Oil Marketers Attribute Fuel Scarcity to NNPC’s $6bn Crude-for-Product Swap Deal

.Blames hurricane Katrina for high cost of petrol

.NNPC owes marketers 800,000,000 litres

 

The Depot and Petroleum Products Marketers Association (DAPPMA) has attributed the current scarcity of petrol nationwide to the failure of some oil trading companies participating in the $6 billion NNPC’s Direct Sale-Direct Purchase (DSDP) contracts to meet their supply obligations.

The marketers have also stated that the high cost of petrol in the international market also contributed to the crisis, stressing that the international price of petrol went up during the hurricane Katrina and has not dropped below $600 per metric tonne. 

The depot owners also added that they paid NNPC for 500,000MT of petrol or 800,000,000 litres that can meet the country’s need for 19 days but are yet to be supplied with the product.

It had been reported exclusively that the scarcity was caused by some of the participants in the DSDP scheme, previously referred to as offshore crude oil processing agreements (OPAs) and crude-for-products exchange arrangements, who imported diesel for NNPC in November/December 2017, instead of petrol as stipulated in their contracts.

NNPC had in April this year signed about $6 billion worth of deals with local and international traders to exchange about 330,000 barrels per day (bpd) of crude oil for imported petrol.

Under the latest DSDP scheme, the NNPC excluded the big players with strong footprint in the downstream sector such as Italy’s ENI, India’s Essar, Shell-BP, Forte Oil, Mobil (11Plc), Oando, Conoil, and NIPCO in an apparent move to empower smaller companies.

Even international oil trading giants such as Total, Vitol and Trafigura that made the list were allocated the same small volumes of crude – 33,000 barrels per day, with smaller Nigerian downstream players in the list.

It was gathered that these oil traders engaged by the NNPC were supposed to bring back petrol into the country after taking crude oil to the international refiners.

It was, however, learnt that in the months of November /December, some of these companies converted their DSDP contracts into diesel as they could not bring back petrol as a result of the high cost of the product in the international market.

The implication, it was learnt, is that the market is flooded with diesel, which is also imported by the other private marketers as a deregulated product, while petrol, which other marketers lack capacity to import and have been relying on NNPC for supply, becomes a scarce product, leading to the current crisis.

Confirming this development, DAPPMA said in a statement yesterday that the participants in the DSDP scheme failed to supply petrol to the NNPC as a result of the high cost of the product.

The statement, which was signed by the Executive Secretary of DAPPMA, Mr. Olufemi Adewole, further stated that the current import price of petrol is about N170 per litre, adding that the NNPC absorbs the attendant subsidy on behalf of the federal government, as the importer of last resort. 

“We understand that NNPC meets this demand largely through its DSDP framework; however due to price challenges on the DSDP platform, some participants in the scheme failed to meet their supply quota of refined petroleum product, especially petrol, to NNPC. This is the main reason for this scarcity,” Adewole said.

 Adewole noted that the international price of petrol also went up during the hurricane Katrina and has not dropped below $600/MT. 

 According to him, the exchange rate is N306 for petrol imports, while banks charge interest rate of over 25 per cent.

He said with this development, the landing cost of petrol is above N145 per litre “which means any of our members that imports would have to resort to subsidy claims, a policy already jettisoned by the federal government.

“It is on record that any time NNPC assumes the role of sole importer, there are issues of distribution, because it is marketers who own 80 per cent of the functional receptive facilities and retail outlets in Nigeria. While we cannot confirm or dispute NNPC’s claim of having sufficient product stock, we can confirm that the products are not in our tanks and as such cannot be distributed. If the products are offshore, then surely, it cannot be considered to be available to Nigerians,” he said.

“NNPC imports and distributes through Depot and Petroleum Products Marketers Association (DAPPMA); Major Oil Marketers Association of Nigeria (MOMAN) and Independent Petroleum Marketers Association of Nigeria (IPMAN). Our members pay PPMC/NNPC in advance for petroleum products and fully paid up PMS orders that have neither been programmed nor loaded is in excess of 500,000MT (about 800,000,000 litres) as at today and enough to meet the nation’s needs for 19 days at a daily estimated consumption of 35,000,000 litres,” he added 

 He further stated that the depots are presently empty, adding that the depot owners are ready to load 24 hours if given product by the NNPC.

“Historically, DAPPMA members imported about 65 per cent of the nation’s total fuel consumption, MOMAN imports about 15 per cent and PPMC/NNPC import the balance of 20, per cent, however this scenario changed drastically due to several challenges faced by marketers.Sadly, some people have blamed marketers for hoarding products, unfortunately this is so far from the truth. Hoarding is regarded as economic sabotage and we assure all Nigerians that our members are not involved in such illicit acts,” Adewole said.