Mr. Akshay Saxena, is the Managing Director of Fynefield Petroleum, and is one of the major players in the downstream sector of the nation’s oil and gas industry. In this interview, Saxena says Nigeria should be alert to developing trends in the global oil and gas sector. Bassey Inyang captured the interview for THISDAY. Excerpts:
How would you assess the policies of the current administration in the country towards petroleum products marketers?
Well, we are lucky that we have a government that is keen on energising the oil and gas sector to drive the economy. The sector is a blessing to all of us because as long as you can cook your food, drive your cars, and charge your phones, you will consume energy. So far, I can say that the administration’s policies have been favourable, despite occasional hiccups here and there.
Recently, the House of Representatives Committee on Petroleum (Downstream) visited the tank farms at the Calabar Free Trade Zone (CFTZ), on a fact-finding mission to establish the cause of kerosene scarcity, with a view to proffering solutions that would make the commodity available and cheap for the consumers. What is your view on that?
Since the cardinal point of the visit was to ensure the right price of kerosene, and how the product can get to the consumer, and at a cheaper rate, it is important that we understand the system first. Between the time of depot sales and distribution to the surface tanks owners, there are a lot of price differentials. The people who retail this product, DPK, are mostly surface tanks owners who sell in large quantity than fuel stations. They are mostly house wives, little business women and men. They require between 5,000 and 10,000 litres of kerosene to stock up their tanks. So, they do not have such money to pay in bulk to suppliers.
But, the middlemen who have money to pay, and buy large quantity would end up getting some discounts from depots. They then go back to these retailers and charge huge credit from these surface tanks owners, and they end up hiking the price enormously.
And since the surface tanks owners get it in bulk from middlemen on credit; they have no option than to accept it. You now find a situation whereby a depot sells a litre of kero, for instance, at N135 to middlemen, and then they (middlemen) would end up selling at N200 to these surface tanks owners who also, in turn, would add N5 or N10 to make profit, thereby selling to end users at N210. This has been the case in the last two years. As government price increases, retailers also increase to remain in the market. This happens in relation to supply and demand theory.
Therefore, I suggest that government, through the Department of Petroleum Resources (DPR), should create a platform whereby the Micro Finance Banks can come into the picture, and take the position of these middlemen, who buy product and supply on credit and at exorbitant rate to surface tanks owners.
This will not only end up empowering Micro Finance Banks to fill up the gap, but would end up doing one of their lines of businesses, which is to provide opportunity for people at micro level to do businesses.
Besides, they would act as a bridge between the supplier and the end users. Besides, Micro finance banks would ensure that right pricing gets to them and put an end to transferring price from the depot to the end users. Under this arrangement, probably only transport cost, and a little interest is what the micro finance banks would charge the surface tank owners since the banks would be giving them some credit for some time. But again, there should be some regulations by DPR to ensure that these surface tanks owners are actually real. They can have a data base and begin to improve upon the consumption battle. Already, there is a drive or effort by government to ensure the actual consumption rate and importation level of DPK in the country. So, they can channel energies on the total consumption of the product.
From your experience as a petroleum marketer, what would you say are the causes of kerosene scarcity in the country?
One is the sources of receipt, which are through local refining and importation. NNPC has so far tried by ensuring that out of 10 million litres of DPK consumed locally, daily, they bridge it by 5 million litres while the other 5 million litres are imported. Furthermore, government has to come into the importation of DPK because it’s no more on CBN approved rate for importation as PMS (Petroleum Motor Spirit).
DPK has been ousted for a while. So, I suggest it should be brought into the same approval as PMS so that the importers can use the right Forex to transfer.
If we use bank rate, the landing cost would become crazy, and there is nothing anybody can do because nobody would bring in a product at higher rate and sell at lesser price.
It is true that advanced economies are moving towards liquefied petro gas, cooking gas. However, as we try to ensure that DPK is rightly managed, priced and not adulterated, we should look out at venturing into gas. There is a lot of gas flaring, and we are trying to explore that to compete with the growing market. The gas market is going to be a good venture for us.
How do you respond to the claim that one of the reasons why DPK is scarce is because often times, ATK (Aviation fuel) users also go for DPK when ATK is also scarce, because of the similarities of the product?
There was a report in the news media about something like that. But, I don’t know whether it is true or not. But, there are two sides to a coin. It is important to understand the similarities, and differences in DPK. DPK means Dual Purpose Kerosene; so it has dual purposes. Though the two (aviation fuel, ATK, and Kerosene, DPK) are different. However, I do not know how people can engage in such practices. The truth is that before you bring in ATK, you must meet up with all government rules and regulations, which among others, include having a specialised tank farm and trucks for them. Besides, that there are several checks before it finally gets to the final consumers. And it has remained so; and I don’t think we have had incidences of air disaster associated with adulterated ATK. So, I disregard that kind of claim.
There is an evolving line of thinking towards the development of biodiesel in the industry, is downstream sector prepared to play any serious role in this aspect?
Yes, some key players in the oil and gas industry including us are exploring the option of biodiesel. Again, I am a member of Depot and Petroleum Product Marketers Association of Nigeria (DAPPMAN) and there is a lot of drive by the association to venture into this area. But for now, it is more of underground study. Certainly, we would want to develop along that because the next line in the industry is cleaner gas and cleaner oil. For instance, you see a society that is cleaner; you see a lot of bio-fuel coming up in the market. There is a story making the rounds that in the next 15 years or so, there would be no more petrol-powered cars in Europe, and some other developed countries. I do not know how true that is anyway. You can see the world is moving at a dynamic speed. Therefore, it is important we catch up with that speed if we want to compete in the industry. As we all know, Nigeria has abundant resources of cleaner gas, so we have to take advantage of that.
What are the major challenges the downstream sector is facing now?
Nigeria has a lot of prospect in this industry going by my experience gathered so far. Again, Nigeria is a fantastic country for investment. I have been in Nigeria for about 38 years, and out of that, I have had a stint in the oil and gas for about 17 years now. Well not much has changed just as there are challenges. But, we look at challenges as an opportunity for better development in the sector. What has happened is that prices have changed drastically, and there is always cause and effects relationship. Some companies have flourished including Fynfield. And it is because of hard work and sticking to the rules. There are some other companies that played against the rules, and they are no more in the business. I think the greatest challenge in the industry is consistency. Once a company is consistent and focused in policies and standards, it would definitely prosper. But, if consistency is lacking, such a company would not break even. My experience in the industry has been very huge and engaging. I had worked with NIPCO PLC companies that started off giving dividends of 35k, and jumped up to giving N4, and from revenue base of say N20million a year to N500 million in assets.
I also joined companies that started from ground zero, and we still broke even. I did not come from abroad to sit in the office. No! I have also worked as a loader, and as a logistics person in a company; I have pushed trucks out of depot. So, I have had various experiences in the industry, and that is what success stories are all about. Other companies I have worked for included Matrix Energy, Acorn, Capital Oil and Gas between 2010 and 2011 and now with Fynefield.