PIB 2020 will ensure free market pricing for Petroleum Products –Expert

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    The Petroleum Industry Bill 2020 currently at the table of the National Assembly waiting for passage into Law is expected to bring an end of subsidy and ensure free market pricing for Petroleum Products.

     

    The Publisher, Africa Oil+Gas Report, Toyin Akinosho, who is also the Managing partner at Upstream Information Update –Energy Intelligence Consulting, stated this at a recent Stakeholders forum in Lagos.

     

    PIB according to him will bring subsidy to an end by Law and there will be free market pricing for Petroleum products as enshrined in the PIB and pricing regime and power to regulate tariffs.

    “Section 205-(1) Subject to the provisions of this Section, wholesale and retail prices of petroleum products shall be based on unrestricted free market pricing conditions”, the Publisher said.

     

    He stated where the Authority determines that  a particular licenced activity is a monopoly service; competition has not yet developed in the market for any petroleum, product to an extent as to protect the interests of customers; or a particular licensee is a dominant provider of services, the Authority shall have the power to regulate the tariffs and prices charged, by licensees in respect of the activities in a manner consistent with the Authority’s duties and with the pricing principles set out in section 207 of this Act.

    Others are the Authority shall undertake periodic pricing methodology reviews, the Authority shall consult with licensees, industry participants and stakeholders before undertaking a pricing review or establishing a methodology for regulating prices and tariffs by licensees providing monopoly or dominant services as enshrined in section 206. Wholesale prices for petroleum products.

     

    Akinosho

    “The holder of a wholesale petroleum liquids supply licence and a wholesale customer shall, subject to the provisions of this Chapter, negotiate the wholesale prices directly between the parties on an arm’s length basis, provided that the transfer price shall be transparent and reflect the transfer

    price between the parties. The Authority shall have a power to monitor bulk sale of petroleum products and may publish market-based prices in order to ensure that the transactions are undertaken in a manner that transfer pricing between the supplier and the wholesale customer are undertaken at a transparent arm’s length basis. The supplier shall, within 14 days of the consummation of a transaction relating to the bulk sale of petroleum products, provide the authority with information relating to the transaction including, where applicable, the cost incurred by the supplier in the production or supply of the product and other information relevant to the price at which the product is sold.  A supplier who knowingly provides information, which is false or misleading with respect to the information required in subsection (3) of this section is liable to a fine stipulated by the Authority in regulations”, he said.

     

    But he noted where constraints are bagging the door as follows, at 2.5% of Opening Expenses, Opex, the Host Community Development Fund is a duplication of 3% levy on oil companies for NDDC). So he suggested the repeal the Niger Delta Development Commission, NDDC Act. So also that $2.50/bbl for Production Allowance “may not be sufficient to fully recognize the impact of the multitude of costs, fees and taxes”.

    Another area is the Midstream Gas Infrastructure Fund will be funded in part from 1% Levy derived from wholesale price of petroleum products and natural gas produced and sold.  Financial contribution for remediation of future environmental damages, appears to be a duplication of the abandonment fund”.

     

     

     

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