the mercy of our bankers, some of whom have been bailed out by the CBN, are now plotting to kill our business without considering the impact this will have on the nation and the economy at large.”
The Jetty owners note that if not nipped in the bud, the acquisition of their companies by AMCON on account of their indebtedness to the banks, will send the wrong signal to the international business community, which was already assessing Nigeria’s progress with building and growing indigenous capacity in the oil industry, through the recent enactment of the Nigerian Content Act.
Indeed, no sooner had the CBN wielded the big stick against the banks for indiscriminate margin loans and other sundry facilities, leading to massive management indiscretion and corruption, than the banks started hounding some of their oil industry debtor customers, starting with African Petroleum, AP, by Access Bank; and just recently, MRS Oil and Gas by Bank Phb.
Justification for bailout
Justifying their demand for a bailout, JEPTFON, who spoke through its Acting Secretary General, Mr Somairi Tamunokuro; and its spokesperson, Mr. Peter Akpatason, a former President of the National Union of Petroleum and Natural Gas Workers, NUPENG, noted that government had used oil wealth to bailout other sectors of the economy, and that there is no reason why the sector should not also benefit from its own resources.
They said, “WE are seriously baffled at government’s negligence of our sector, owing to the fact that government has bailed out the banks, Agriculture, aviation, manufacturers and even Nollywood without considering our sector.”
They argued further that considering that their loans were invested in-country in form of downstream logistics such as petroleum depots, jetties, storage vessels and a host of others as well creating employment opportunities for hundreds scores of thousands of Nigerians, any takeover of the companies will lead to huge economic dislocation of millions of families.
Furthermore, they said that operators would be forced to go offshore to seek for debt financing, leading to further impoverishment of the economy through huge capital flight, which, otherwise, would have been domiciled in the economy.
Ironically, the Yuletide Season is usually characterised by fuel scarcity, which would become compounded if 70 per cent operations are stifled, with no succor, as the existing refineries cannot meet local fuel needs.
With the general elections round the corner, the development will make the incumbent government unpopular among the masses, as meeting energy needs is one of the measures of assessing government’s stewardship.

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