Yemi Adebowale
31 October 2009
Lagos — With a fuel importation bill rising to a whopping N300 billion ($2 billion), the Nigerian National Petroleum Corporation's race to outdo the competition has led to the build up of a Petroleum Products Armada of 58 ships anchored on Nigerian territorial waters, reminiscent of the Cement Armada of the late 1970s.
The corporation, THISDAY learnt, amassed the $2 billion debt by falling behind in payments by some 250 days to the numerous commodity traders which import petroleum products on behalf of its subsidiary, the Pipeline and Products Marketing Company.
As at last night, petroleum industry sources confirmed that the payment backlog was close to $2 billion or about N300 billion.
Shipping position data compiled as at last Wednesday by Daddo Maritime Services, a Lagos-based shipping agent, on petroleum product imports, revealed that 58 ships laden with petrol and kerosene imported for the PPMC are either on berth at numerous jetties in Lagos and Port Harcourt or anchored on the high sea.
The vessels are accumulating demurrage running into several millions of dollars, while waiting to discharge their cargoes.
The NNPC piled up the $2 billion debt after it embarked on "reckless" importation to muscle out other major oil marketers from the importation of fuel products and to also show that it can single-handedly manage the importation of products into the country.
Some of the international commodity traders to which NNPC is indebted are Trafigura, Mercuria, AMG, Arcadia, Vitol, Matrix Energy, BP and Pennington.
Sources say the NNPC has been running from pillar to post in the last few days, trying to liquidate part of the huge debt to the commodity traders in order to avert a supply crisis.
"The NNPC gets 30-day credit from the commodity traders, but this is being abused and is in spite of the fact that the corporation collects crude oil receivables on behalf of the federal government and deducts at source to import refined products," revealed an oil industry source during the week.
"However, the commodity traders are still cooperating and hoping that things will improve.
"But it might get to a point where the traders would have to slow down on imports if NNPC does not start to meet its obligations to them," he added.
Another petroleum industry source wondered why an oil-producing country like Nigeria should be importing millions of litres of petroleum products daily.
"I can understand if a country like war-torn Iraq is importing petroleum products. But Nigeria is a sucker. It gets no value added by selling its crude oil and importing petroleum products in return," he said derisively.
While the NNPC is battling to pay the $2 billion debt to traders, it is equally battling with how to pay the huge demurrage being bill piled up by the 58 ships waiting to discharge at Lagos and Port Harcourt fuel product jetties.
Each of the 58 vessels is accumulating $20,000 to $25,000 on demurrage charges daily. Investigations revealed that some of the ship would likely spend between 50 to 60 days before discharging their cargoes.
For example, documents obtained from the Nigerian Ports Authority showed that a ship named Tom Hanstholom chartered by Trafigura to deliver 38,819MT of petrol to the PPMC arrived Nigerian territorial waters on September 9. It was only able to berth on October 27.
According to the document, Tom Hanstholom's estimated time of discharge was yesterday, October 30. Discharging ordinarily takes two to three days to be completed.
By implication, Tom Hanstholom won't sail out until November 3, a clear 54 days after anchorage, which translates to well over $1 million NNPC will have to pay as demurrage on this cargo alone.
Another ship named DL Navig 8 carrying 30,000MT of petrol for the PPMC (chartered by Mercuria) anchored on September 15 in Lagos and has been waiting to berth.
DL Navig 8 is expected to berth this morning, October 31, and will start discharging on November 6 and won't finish until November 8 or 9. This is another clear 54 days after anchorage, thereby accruing a demurrage bill of over $1 million.
Confirming the enormity of the demurrage bill paid by the corporation, an official with NPA said last night that the Ministry of Finance, which has been responsible for coordinating the planned deregulation of the downstream oil sector, recently commented on the astronomical amount during a meeting with oil marketers, the Petroleum Products Price and Regulatory Agency and NNPC.
According to the official, "during the last meeting the ministry had with the NNPC, PPPRA and oil marketers, it was clearly stated that the NNPC had paid over $1 billion as demurrage on imported fuel this year alone."
Also commenting on the unusually large number of ships waiting to discharge their cargo, an obviously angry industry official wondered which nation would allow 58 ships to come in at almost the same time and accumulate demurrage of $20,000 to $25,000 daily on each of the vessels.
"Why can't they programme three to six ships to arrive a week and discharge before allowing others to come in? It shows lack of planning, mismanagement and institutionalised corruption."
Other than the demurrage NNPC has to pay, with the number of cargoes it has waiting to berth and many more still on their way, maritime experts are concerned that this would cause traffic for other ships carrying other goods coming in and impact negatively on the import economy.
Already, companies and industries in and around Apapa and Tin Can seaports have to contend with the menace of fuel tanker drivers queuing to load their trucks and competing for every available space with vehicles and commuters.
THISDAY had last week published a story on a clique within the NNPC feeding fat from the millions of litres of petroleum products imported daily into the country.
The mafia, using PPMC, receives commissions of $500,000 (about N75 million) per cargo from international commodity traders that import petroleum products for the NNPC subsidiary.
Meanwhile, the PPPRA yesterday denied being directed by the federal government to stop the issuance of import licenses to petroleum product marketers.
In a statement yesterday, PPPRA said it was alarmed by the report and that "there is no iota of truth in the report credited to the agency."
PPPRA's rebuttal came just as the agency has decided to resume the award of import licenses to major and independent oil marketers in the country.
Major and independent marketers have been at logger heads with the agency and NNPC since it stopped giving them allocations to import petrol and kerosene a couple of months ago.
NNPC has been the sole importer of kerosene for the past six months and the only importer of petrol in the last six weeks, a development which has put the corporation and marketers on the warpath.
Confirming the development, a major oil marketer said last night that the PPPRA has been directed by the Ministry of Petroleum Resources to issue licenses to private sector oil marketers to import both products.
Award of allocations should be ready by next Monday, said the source.
In a related development, Folawiyo Energy Limited and Capital Oil and Gas Limited have both denied offering inducements to the NNPC clique for the use of their depot facilities in Apapa and Ibafon, Lagos, respectively.
Both companies acknowledged that their jetties are used by PPMC and other oil marketers for throughput services for which they get paid N3.00 by "PPMC/NNPC in arrears."
Their statement, however, contradicts the PPPRA pricing template for petroleum products which makes a clear distinction between throughput services for which jetty operators charge a fee of N0.80 per litre, and storage charges that attract a fee of N3.00 per litre.
THISDAY in its story last week clearly indicated that the N3.00 paid on every litre was for the lease of their facilities and not throughput services.
Folawiyo Energy, nonetheless, in its statement said "we have not leased our facility to PPMC; it is only one of our industry customers out of about 14 which include four major marketers and numerous independents."
The company added that it is not aware of any "NNPC Mafia" and that in all its previous and present dealings with the PPMC/NNPC, it has never been solicited for, nor has it paid or given any form of inducement or kickback to any government official or any other person in respect of such dealings.
Similarly, the chief executive officer of Capital Oil, Mr. Ifeanyi Uba, stated that he could not have offered anyone any inducements because NNPC has not paid his company a farthing.
"NNPC has not paid me a dime for the billions it owes since the beginning of the year, so this is not possible.
"The throughput charge is N3.00 per litre but we have not received any payment. Moreover, we own the largest private jetty in the country that attracts several other marketers that use our facilities.
"PPMC is simply one of several customers that we provide services to," he stated.
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