Page 9 - DMEA Week 11 2020

DMEA COMMENTARY DMEA
week, the group asserted that its members would be able to resume imports of gasoline if Nigeria’s national currency were to trade at 306 naira per dollar, compared with the current rate of about 368 naira to the dollar.
MOMAN’s member companies have refused to import gasoline for more than two years, say- ing that oil prices are too low to do so profita- bly. This has left state-owned Nigerian National Petroleum Corp. (NNPC) as the country’s only supplier of imported gasoline.
According to MOMAN’s chairman, Adetunji Oyetunji, the government has other options, such as instructing the Petroleum Products Pricing Regulatory Agency (PPPRA) to increase profit margins on petrol. The PPPRA’s current pricing template sets margins for retailers at NGN6.0 ($0.016) per litre and for wholesalers at NGN2.36 per litre ($0.0064). The agency also sets an allowance of NGN3.36 ($0.0091) per litre for fuel transporters.
“We call on the government to seize the opportunity of these lower oil prices to either give us an immediate margin increase or remove subsidy [on exchange rates] because today, the landing cost of petrol is much lower than the approvedpumpprice,”Oyetunjisaid.“Soitgives a unique opportunity to be able to get out of this subsidy business. It happened like that in 2016, when oil prices dropped significantly, but we didn’t seize that opportunity.”
Angola
In Angola, government officials have been the ones to call for revisions to fuel pricing policies.
On March 13, Finance Minister Vera Daves told reporters that Luanda intended to eliminate subsidies for motor fuels. She did not say when this change might take place, saying only that the
government had not taken this step yet because it wanted to make sure that the new policy had an impact on consumers that “was as small as possible.”
Lifting the subsidies will help the national oil company (NOC) Sonangol, as the subsidies have imposed constraints on downstream revenues, she said. This, in turn, will help the government, as it will put the company in a higher tax bracket, she added.
Additionally, Daves said, the policy change will discourage cross-border fuel smuggling. Speculators have long been taking advantage of Angola’s low domestic prices, buying fuel locally and then selling it for higher prices in neigh- bouring countries, she explained.
Currently, Angola’s government spends about $3.5bn per year to keep domestic fuel prices arti- ficially low.
Kenya
In Kenya, the Energy and Petroleum Regulatory Authority (EPRA) has authorised a slight reduc- tion in petroleum product prices.
On March 14, the agency said that it had brought down the price ceiling for gasoline by KES2.0perlitre,fordieselbyKES2.8perlitreand for kerosene by KES7.23 per litre. It explained the cuts by noting that the price of imported gas- oline had dropped by 3.44% to $0.47259 per litre in February, while diesel had slipped by 5.2% to $0.48021 per litre and kerosene by 14.96% to $0.42124 per litre.
The new pricing schedule will remain in place from March 15 to April 14, the EPRA said. The agency conducts a monthly review of prices for refined petroleum products. Its decisions have a significant impact on the economy, as refined fuels account for about 25% of Kenya’s total imports. ™
POLICY
Lebanon sets out to explore the offshore as chaos rules at home
LEBANON
Lebanon is contending with an economic meltdown and liquidity shortages.
THE long-discussed drilling of Lebanon’s first offshore well which started on February 27 has come amid high anticipation that a major hydro- carbon discovery could help redress the coun- try’s debt-burdened economy. However, it is important that as few eggs as possible are placed in that basket until such time as there are definite prospects and steps have been taken to put any putative oil industry on to a firm footing.
The Tungsten Explorer is set to drill at its first exploration well situated some 30 km (16 nautical miles) offshore Beirut and was said to have anchored in Block 4 at Total’s Byblos-1 well. Total said the drilling would last two months and
start at 1,500 metres below sea level. All eyes are pinned on this well, waiting to find out whether it is dry or potentially commercial. It will take at least three or four months before there is a con- clusive result and it is vital to recognise that this is merely an exploration phase.
A consortium composed of energy giants Total, Eni and Novatek was awarded two of Leb- anon’s 10 exploration blocks in 2018: Block 4, and Block 9 near the Israeli border. No date has yet been set for the exploration of Block 9, where drilling has been more controversial as Israel claims ownership of some of the block. Total had in the past said it was aware of a border dispute
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