Royal Dutch Shell Group .com Committee Blames Shell, NNPC for High Fuel Price ( Posted 26 April 05


Vanguard (Lagos)

Luka Binniyat



THE House of Representatives' Committee on Petroleum, has accused oil giant, Shell and the Nigerian National Corporation (NNPC) of forming an unwholesome alliance that leads to avoidable high cost of petroleum products higher than the commensurate increases in the international price of crude oil.


Speaking to Energy Correspondents in Abuja, Chairman House Committee On Petroleum, Dr. Cairo Ojougboh, said the NNPC was engaging in a curious dealing with Shell that allows Shell to buy part of Nigeria equity share in crude oil, in their Joint Venture, exporting to its refineries overseas and selling back to NNPC as refined products.


This, he said, was in spite of the fact that Shell and other major oil firms operating in Nigeria could established refineries to refine products in Nigeria at a lower cost. This he said is responsible for, what he termed as the, "unacceptable" high pump price of the product in Nigeria, a major oil producing country.


He added that part of the staunch opposition of major oil firms to the proposed amendments to the Petroleum Act which seeks to force them to refine their products locally, was because they are only interested in the present arrangement of importing from their overseas refineries to boost their economies.


However, the Group Managing Director (GMD) of the NNPC, Engr. Funsho Kupolokun, has asserted that Warri, Port/Harcourt and Kaduna Refineries are currently producing at 70% capacity. But that even if they were to produce at 100% capacity, Nigeria would still need to import 70% of its daily consumption, if new refineries are not built.


But Hon. Cairo said that the kind of relationship that exist between the NNPC and Shell outside the Joint Venture arrangement is detrimental to the Country.


His words: "Shell has an arm of company that produce crude oil - The Shell Petroleum Development Company of Nigeria Limited (SPDC). They take their own equity share. Nigeria takes her own through the NNPC.


"Shell will now take their share and still bid for part of Nigeria's crude. Naturally, they get as much as between 30% - 40% of it to export for Nigeria where it would be refined.


"When it gets there, they pay import duty, environment tax, high labour cost. This also provides jobs for their people that we could have had, were they to refine here. They also pay high freight. Shell would now bring back this refined products to Nigeria through the NNPC. Put in mind, Shell is also involved in buying white products and selling it to the NNPC.


"Now before the product arrives Nigeria, they have to pay export duty. It arrives here in Nigeria for the NNPC to distribute to the local market with all these variables added to the cost.


"All this charges abroad add to the cost of the product when it arrives your filling stations. This is the unfortunate position we are today", he lamented.


He said that the National Assembly is committed to seeing that government shifts emphasis from the export of crude to local refining.


According to him, that is the only way to resolve the energy crises that has held the country hostage for decades. "Imagine that we have 50 refineries working in Nigeria; imagine the number of jobs and related activities it would trigger; imagine the industries that would come with it and their by-products", he posited.


He said that the position of the House on local refining of petroleum has received wide acclaim from relevant government bodies and the private sector, going by the memoranda they have submitted to the proposed amendment to the Petroleum act.


He said that Committee would hold a Public hearing on some of the activities of the NNPC and major oil companies involved in the deep offshore oil exploration.


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