16 November 2012

Nigeria: How Breaches On Oil Pipelines Cause Fuel Queues

Why are the military and security forces unable to protect the pipeline network despite repeated complaints by the Nigerian National Petroleum Corporation (NNPC)? This is a pertinent question that hints at systemic problems as this is not the practice in other climes.

For the past few weeks in Abuja and other major cities nationwide, it takes an average of six hours of agonizing queues to get fuel.

Pipeline vandalism and crude oil theft should be considered as security risks and economic sabotage.

Nigerians must not forget that energy worldwide is regarded as national asset.

Investigation has revealed that since the 1990's when Pipelines Products Marketing Company (PPMC) witnessed an increase in pipeline vandalism, none of the main players who use valves to siphon products with barges and trucks has been arrested or prosecuted.

Today, vandals often resume stealing petroleum products as soon as NNPC engineers seal the valve points used for the theft.

According to an impeccable source, surveillance checks on the Escravos-Warri pipeline last week revealed a total of 12 valve insertion points used by vandals to steal petroleum products. There were two insertion points on the Egbokodo-Itsekiri section, three on Ugbokodo-Okpe, six at Batan and one at Kpokpo creek. PPMC engineers began repairing these points over the weekend with the JTF providing security.

To confirm the worsening problem of vandalism, the PPMC only completed repairs of 15 insertion points on the same pipeline in an operation that lasted from 12 to 21 October 2012.

An attack by vandals in September 2012 killed NNPC engineers repairing the System 2B pipeline at Arepo in Ogun State, forced the NNPC to decommission the strategic pipeline that distributes 11 million litres per day to depots in the South-West, and help in bridging supplies to the north and east of the country.

About 60 per cent of NNPC's import is discharged through the System 2B (Atlas Cove - Mosimi pipeline) for onward distribution to the market through the five NNPC depots.

Increased activities of vandals on the NNPC pipelines and jetties made the corporation to lose about N105 billion worth of crude oil and products in 2011 alone. System 2B alone, when operational, was losing an average of N600 million per week due to the activities of vandals. The insecurity along the pipeline network is also increasing costs for the PPMC because it is making it difficult to evacuate imports from the ports to inland depots.

By early November, PPMC has about 22 vessels carrying about 697,825 metric tons of petrol attracting demurrage as they wait to deliver their cargoes.

Due to System 2B outage, NNPC has attached all the five depots under the system to private depots in Lagos for products loading. This means increased reliance on trucks to evacuate products, and increased pressure on the roads in Apapa where most of the tank farms are located. Lagos State government is already responding to public complaints about the gridlock the trucks are causing by threatening to shut the tank farms. Without the pipeline network, the distribution of 35 million litres per day in a country as vast as Nigeria will require about 1,062 trucks per day.

Yet Nigeria has a 5,120km pipeline network, connecting 21 NNPC loading depots and 19 pump stations, a distribution infrastructure that experts agree is absolutely sufficient to distribute petroleum products nationwide and eliminate scarcity in its totality.

The vandals have knocked vast sections of the pipeline network, and their repeated breaches of the pipes have put the integrity of the pipelines into question.

Based on Petroleum Products Pricing Regulatory Agency (PPPRA) allocation for 2012, NNPC is supplying approximately 47% of the entire national requirement of PMS, and marketers collectively are expected to contribute about 53% of the total national requirement.

In addition, PPMC is required to hold at least 35 days' sufficiency stock level at all times.

But the marketers are not importing due to delayed payments by the Federal Ministry of Finance.

This has caused PMS supply tightness in the market with immense pressure on NNPC to cover the shortfall in order to prevent shortage with the resultant queues at petrol stations.

The marketers are also beset by lack of credit facility or credit line from the banks for PPPRA marketers to import products and accumulated bank interests on the outstanding PSF payment to marketers.

NNPC being the supplier of last resort, is now supplying the entire market from its PPPRA quarterly allocation.

Some marketers are taking advantage of the current situation to divert products that are meant for the major cities to the vulnerable areas (villages, hamlets and non-performing filling stations) for profiteering in view of the strict regulation to sell PMS at N97.00 a litre. Department of Petroleum Resources (DPR) needs to be more proactive in checking the unwholesome practices of some marketers and the continuous shutdown of stations for price infractions has its negative consequences.

Copyright © 2012 Daily Trust. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.