The Petroleum Equalisation Fund (PEF) is very essential to the Nigerian downstream industry. It is there to ensure that every petroleum transaction is being done according to policy, with strong emphasis to the transparency needed in the sector. Kindly elaborate on how PEF came about.
PEF(M)B is one of the oldest organizations in the petroleum sector. It has been in existence for decades.
The intent of PEF is to ensure that regardless of your geographical location or how far you are from the refinery, you can access petroleum products at a standard government approved price. That is the mandate of the Board, to ensure that the uniform pricing mechanism works effectively throughout the country. It appears simple, but it is much more complex.
The Board puts into consideration the location of retail outlets all over the country, how and who transports the products to the outlets and the volume that arrives there. All these involve a lot of data gathering. PEF(M)B is one of those organizations with a tremendous amount of data on the downstream sector. Data is key to the work of the fund and is acquired to support business decisions.
You see, the variable element in the sale of petroleum products at uniform prices nationwide is the transportation cost; this is what makes prices differ from one point to another. So we equalize the transportation differentials by reimbursing petroleum product marketers’ for any losses sustained by them, solely and exclusively, as a result of the sale by them, of petroleum products at government approved prices throughout the country.
Everybody buys from the depot at the same cost; the profit margin is also the same. It is the transportation that differs and that is where PEF(M)B steps in. We have the responsibility of determining how much marketers’ get paid based on economic data (e.g. how much it cost them to maintain their trucks, and so on) at defined rates. We’ve developed a matrix and pay the people who are involved in the transportation of these products based on that matrix.
We gather data to know where they are moving the product to, and how many liters are being moved. As you know, billions of liters of petroleum products are moved every year and that requires us to be present in practically over 70 locations around the country. We are represented in both government-owned and private depot facilities. In most cases, you will find that fuel cannot be moved in the country except when a PEF staff is involved in the process.
In your opinion, will the privatization of the refineries enhance the sector?
Privatization is definitely going to help. What happens to PEF however depends on government policy.
The PEF Management Board is one of those agencies that is so far ahead in the area of effectiveness and efficiency, and the use of information technology to drive industry’s productivity. The Board possesses such great skill, and such energized and engaged employees. It will always be there to deliver and fulfill whatever role that government decides.
Maintenance of a Bridging fund and bridging claims payment are among the key services provided by the PEF(M)B. It was initially a temporary solution until refineries started producing at full capacity. Unfortunately, that is not the case. Bridging has gone up by more than 50%. How much of a challenge will bridging be, and what is the best way to address it?
The level of bridging is quite high now as a result of pipeline vandalism. I think that a lot of investment has to be made in this area. The pipelines themselves are not functioning at optimum levels and because of damage to the pipeline system over the years, investments have to continually be done to ensure the integrity of those pipelines; otherwise, we will have to deal with health and safety risks and product loss.
Finding alternative means of transporting petroleum products has to also be considered. The Niger River was dredged a while back so petroleum products can now be moved on barges. I know that this administration has been working very hard on rehabilitation of the rail industry. We have been having discussions with the Nigerian Railway Corporation (NRC) to see how we can get stakeholder participation, and promote awareness about moving petroleum products by rail. There are some very exciting things about ways of moving products that we have discussed with the NRC. These are just some of the areas that need to be explored over the years to ensure that we bring the level of bridging down.
We understand that you are looking to apply the Project Aquila to the railway system. It is a very interesting, new, and revolutionary project. It was recently awarded for being one of the best e-Payment systems.
We started Project Aquila in 2007, when I came on board. It is a 3-phase project and right now, we are basically finalizing Phase 1. The first phase has to do with the bridging aspect of the Project. The second phase has to do with monitoring the products as they go to the retail outlets. The third phase has to do with monitoring the importation of products. From our point of view, we can be assured of the amount of income. Certainly, Phases 1 and 2 are very critical to our success; we will see how Phase 3 goes.
Project Aquila is a new thing that has been met with a lot of praise and a lot of challenges. In terms of the things that you have to overcome, what action plan have you devised?
During the pilot stage, one of the very early challenges that we had was with power and being able to get a stable network across all the facilities, as well as all the issues surrounding the sector’s volatile environment (i.e. having to deal with petroleum products and fumes).
Here in PEF(M)B, we have a fantastic team of employees. The Aquila application is a bespoke software which allows for easy amendment as we encounter challenges. This has saved the government millions of dollars and is a great advantage for us. Our staffs have been able to achieve so much where certain people have not been able to do that.
To address our network issues, we released a new version that took the dependability on availability of network by putting all the necessary information required to complete a transaction on the Radio Frequency Identification (RFID) readers, thereby removing the dependencies on network for certain tasks.
