KEY POINTS
• Petroleum Minister Heineken Lokpobiri says deregulation allows market forces to determine refined petroleum product prices in Nigeria.
• He said higher domestic crude production would not automatically lower local fuel prices under a deregulated market.
• The minister said oil sector investment and increased drilling could raise Nigeria’s crude production to about three million barrels per day.
MAIN STORY
Minister of State for Petroleum Resources (Oil), Sen. Heineken Lokpobiri, has said the prices of refined petroleum products in Nigeria will continue to respond to market forces under the country’s deregulated downstream petroleum sector.
Lokpobiri made the clarification on Monday in Abuja while responding to concerns over repeated increases in fuel prices.
He said crude oil was traded internationally, meaning its value was influenced by global market conditions irrespective of how much crude an individual producing country supplied.
The minister said the same market principle applied to refined petroleum products and that Nigeria had chosen to allow prices to be determined within a deregulated downstream market.
“Oil and gas is an international commodity, the price is known globally.
“The price in Nigeria is the same as the price in New York and London.
“Increasing Nigeria’s crude oil production will not necessarily reduce the prices of locally refined petroleum products under a deregulated market,” he said.
Lokpobiri said the government’s decision to deregulate the downstream sector was intended to allow market forces to operate while creating conditions capable of attracting investment into domestic refining.
He cited the Dangote Refinery as an example of the investments that could emerge from the policy environment.
The minister, however, said Nigeria’s crude oil output was expected to rise substantially in the coming years, with production potentially reaching about three million barrels per day.
He attributed the projected increase to rising investment and greater drilling activity across the country.
According to him, the number of active drilling rigs has increased from 10 to 65 under the present administration.
“Today, we have over 65 rigs actively working in different fields in Nigeria. We are drilling new wells and making new discoveries,” he said.
Lokpobiri said the increase in drilling activity reflected government policies aimed at creating a more favourable environment for investment in the oil and gas industry.
THE ISSUES
- Deregulation separates crude oil production from the direct determination of pump prices. Under the market based system described by Lokpobiri, increasing domestic crude output does not automatically translate into cheaper refined products.
- Global oil market conditions remain relevant to petroleum pricing because crude oil is traded internationally. This means domestic production levels are only one factor within a wider market that influences the value of petroleum products.
- The government is also linking deregulation to investment in domestic refining. Lokpobiri cited the Dangote Refinery as an example of the investment the policy environment is intended to support.
- Increased drilling activity is expected to raise Nigeria’s crude production capacity. The minister said the number of active rigs had risen significantly and that additional drilling and discoveries could support higher output in the coming years.
WHAT’S BEING SAID
“Oil and gas is an international commodity, the price is known globally.” – Heineken Lokpobiri
“Increasing Nigeria’s crude oil production will not necessarily reduce the prices of locally refined petroleum products under a deregulated market.” – Heineken Lokpobiri
“Today, we have over 65 rigs actively working in different fields in Nigeria. We are drilling new wells and making new discoveries.” – Heineken Lokpobiri
WHAT’S NEXT
The government expects continued investment and drilling activity to support higher crude oil production, with Lokpobiri projecting output of about three million barrels per day in the coming years.
BOTTOM LINE
Lokpobiri says higher Nigerian crude production should not be viewed as an automatic route to lower fuel prices under deregulation. The government is instead linking increased production with investment, drilling and stronger domestic refining capacity.
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