Chairman of Heyden Oil, Dapo Abiodun, in this interview with AYOBAMI ADEDINNI speaks on the challenges of the Oil and Gas sector and how the company is set to be the game changer in the Liquefied Petroleum Gas sector of the economy. Excerpts:
What is the update on the amount owed marketers by the government?
The problem of unpaid foreign exchange differentials has continued to accrue interest in banks. The amount of money remains outstanding and is crippling marketers’ business which also making them have issues with the Economic and Financial Crimes Commission (EFCC) and the Asset Management Corporation of Nigeria (AMCON )
This government has listened to us at several meetings yet that amount of money remains outstanding and are crippling marketers. Some marketers are having issues with EFCC and AMCON while some are facing liquidation. This is a problem that has lingered on for so long”, he said.
The Minister of Finance had collated these claims and gone to the Federal Executive Council (FEC) to seek approval for the total amount due to marketers but because this was not in the budget, it had to go the National Assembly which according to him could not approve it until it went on recess.
How much is the debt now?
It is in excess of N500 billion. Our prayer was that the payment began before the end of July but that has not been the case, interests continue to be mounting up.
The situation is getting worse; most marketers have lost the economic power to even pay their staff because this amount of money has accrued over time.
This time last year when the exchange rate was changed, we had transactions that were done at the rate of N197. The thinking is that once you get naira, you could to CBN at N197 to a dollar. CBN however changed it to N305. So, the same naira you are supposed to get has become double. It is so bad.
We know that the FG is doing do much to ensure we are paid but there is just so much bureaucracy involved. We are hopeful that the National Assembly will be gracious enough to come back, if only to address this issue and go back to their recess.
You would observe that there has been stability in the supply of petroleum products in the country since the beginning of the year. This is largely due to efforts by the President Buhari-led administration through the Minister of state, Petroleum and the Group Managing Director of NNPC, who have jointly ensured that marketers and the issues affecting them are being dealt with because that’s the only way you can have the supply and distribution that you see today.
Sometime last year, we did partial deregulation that took prices from N96 to N145 and since then prices of crude oil have been epileptic and since the relationship between crude pricing and refined products pricing is directly proportional, any increase in crude price will affect prices of refined products. As such, the government has been managing the situation with us.
The government itself has played the supplier of last resort meaning that when marketer are not able to import because crude has gone up.
Despite the fact that the CBN has graciously ensured that they make foreign exchange available to us as much as we need it through what we call the NNPC intervention.
However, when crude price rallies and gets to a point, even with that forex intervention, we will not be able to import because as crude price goes up and exchange rate remains constant, the landing price of petrol will go up unless we begin to get forex at a rate that begins to follow that differential which of course they cannot possibly do.
What happens is that, government imports and sells to us in Naira to enable us sell at prescribed market rate. So, government has done relatively well and even much better than previous years,
As I said to you, we hope that the National Assembly will come back from recess and approve this. The CBN has been very supportive and strategic to our cause.
We have also pleaded with CBN to talk to banks to stop accruing interest for now.
So there is a directive on that?
We have appealed to him and I believe he is working on it since the banks know the money is there, so there is no point in accruing interest because it is the FG that will pay the interest anyway.
Looking at HEYDEN Petroleum, I know for the past 3 years despite economic challenges, we can say that the company is acquiring several filling several filling stations, can we say that is part of the growth plan of the company?
It is in line with our strategic development plan to play in the entire value chain of the downstream sector. Quite frankly, anyone who is not doing such, it is only a question of time. In the first instance, we acquired 45 filling stations and all these between Lagos and Ogun states.
Now we can either import our petroleum products or take it from refinery through our own jetty. So, we have control of the entire value chain. If everybody does that, it will become more efficient because you are not depending on someone to patronize you. You know, in Nigeria, we are under retailed.
For instance, we have about 4 filling stations in V.I. but under the leadership of the Minister, state for petroleum, a lot of incentives was put into the retail to bridge the margin at the retail end. We are also targeting upstream because we are one of those that won the bid for the direct purchase of crude. So, we are able to get crude from government and bring back the desired product.
What about Midstream?
We are talking with partners. You are aware that part of the condition we gave government is to fund the upgrade and repair of the refineries. We are also collaborating with Nigerian Petroleum Development Company (NPDC) in the production of LPG. We are hoping that in the nearest future, we will be one of the largest producers of LPG in the country and for us, LPG is very strategic.
This is because we also have a subsidiary which we own 100 per cent in the power generation business-First Power. We took over the Ijora power plant which is the first in Nigeria. We have installed turbines, gas pipelines. We are about to commission the plant. We are looking at generating power through LPG.
What’s the capacity we are looking at?
It was a 60 MW plant when it was at its peak. What we have done today, we have done a 14 MW plant there in the first instance. But being a Genco, we are going to be relying not only on NERC as regulator but also DISCOs. The power plant itself has been built and completed for over one year and today we are just waiting for the formality between us and Eko Disco to commence generation.
Is that under the agreement of embedded power plant?
Yes, I have embedded power plant. So you can imagine if it were to be a bigger power plant, we would have a bigger exposure. Our plan is to start and then increase generation.
Is it natural gas or LPG?
It is natural gas. The power plant will serve the Central Business District whose primary customers are around marina. We have CBN, NSE, banks and the likes. We designed it to meet their demands. So, you can see that HEYDEN is a full energy company.
What are you doing about payment because Discos today are having issues with payment?
We are an embedded power company and we expect that the DISCOs will pay us. They are having challenges with tariff. Unfortunately, there was devaluation of currency last year. The gas is the most expensive component which is dollar-indexed. You were paying an amount in dollars for gas like N197 last year at X amount.
Suddenly, it went from N197 to N305. How will that tariff now hold? If my price has gone from N197 to N305 and I am buying gas before at $7/scf and my tarriif was N25/ Kwh. So these are the kind of things affecting.
Meanwhile, the tariff is regulated. The DISCOs cannot just wake up and change the price. However, as a Genco, I will pass my bill to the DISCOs while the DISCOs have any to pass it to.
We have met with the Minister of Power who has agreed to find everything within the law that allows us to do things differently as an embedded power plant so that there will be a willing buyer, willing seller agreement which allows us to operate viably. If not, your business has grounded before it even started. It is one of the hazards of doing business in a developing economy.
Are you going to commission before the end of the year?
So, what about the funding for the scale-up?
There are many investors ready to fund power plants. The challenge has just been the tariff. The assurance that a financier wants is the guarantee that you will be able to generate, and once you do so, you will be paid.
On the issue of fuel supply, how prepared is DAPPMA to take over from majors?
Let me tell you today that DAPPMA distributes over 75 per cent of products .if DAPPMAN should shut the door today, everyone will be affected. This should tell you that DAPPMA has taken over. We have the largest number of filling stations, jetties and the likes. We are taking over. This is because in terms of decision making, we are there. It is just like a situation where an IOC will leave a place and an indigenous company will go to the same place and drill even more wells. We are more bullish.
On the issue of debt recovery by AMCON, some of your members are complaining about the way it s going about debt recovery whereas government is still owing…
The debt to AMCON has been captured. Definitely, AMCON will be more understanding. It has been worked out based on what we discussed with government.
What are the prospects for HEYDEN in 3 years?
Our strategy is that in few years, we will be an indigenous company producing about 30,000 bpd. We willl be one of the largest indigenous oil companies in Nigeria.
Have you identified a particular field?
Yes, a marginal field. We will produce LPG in the country. By so doing, we will be operating in the entire value chain. We will be one of the largest indigenous power producers.