Whenever we are met with a challenge, we saw it as an opportunity to enhance our operational processes making it better and more efficient. This enables us to improve processes gradually. We have actually done four application version releases for Phase 1. We are about to go out and do some other new improvements. You see, when you have something so new and so revolutionary, people do not understand its benefits to them. In our case, we had people initially going against these improvements (just like they did when we implemented the e-payment system). We just had to keep pushing forward.
So far, we have been able to bring savings and efficiency into the system because of Project Aquila.
This year, we have had very few manual processes. We took on the backlog of outstanding manual claims from the last 3 years with the goal of clearing them. We are just at the tail-end of completing that—we either destroy those that are not claimable or send them back to the claimants. We have also retrieved the software used for manual processes from the depots. Now, we are fully automated. What is so exciting about that is that PEF(M)B is one of those organizations with processes are all IT-driven, from end to end—from customer service (CS) to budgeting, to procurement. Everything is very efficient and transparent. We also have so much information available.
You touched upon the need to establish a better level of understanding about these processes, and the benefits of the Project Aquila.
Our Corporate Communications Group (CCG) has been out continuously this whole year and the year before to get information out. We have used news paper publications and also, we have continued to solicit the support of our stakeholders. We have met with them on several occasions to brainstorm on issues and share information on ways of improving our services. We are also working on a documentary that is meant to help people learn more about our project.
We are not even close to realizing the immense benefits that Project Aquila offers. One of the things that we have been able to do is that anybody from any marketing company (even those from mom and pop stores) can sign into our website and view the status of submitted claims (e.g., how much money you have been paid, status of claims process and so on).
In your opinion, what does it take for an indigenous company to reach global competitiveness, and become an effective agent of socio-economic change?
O&G is an international game. The first thing that indigenous companies require to be able to compete effectively is to gather the right skill sets; you must add value. You have to come up with good training programs, enhance your people’s skills, and make sure that they get the right opportunity once they have developed their skills. O&G is also capital intensive. Indigenous companies require access to funds at competitive rates to participate effectively in the global arena. Excellence in service delivery is also critical for global competitiveness. These, along with certain government initiatives like the Petroleum Industry Bill (PIB) which aims to ensure favorable fiscal policies, are important.
It is all about getting the job done in an efficient manner and meeting the set timelines.
How would you comment on the culture of innovation within the company?
I believe that innovation is at the heart of PEF(M)B. I discussed e-payment and the like with you earlier. Companies today are trying to do the things that we have been doing since 2007.
We are very innovation-minded. Even as early as 2009/10, we have been looking at the different kinds of roles we can play, and the various other things that we can bring on-board. Needless to say, it is a bright future ahead.
You have a strong background in the O&G industry, having been affiliated with the likes of ExxonMobil Corporation, Mobil Oil, and now, PEF. What motivates you?
For me change is crucial. I love to see transformation. I love to see things work well. Those things drive me. I love efficiency and excellence. I want to see things get done and done right. I like to see people change and become better. That gives me joy. I want PEF(M)B to be one of the best organisations in the country, such that when I leave, people will continue to have the commitment and passion to carry things out with great efficacy. I want us to reach the point where people see that it is the best place to work within the public sector. I want our staff to be recognized as the happiest, most energetic, highly skilled and well compensated indigenous people in the Nigerian O&G industry.
I have been fortunate enough to have lived and worked in many places, and to have done different kinds of jobs (e.g. planning, CS, retail, finance etc.). The amount of exposure that you have had makes who you are today. It keeps you balanced and helps you see things from a very diverse viewpoint.
Where did your passion for O&G come from?
When I was an Auditor in Texas, I mostly handled O&G companies. I have always been in and around O&G, even way back then. In fact, I have been in the industry for more than 21 years. Coming from Nigeria, a strong O&G country with so much untapped potential, I just found myself gravitating towards the industry.
What does the international audience have to understand about Nigeria?
Nigeria is at the precipice of a major breakthrough. Not much has been publicized about the PEFs that are working in Nigeria. One of my foreign colleagues mentioned that it was unbelievable that it is happening here.
Nigeria is poised to provide so much investment opportunities. Despite all the challenges that the country is facing, it is still expecting a significant GDP growth. We believe that this upward trend will continue.
Nigeria has an abundance of gas. With all the issues surrounding global warming, countries like ours are going to take significant positions when it comes to gas-produced energy.
What message would you like to convey about PEF(M)B?
PEF(M)B has such brilliant people. You can never take that away. As you know, the opportunities and successes are tied in with the people.
What message would you like to leave to the readers of The Independent?
The time to come in is now. Otherwise, you just might miss the train. You get in now and take a stake. The returns you can expect are greater than what you may find anywhere else in the world.
Nigerians are such aggressive go-getters. They are hard-working and committed. They are willing to do what it takes to move forward.
Nigeria’s industrial growth and its surrounding activities continue to draw interest. People should just come and see how they could be a part of that.