18 November 2012

Nigeria: How Insecurity Sustained Fuel Scarcity

Close to two months, it takes a motorists an average of six hours on queue to get fuel. So many factors account for this unwarranted situation

The current fuel supply and distribution situation Nigerians are experiencing can be traced to recent vandalism of products pipeline at Arepo and as a result of security challenges. Engineers have not been able to gain access to the vandalized points to effect repairs.

Investigations have 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 with trucks have been arrested or prosecuted.

It is said that vandals often go 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.

In a sign of the worsening problem of vandalism, the PPMC only completed repairs of 15 insertion points on the same pipeline last month 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. This forced NNPC to decommission the strategic pipeline that distributes 11 million litres per day to depots in the south-west and helps in bridging supplies to the north and east of the country. About 60 percent of NNPC's import is discharged through this 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 N105billion 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 also increases costs for the PPMC because it makes it difficult to evacuate imports from the ports to inland depots. By early November, PPMC had about 22 vessels carrying about 697,825 metric tons of petrol attracting demurrage as they waited to deliver their cargoes.

Due to System 2B outage, NNPC has attached all the five depots under System 2B 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.

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

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

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 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 too has its negative consequences.

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