1. Oil Marketers, End Users Will Fare Better in A Deregulated Environment
A combination of the crisis in the fuel subsidy regime and the attendant plights of consumers can only be a thing
of the past in an environment devoid of regulation and reliance on government handouts to fuel marketers,
argued Chairman/Chief Executive, Pinnacle Oil & Gas Limited, an integrated oil and gas company, Mr. Peter
Mbah, in this interview with Festus Akanbi
THIS DAY, THE SUNDAY NEWSPAPER – AUGUST 5, 2012
Why are young men these days flocking into oil & gas sector? Is it that
lucrative?
Oil and gas sector is quite technical and it requires experience to do well in it. It may be fashionable for people to
parade themselves as oil and gas operators, but to become a professional, it is more than that. Of course, it is
perceived as a sector where, because you do a huge volume trade, you will have a huge turnover, in terms of
numbers, this is not the reality as far as your bottom-line is concerned.

2. However, as far as Pinnacle Oil and Gas is concerned, we are determined to be the leader in the industry given
the kind of investment we are putting in place, although we have chosen not to be loud about it.
An analysis of the performance of some of the frontliners in oil and gas
marketing section showed that most of them recorded dips in their profit
margins last year against their 2010 performance. What do you think was
responsible for this?
Oil and gas sector, particularly, the downstream sector is a very volatile subsector. It’s volatile because it’s
hardly stable. There is a constant fluctuation in the market. Again, it is an international market. The prices you
pay for a particular product and what you prefer to sell is largely controlled. So you have to be able to plan and
have market intelligence in order for you to make a margin and as to whether you have a sustainable margin, the
one which you can say has translated into profit, you have to have a good market intelligence. On what might
have affected the profit margin of operators in the oil marketing sector, you should realize we are operating in a
world where news of happenings in Iran can affect what the market is doing; a release of economic data in the
United States can affect the trend of the market. You can never get in right. If you are working in the
downstream sector, you just have to work with market intelligence and try to make sure that you have your back
end covered so that you won’t be exposed to the volatility of the market. This means you have to know what the
market is doing and that at the time you are locking in, make sure you have an off-taker with firmed up rice so
that you are not exposed to the fluctuation of the market.
What we were told was that the pump price of fuel would drop as soon as
prices of crude oil fall at the international market. Crude oil has receded this
year, but Nigerians are yet to experience a reduction in pump price. What
happened?
This is perhaps why some people are calling for a total deregulation of the downstream sector. The pump price
of oil is N97 per litre, if the price of oil at the international market drops, we will be able to land refined products at
a price lesser than N97 per litre and I’m not sure if the government will be inclined to review the pump price
downward. When we look at the argument surrounding what it has cost the government to sustain oil subsidy
policy, we begin to ask ourselves whether it really makes sense to continue with the subsidy regime. Prices
fluctuate and the experience we see from the marketing of AGO (diesel) is that market forces are pushing down
the price and you also discover that because the market is left opened by way of deregulation, diesel is being
sold at cheaper rates to the people, especially if you were able to buy products at a period when they are cheap.
What will fuel marketers prefer, a deregulated regime or that of subsidy?
Without hesitation, we will prefer a deregulated regime. We talked about a market being driven by volume and
not by numbers. The margin you make is not much when you do a particular trade, so what you depend upon
most times to improve your profits is to do as much volume as you are able to because that then translates to a
huge turnover.
Now you are unable to do that in a regulated regime, no matter how much assets you have to finance you are still
restricted to the volume the government allotted to you to bring in and you are also restricted to the price at which
government wants you to sell the products.

