It is a thing of joy that to the glory of God, we are gathered here once again to celebrate our major breakthrough in the Oil and Gas sector of our nation's economy. It is therefore my pleasure and privilege to welcome you distinguished shareholders, special guests, fellow Directors, ladies and gentlemen to this epoch making 2nd Annual General Meeting [AGM] of your great company, NIPCO PLC and to present to you, the Directors' Report, and the company's financial statements for the year ended 31st December, 2005. This AGM is indeed another unique one as it will demonstrate our aggressive sustenance of the inroad we made in the downstream sector of the petroleum industry in the 18 months of our operation.

THE INDUSTRY

The year 2005 evidently witnessed turn around activities in the socio-political and economic development of our dear nation. The political environment was relatively stable and the posture of the international community was equally favorable with renewed expectations.

The effects of the stable domestic environment and the various economic reform programmes of the Federal Government gave the operating environment a new lease of life.

The National Economic Empowerment and Developmental Strategy [NEEDS] remained the lynch-pin of Government's economic reform policies and programmes though its implementation and results appeared inadequate despite improved funding arising from surge in revenue.

Economically, we witnessed 2 major upward reviews of prices of petroleum products which was an aftermath of the upsurge in the prices of crude oil in the international market. The natural disasters in the United States , Hurricane Katrina, Rita and Wilmer, the political turbulence in the Middle East and the hostility in our native Niger Delta Region, which culminated in severe cut in our local crude oil production, did not help matters as the international oil price was the worst for it.

During the period under review, there was generally, a prevailing difficult operating environment which the industry has been experiencing for a longtime. Though there was stability in the supply of petroleum products, domestic requirement of these products could not be met locally hence the import regime continued. This factor impacted negatively on the marketers margins and as a result, returns on investments were very low. There was an optimal capacity utilization of our local refineries, but they could only produce about 70% of the domestic requirement.

Consequent upon the insufficient supply by local refineries, there was a complementary dependence on Government importation through NNPC, for supply of petroleum products and these products were imported at prices commensurate with international crude oil prices. It will be recalled that at a stage in the year under review, the prices of crude oil in the international market was about $65 per barrel as against $45 per barrel in the corresponding period in year 2004. Nevertheless, the present administration of President Obasanjo has stemmed up the tide by the sustained resuscitation of the refineries and increase in their capacity utilization. Government is also strictly pursuing its full de-regulation policy and this will in no small measure create a level playing ground for all stakeholders and improve their returns on investment.

OPERATING ENVIRONMENT

Distinguished shareholders, your company has only spent 18 months in the industry and during the year under review, the operating environment was highly volatile. Our annual dispensing capacity on a single shift operation is 1 .2b liters but during the year under review, we could only dispense 305m litres which were about 25% of our installed capacity. Notwithstanding the fact that NNPC was unable to meet the daily domestic requirement, the major marketers were having a regular supply of products from them. They had a guaranteed 50% allocation. This enabled the majors to have a well planned import regime. We on our part, had a precarious situation as we had to struggle to earn the confidence

of relevant authorities and agencies for our own allocation notwithstanding the fact that our shareholders control about 75% of the retail outlets in the country and are serving both the urban and rural populace.

We are however delighted with the improved relationship we have with Nigerian National Petroleum Corporation [NNPC] and s subsidiaries which had impacted positively in our product allocation. However, the company has put in place measures to augment product allocation from NNPC with our resolve to commence direct importation of deregulated products in the first quarter of 2006.

The precarious operating environment was aggravated by the negative attitude of Petroleum Tanker Drivers [PTD] as they continuously imposed unwarranted heavy dues on our marketers and this factor negatively affected the margins of our marketers.

Notwithstanding our strategic location with an NNPC jetty right behind our terminal, it was still relatively difficult to receive products from the jetty due to bureaucratic bottlenecks and logistic problems associated with the jetty. Nonetheless, concerted efforts have been made by the management to secure a dedicated jetty or earn priority discharge from the NNPC in the use of the jetty. Before the end of the first quarter of 2006, this problem would have been a thing of the past.

Distinguished shareholders, due to the epileptic nature of power supply from NEPA, your company was compelled to resort to the use of private generators and this situation increased our operational costs tremendously and impacted negatively on the prices of our products. It is believed that the reforms introduced on the power sector would ameliorate the situation.