Nigeria: Crude Oil Price Rises Towards U.S.$59 Per Barrel

Crude oil price rose towards $59 per barrel Wednesday to sustain Tuesday's rallies where it gained one per cent after the Saudi Energy Minister, Khalid al-Falih, said the focus remained on reducing oil stocks in industrialised countries to their five-year average.

The minister's statement had raised the prospect of prolonged output restraint once the supply-cutting pact led by the Organisation of Petroleum Exporting Countries (OPEC) ends.

This is coming as the Nigerian National Petroleum Corporation (NNPC) has restated the commitment of the country to exit petroleum products importation in the medium term and urged downstream operators to invest heavily in retail outlets to take advantage of the potential opportunities.

Oil prices have maintained multi-week highs with Brent crude at $58.41 per barrel, and US crude at $52.46. Khalid al-Falih told Reuters at an investor conference in Riyadh on Tuesday that global oil demand was expected to grow by 45 per cent by 2050 despite an international push for using more renewable sources of energy.

OPEC, Russia and nine other producers, have cut oil output by about 1.8 million barrels per day (bpd) since January. The pact runs to March 2018 and they are considering extending it.

In a related development, the NNPC has restated that Nigeria would exit petroleum products importation in the medium term and called on downstream operators to invest heavily to take advantage of the commercial opportunities.

Speaking yesterday in Lagos at the inauguration of the state-of-art mega filling station built by Emadeb Energy Services Limited, the Managing Director of Pipelines and Product Marketing Company (PPMC), a subsidiary of NNPC, Mr. Umar Ajiya, stated that the corporation did not intend to be the sole importers of petrol in the country. Ajiya commended Emadeb Energy for the huge investment and called on other downstream operators to take advantage of the opportunities that would arise when NNPC exited importation.

"We will exit the import era perhaps in the medium term and with the retail outlets, you will still have a business model that works because if you only stay at the coast and tank farm, where that tank farm is unable to export, it means your business has come to a stop," Ajiya explained. "Our intentions to exit petroleum products importation in the medium term will entail that people who don't go downstream perhaps will not have a role to play in the market.

What Emadeb is doing today is in the right direction and we commend them," he added. Also speaking at the event, the Managing Director in charge of Retails for Emadeb Energy Services, Mrs Olugbesoye Olujimi, noted that the company's integrity had sustained it in the business in the face of the dwindling margins in the downstream sector.

She said: "Yes, there are low margins, especially when you have to transport products from Lagos to the North. But like I said, we are truthful and the integrity makes the turnover a bit higher. In Emadeb, integrity is our watchword.

The catch phrase in Emadeb is 'powered by integrity'. So, we are powered by integrity. The banks know us that when Emadeb says 'please give me a line to trade, Emadeb will trade purely with the line and then we pay.' We don't divert whatever funds we are given to do what we need to do. Our bankers - FCMB, Union Bank, GTB can testify to that."

In his keynote address, the Group Managing Director of the company, Mr. Adebowale Olujimi said his company's target was to acquire and brand at least 10 more mega stations across the geographical zones of the country in the next 24 months. The 270,000 litres capacity outlet located along Oshodi-Apapa expressway, has 16 petrol, two kerosene and two diesel nozzles. A former Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Mr. Reginald Stanley, said in his remarks that when he championed the entry of independent marketing companies in the distribution of petroleum products as a young graduate in the NNPC in the 1980s, the oil majors that had dominated the downstream business opposed him.