3. But none of such restrictions exist in a deregulated market. This is because you will be able to procure the
products in the quantity you have buyers for and you can also allow your prices to be dictated by the prevailing
market forces.
What will you describe as the fallout of the ongoing trials of oil marketers
indicted by the federal government’s panel that probed into the oil subsidy
regime?
Remember I told you that oil and gas sector is highly technical and professional. It is sad for oil marketers in this
part of the world to be perceived as thieves. This is because this is a sector where anybody playing in it in any
part of the world is always proud of playing that role. What we are experiencing in the country today is sad but it
is not a reflection of the characters of those playing in the industry.
What the two probe panels have revealed is that regulatory framework is weak. The framework we have in place
for regulation makes room for operators in the sector to commit infractions. The two reports have shown that if
government will continue with the subsidy arrangement, then it has to be firm in terms of regulation.
What are the strategic projects you have ongoing?
As a company, we started as a trading company. We modeled our business to trade. We bring petroleum
products and sell to bulk buyers, these are people who would buy from our vessels or our tank farms. But as we
did this trade, we equally found out that we had infrastructure deficit in the supply chain whereas we are
witnessing a lot of tank farms springing up which deal with the distribution end of the trade, so you have on one
hand the supply end and then the distribution end.
You are able to bring in a 100,000 metric tonnes and stored without much worries because you have many tank
farms, we have enough storage facilities to take that volume.
But if you have a 100,000 metric tonnes in the sea and you want to bring them into our shores, into the terminals,
you probably required six to eight weeks minimum, to fully evacuate that, now the cost of that is actually what you
and I are paying for today as part of the subsidy because if you look at the subsidy template, you will notice that
government has earmarked certain amount of money for operations so it is expected that you are going to hire a
shuttle vessel to lighten the bigger vessel so that you are able to come to the jetty.
Of course, the natural consequence of that is that you have to do a ship to ship transfer with the attendant risk of
pollution in case of spills. You also have the issue of demurrage because once you have a volume you can
discharge conveniently at our depot, you now have to deal with whether or not the jetties are free. Most times,
you have to queue and wait for between 10 and 15 days before you are able to come in and you cannot come
with more than 10,000 to 15,000 metric tonnes of products at every point in time.
We carried out a research and we realized a lot of people are interested in building storage facilities or tank farms
but that actually is not where the problem lies.
We have a major issue in the supply chain. How do we effectively evacuate this product?

4. Why can’t we just bring in this vessel and discharge straightaway without
other customers incurring demurrage or incurred the cost of STF and the cost
of short vessels?
What we came up with was to do an SPM (Single Point Mooring) facility. We actually combined that with a
conventionally port mooring (CPM).
The facility we are building is called offshore reception and all it does it to eliminate the shuttle buses and
demurrage.
The facility we are constructing has the capacity to do as much as 12million metric tonnes of product
annually. What that translates into is if you have 100,000 metric tonnes which would have ordinarily taken you
two months to dispatch, it will only request 48 hours and you would not need to lighten the big vessels.
The reception facility we are building is capable of receiving 150,000 dead vessel and you can come in with the
full cargo of that vessel, anchor and discharge its products into our terminal, so this is something we are going to
begin to witness before this time next year. We are going to have the SPF fully commissioned and functional by
next year and what that means is that we would have not only saved the government the costs of operations that
are factored into the template, but we would have been able to provide an efficient way of delivering
products. So all these deficits and deficiencies in our supply chain will be solved by this single concept of
provision of a Simple Point Mooring.
In view of the capital intensive nature of this project, how supportive are
banks?
They are indeed capital intensive, but that again underscores how creative and how innovative we have been in
the industry. The fact that the project is something that we need not just as a nation, even to those of us in the
industry, it is a solution provider.
Therefore, a whole lot of banks are eager to be part of it. They have indicated interests, they have opened
discussions with some of the key players by indicating their interest to finance. We didn’t even need to do a lot of
scouting.
As you may be aware, we have this agreement with the Lagos State Government on the Lekki Free Trade Zone
to provide facilities and since then, banks have been enthusiastic about the funding of the project.
We have foreign technical partners that we are doing the projects with and by the time the project is completed,
all the local tank farm owners will be our off- takers but this is essentially not to just service our own needs, but it
is also to service our supply, need in the country. The conception of building that single point mooring is to meet
over 80 percent of the country’s imported products needs. So we wouldn’t need to go and start looking for a
shuttle vessel.
Are you saying this project will take care of additional cost on fuel supply
under the subsidy regime?

5. You are right because if you look at the template, you will notice that cost operation is usually high and if you look
well, you will discover that you must have eliminated some of these costs associated with taking the products
from the vessels to the jetty. Government may have factored all these cost in the template.
Can you quantify this project and what will this save the government without a
particular period of time?
If you look at this in terms of figure and savings, a simple point mooring may cost the company between $200
and $250 million to construct but if you look at how much this will save the government, this may translate to
N40billion. If you look at the pricing template you will see that for operation alone, government will be saving N13
per litre and when you multiply this by 35,000 units, then you be getting N450million per day and in 100 days, it is
over N45billion.
What is the idea behind Pinnacle Oil & Gas?
Pinnacle Oil & Gas is an indigenous marketing, trading, distributing, supply chain infrastructure provider. We are
essentially involved in the downstream sector of the Oil & Gas Industry and we have over the years participated
very actively in the importation of petroleum products but beyond the importation of petroleum products, we have
done quite a number of other things, which today make people to refer to us as an integrated oil and gas
company. This is what people call oil and gas solution provider.
How old is the company?
Pinnacle Oil & Gas was founded in 2004, but my experience in the oil and gas sector goes back to 1992. I have
been representing an American oil and gas company. International Oil Corporation up till date. I have remained
their sole agent in Nigeria.