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PPPRA, marketers to review cost parameters for petroleum products

By Oscarline Onwuemenyi

ABUJA – The Petroleum Products Pricing Regulatory Agency, PPPRA, and stakeholders including major oil marketers in the downstream sector are set to begin the review of cost parameters for the importation of petroleum products into the country.

The Agency convened the meeting to review industry operational activities in the year 2010, with a view to hedging against the challenges that might militate against the industry’s effectiveness and seamless petroleum products supply, as the nation approaches the festive season and the election period.

In a communiqué issued at the end of the meeting, which was chaired by the PPPRA Board Chairman, Senator Amadu Ali, the stakeholders examined the pricing template and noted the inadequacy of some cost parameters.

The meeting therefore, requested the Agency to put machinery in motion for a review, in line with current market realities, to guarantee seamless product supply in the system.

The Executive Secretary of the PPPRA, Mr. Abiodun Ibikunle, explained that such a review would not necessarily impact on the pump price of petroleum products.

He said, “The review is yet to take place, but any talk now about its impact on the pump price of petroleum products would be mere speculation and premeditative. It is, however, accepted by all stakeholders that there is a need to examine our pricing template and implement changes where necessary in view of the fluctuations in the international market.”

Ibikunle noted that the general view of stakeholders is that the Platts posted price adopted by the Agency is credible and should continue to apply, and charged marketers and traders to be innovative in hedging against market risks.

However, the meeting agreed that the allowable demurrage provision on the Template does not ensure adequate cost recovery to marketers in view of the current market realities, and called for a review by the Agency.

It noted that, “the winter premium as recognised on the Template should be triggered from November to February annually, based on the seasonal reality while the relevant winter premium is applied accordingly.”
Import approvals

Also, the stakeholders resolved that the PPPRA should ensure the issuance of import approvals at least 15 days prior to the commencement of a quarter, to enable Marketers fulfill their quarterly supply obligations.

The communiqué noted, however, that due to operational exigencies in Q4 2010, approvals, the Agency should give additional period of grace after the permit expiration, with a view to allowing for the discharge of cargoes that may arrive late.

It further noted that the Agency should adhere to the new products allocation model approved by the PPPRA Board, while also ensuring mid_quarter product review and promptly bridging supply gap if necessary, to avoid scarcity during the quarter.

Against this backdrop, the Agency is urged to consider issuing additional volume allocations to marketers that have performed impressively to date based on Q4 approvals and possess capacity for additional supply in order to forestall products scarcity.

According to the communiqué, “That PPPRA should continue to encourage investments in the downstream sector and as such, continue to give due priority to Logistic Facilities owners in the product allocation process, without compromising level playing field as enshrined in the mandate of the Agency.

The Agency was further charged with the implementation of the Board_approved ground rules for the implementation of the PSF scheme, including the policy on the calculation of subsidy payable to marketers based on five_day to the Bill of Lading date, with effect from January 1,  2011, as earlier communicated to marketers.

Furthermore, the Agency was mandated to adopt the Pipelines and Products Marketing Company, PPMC approach in the implementation of this policy, and also ensure that the sanctity of the 45_day payment deadline for subsidy re_imbursement to marketers is maintained.

“Henceforth, shore tank figures (gross observe volumes in litres) are applied in verification of subsidy. However, in cases where shore tank figure exceeds arrival figure, an average of the two (arrival figure and shore tank figure) should be applied subject to a variation of 0.03 percent,” it added.

The meeting further noted that any marketer that was short_paid based on the adoption of understated volumes be reimbursed without further delay through a reconciliation exercise to be conducted by the Agency with the affected marketers in respect of the cargoes concerned.

The outcome of the exercise should be forwarded to the government appointed auditors for audit and be included in the next batch of payments to be issued by the Agency.


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