- NNPC to increase oil swaps, reduce import allocation
Tobi Soniyi in Abuja
After weeks of promises by the Nigerian National Petroleum Corporation (NNPC) and its subsidiary, Petroleum Products Marketing Company (PPMC), on their capacity to meet domestic demand for petrol and end the fuel shortages, Nigerians were finally told yesterday not to expect fuel queues at filling stations nationwide to disappear very soon.
Finally admitting to the enormous challenges of importing petroleum products into the country against the backdrop of dollar shortages, moribund refineries, and the misallocation of fuel imports by the Petroleum Products Pricing Regulatory Agency (PPPRA) for the first quarter of 2016, the Minister of State for Petroleum, Dr. Ibe Kachikwu, said there was no quick fix to the perennial problem.
Since his appointment as the Group Managing Director of NNPC (he holds both portfolios) about eight months ago, Kachikwu has been gung ho about bringing back Nigeria’s three refineries, which have suffered years of underfunding, neglect and mismanagement, back on stream to meet up to 40 per cent of domestic demand of an estimated 40 million litres a day. But this has not happened.
Seeing that this was going to be a pipe dream, more recently he promised to end fuel importation in 18 months. The ambitious target, he said, will be met through the co-location of greenfield refineries in the existing refinery complexes under joint venture arrangements with international oil companies or commodity traders.
But even this strategy has been questioned by industry analysts who have wondered if oil firms would be willing to invest in refineries in a low oil price environment and razor-thin margins without mouthwatering incentives that will be impossible to resist.
Nigeria’s fuels shortages have also been compounded by PPPRA’s ill-advised first quarter allocation of petrol imports which saw NNPC getting a greater share of 72 per cent, relative to private oil marketers which were asked to import 28 per cent of the country’s fuel requirements between January and March 2016.
PPPRA was believed to have altered the allocation, which for over a decade, stood at 60:40 for oil marketers and the NNPC, in a bid to please Kachikwu.
But historically, NNPC and PPMC have never proved to be efficient in the importation, distribution and marketing of petroleum products, thus necessitating the liberalisation (deregulation) of the fuel importation regime by the General Abdulsalami Abubakar administration in 1998 after years of perennial fuel shortages during the General Sani Abacha administration.
The bigger snag, however, is that even if PPPRA were to give private marketers higher import allocations, they would still be hamstrung by the scarcity of dollars in the foreign exchange market, except the Central Bank of Nigeria (CBN) ensures that their dollar demand is met promptly.
The minister, who spoke with State House correspondents after President Muhammadu Buhari met with him and the leadership of Nigeria Union of Petroleum and Natural Gas (NUPENG) and Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said it was a sheer magic to achieve the present level of supplies of fuel.
Under the present circumstances, NNPC has been forced to resort to crude oil swaps, which the minister previously said the government would end, in the hope that at least 50 per cent of domestic demand is met, but would not see the back of fuel queues.
Asked when queues would disappear from filling stations, the minister replied: ”One of the trainings I did not receive is that of a magician but I am working very hard to ensure some of these issues go away.
“And let’s be honest, for the five or six months we have been here, the Nigerian National Petroleum Corporation has moved from a 50 per cent importer of products to basically a 100 per cent importer.
“And the 445,000 barrels that is allocated to it covers between 50 and 55 per cent importation. So it’s quite frankly sheer magic that we even have the amount of products at the stations.
“We are looking to see how to get foreign exchange, so the president and I discussed extensively on how to get more crude directed at importation (presumably oil swaps). His Excellency would rather have less crude and have individuals in the society suffer less of the inconveniences, than have more crude and have them continue to suffer.
“So we are going to put a new model to enable us increase the pace and actually get the major (marketers) as part of those to bring in more products so that the NNPC will sort of go back on the capacity of what it used to import and the majors will take over the balance of importation.
“I think if we do that, although I don’t want to put a time frame, but I will expect that over the next two months or so we should see some improvements. Of course, you are aware that the DSAP programme begins in April, so over the next two months we should see, quite frankly, the complete elimination of this.
“Our strategy is that whatever is produced in the refineries will not go for sale, we are going to keep them in strategic reserves, because the key problem here is that there are no reserves anytime there is gap in supply.
“So we are going to dedicate the next couple of months to moving all the products that we produce to strategic reserves so that we can pile up reserves in the nation and that will push up the reserves in the nation.
“Believe me this is giving me and my team sleepless nights and we are working on it and we are committed to making this go away, Nigerians should please bear with us.”
He said the meeting with the president was basically to review some of the concerns in the oil industry which the president himself is trying to find joint solutions and share thoughts on.
Asked what the demands of the unions were, the minister said they raised concerns over the Petroleum Industry Bill (PIB), fuel scarcity, the refineries, utilisation of depots, logistics issues, and loss of jobs in the petroleum sector.
He however stated that government was working with the oil majors to ensure that the anticipated job loss in the sector never happens.
Kachikwu also pointed out that lots of the challenges facing the oil sector were inherited by the Buhari administration.
He said: “Like you know, His Excellency has too many constituencies; first, will be politics, second, army and the third, will be the oil industry, so a matter of this nature touches his heart very much.
“And this is the first opportunity that the unions have had to spend a bit of time with him. So we shared thoughts, areas of concerns and some solutions and agreed to collaborate and work together.”
Also speaking, the National President of NUPENG, Mr. Igwe Achese said they had a successful meeting with the president.
He said: “Quite interesting in terms of the emotional attachment of Mr. President on the issue of the oil and gas sector and the challenges we are facing as a nation.
“We tabled the issue of fuel scarcity, the quick passage of the PIB and to see how the sector can bounce back economically and to make Nigerians smile again.
“Clearly we talked more on the corruption in the oil and gas sector and products allocations. Also, Mr. President has assured that both NUPENG and PENGASSAN would continue to be part of the restructuring and that he is going to look into these issues and to make sure that scarcity is reversed at our filling stations.”
The President of PENGASSAN, Mr. Olabode Francis Johnson also said: “We had a very successful meeting with the C-in-C and one of the highlights of the meeting was when he spoke on how he created the NNPC. He is emotionally attached to it and that everything that is going to happen in NNPC must follow due process.
“He said he was concerned about what Nigerians are going through and he bears their pain and whatever it takes to end the misery, he will adopt.”
Additional report by Ijeoma Nwogwugwu