Page 5 - AfrOil Week 30 2022

AfrOil COMMENTARY AfrOil

Fee for service Roberto Castello Branco, an economist and
Interestingly enough, though, one of the points experienced businessman – after they declined
Kyari mentioned ahead of the launch ceremony to cut diesel prices at his urging.
actually served to highlight the fact that NNPC Under these circumstances, Paes de Andrade
would be different from other NOCs – and in might very well wonder whether Brazil should
particular, different from Petrobras. attempt to imitate Nigeria, with Petrobras act-
According to a report from This Day, Kyari ing as the federal government’s fuel supplier in
noted in a pre-recorded interview broadcast by exchange for a fee, without any involvement
Nigeria’s Channels Television two days before in the issue of domestic pricing. Perhaps his
the launch ceremony that NNPC had previously position would be more secure if Petrobras did
functioned on a non-commercial basis as the not have to decide whether to exercise its right,
country’s only licensed importer of petroleum which is formally protected by Brazil’s consti-
products. By contrast, he said, NNPC Ltd will tution, to set prices for petroleum products in
perform the same function on a commercial accordance with global crude oil prices and not
basis, importing fuel on behalf of the govern- with the government’s notions about what is best
ment in exchange for a fee. for consumers at any given moment. NNPC Ltd may be
“In the case of the price of petroleum, this is adopting a more
a policy matter. And [NNPC Ltd] is going to be The downstream factor
a supplier to the [federal government] at a fee. If so, however, the dispute could shift to the corporate style
So the issue of at what price you sell petroleum question of what the Brazilian government con-
[products] will be the decision of the state,” he siders to be a fair fee for service – and whether of management,
said. that fee should remain static at times when
He added: “The state has continued to main- crude oil prices change. (It is not out of the ques- but it will still
tain that we must continue to pay subsidy on tion, for example, that Brasília might ask for a maintain a more
petroleum products. We are happy to do this, discount when petroleum is expensive, citing
but as a commercial venture, we will have a ser- the diminishment of its own resources.) substantial focus
vice-level agreement between us to render that In the long term, Petrobras might be able to
service.” endure a dispute of this nature, as it is looking on downstream
to shift its focus to its upstream business – espe-
Avoiding disputes cially the development of its large offshore pre- operations in the
Kyari did not mention Petrobras by name. How- salt fields, which have been and will be the main long term than
ever, the Vanguard newspaper, which cited his source of production growth. That is, over time,
televised remarks, made note of the Brazilian it could reasonably expect the fee that it receives Petrobras
NOC’s recent disagreements with President Jair from the government for handling fuel imports
Bolsonaro on the subject of domestic fuel pric- to represent a smaller portion of its income.
ing and speculated that the CEO did not want However, NNPC Ltd is in a different posi-
to find himself or his new company embroiled tion. The Nigerian company may be switching
in the same kind of disputes that have led to to a more corporate style of management, but
repeated firings and hirings. it still has a substantial downstream footprint,
Petrobras’ board of directors recently elected as it is the operator of four idle refineries that
Caio Mário Paes de Andrade as the company’s it hopes to bring back on line soon, along with
new CEO. Paes de Andrade is the fourth per- an extensive chain of branded filling stations. It
son to hold this position at the Brazilian NOC will be involved in the downstream sector for a
since early 2019 and is also the second person long time, if only by virtue of the fact that the
nominated to the post this year, following José fuel it imports will be loaded into its own stor-
Mauro Ferreira Coelho, who lasted less than two age and distribution networks, which it will then
months. have to repair and maintain. The fee it receives
Bolsonaro dismissed both of Coelho’s pre- will, therefore, matter in a way that it may not
decessors – Joaquim Silva e Luna, a former in Brazil.
military officer with close ties to the president So once again, the comparison will not be
and no direct experience in the oil industry, and easy to make. ™

Kyari (L) and Buhari (R) view a sample of NNPC Ltd’s new filling station pumps (Photo: Twitter/@nnpcltd)

Week 30 28•July•2022 www. NEWSBASE .com P5