Downstream operators in the oil and gas sector have said that the inability of the rail system to be running, the inefficiency of the inland waterways, coupled with the poor state of roads across the country has made the movement of products from the various depots to the retail outlets difficult.
Downstream operators in the oil and gas sector have said that the inability of the rail system to be running, the inefficiency of the inland waterways, coupled with the poor state of roads across the country has made the movement of products from the various depots to the retail outlets difficult.
In a paper presentation at the just concluded OTL Africa Downstream Week 2015, obtained by Shipping Position Daily, Managing Director Rain Oil Limited Gabriel Ogbechie also highlighted activities such as pipeline vandalism, arson, smuggling of petroleum products among major challenges facing the downstream oil sector
Ogbechie said that downstream operators are faced with problems of ports with shallow vessel draught which inhibit berthing of larger vessels and raise product landing cost.
In the paper titled ‘Fuels, Storage Terminals and Sustainable Energy Supply’ the Rain Oil boss stated “the poor state of roads makes the movement of products from the various depots to the retail outlets difficult. This is compounded with the near absence of rail service networks across the country as well as the ineffective functionality of our inland water ways”
“Certain activities such as pipeline vandalism, arson, smuggling of petroleum products among others are major challenges facing the downstream oil sector”
He said that there is delay in the payment of subsidy to marketers, and that government computes subsidy payments based on 60 day payments and that currently, marketers are currently 360 days above this window.
Another issue raised is the financial risk which includes price of crude oil at the international market, he said that crude prices have dropped from $115 per barrel in June 2014 to as low as $40 per barrel in Aug 2015.
“Volatile international crude prices, government subsidies and exchange rate fluctuations, have remained a big challenge for investors. Ports with shallow vessel draught which inhibit berthing of larger vessels and raise product landing cost”
“Limited infrastructure such as storage facilities and pipelines for transportation of petroleum products from the coast to inland areas”
The rain oil boss advised that funds should be invested in local storage infrastructure. He also called for investment in local infrastructure which according to him will cut costs and improve the efficiency of product distribution.
Such investment he said could include, construction of ports with deep vessel draught or single buoy moorings (SBMs), which allow efficient berthing of larger vessels, dredging of existing ports to allow the discharge of larger vessels, cconstruction of underground pipeline systems to minimise theft and vandalism.
“Improved storage infrastructure is important to ensure sufficient buffer to mitigate disruption in the supply. Storage facilities have a significantly shorter turnaround compared to refineries. Hence, would be a more efficient option to take advantage of the reduced global oil price regime”
Discussion about this post