Home Finance Circles of fuel scarcity how can we continue as a nation

Circles of fuel scarcity how can we continue as a nation

by Business News Report

By Omoh Gabriel, Business Editor
Nigeria is country of circles. The land scape, whether political, social or economic is rept with circuital. One of such circles is perennia fuel scarcity. There has been no government in the country that has not grapple with the issue of fuel scarcity, yet non has been able to resolve the problem over the longer time. Despite the discovery of oil in Nigeria and the huge rent it has accumulated for government and a few Nigerians that have had access to oil blocks and oil lifting, the nation has not been able to fashion out any policy on energy. Without a comprehensive energy policy to look at every aspect of the energy need of the country it would be near impossible for any government or individual to come up with any solution to the fuel crisis that plagued the country.
It is not yet self-evident to many Nigerians that a nation does not need to have any petroleum resources as in Austria, Burkina Faso, Cuba, Japan, Switzerland, Niger, or Zambia, or refineries, like in Chad, Uganda, Benin Republic, or Zimbabwe, or petroleum products distribution pipeline networks as in most African countries, in order to be free of the trauma induced by the crisis of fuel “scarcity” that Nigerians have been made to take as normal.
Indeed, for most countries of the world, the importation of crude oil, or/and refined petroleum products for meeting their national energy requirements, is among the top most priorities and responsibilities of any responsible government. But importation of petroleum products is not necessarily bad, as perceived in the Nigerian stereo type. In Nigeria, massive fuel importation has become unavoidable, given the potentially dire social, economic, and political repercussions of the significant deficits in the available inventories of petroleum products nationwide, occasioned by monumental blunders and failures in both political and indigenous technocratic leadership, over a period spanning more than 49 years, to date.
The government does not even know the fuel requirement per day of the country. It is all guess work..

The demand that is being touted is it for generating, household power as is common in Nigeria or for vehicular use?
Those who follow time series data or trends as most would like to call it will recall to mind that in the past when the refineries were working that the issue on the table for discuss was that the complex interplay between the demand for petroleum products, and their timely availability to the Nigerian consumer, was constrained by the inadequacy of the quantum of crude oil allowed by the Federal Government of Nigeria for domestic refining, the deficit of available petroleum products needed to satisfy the national demand at any given time, the recurrent low capacity utilisation of Nigerian refineries, the epileptic performance of the pipeline distribution network, and the adverse impact of price regulation in the country.
Going by figures touted by government official, Minister of state for Petroleum, Odien Ajumogobia, the estimated daily crisis-free demand for petroleum products in Nigeria today, are 30 million litres of petrol (PMS), 12 million litres of kerosene (DPK), 18 million litres of diesel oil (AGO), and 780 metric tons (1.4 million litres) of cooking gas (LPG). And so, based on the yield profile of the benchmark Nigerian crude oil (i.e. Bonny Light, the feedstock of the least crisis-prone refinery in Nigeria, PHRC), the estimated amount of crude oil required daily for domestic refining, that would satisfy the pent-up demand for petroleum products in Nigeria adequately, should be about 530,000 barrels per day (bbl/d), which are some 85,000 bbl/d more than the combined refining capacities of all the state-owned, state-ran, poorly maintained, and chronically dysfunctional refineries at Warri (WRPC), Port Harcourt (PHRC), and Kaduna, (KRPC),or about 230,000 bbl/d more than the quantity of crude oil (300,000 bbl/d) allowed by the Federal Government of Nigeria for domestic refining, and consumption, or/and about 440, 000 bbl/d more than the current ultra-low efficiency domestic refining operations in Nigeria.
According to the minister “Local consumption of refined petroleum products in Nigeria is expected to grow from the current 27 mm litres per day to 40 mm litres per day by 2010, the Minister of Petroleum, Mr Odien Ajumogobia has said. Speaking in Abuja at a conference marking 50 years of oil in Nigeria, Ajumogobia said domestic consumption would grow alongside the economy, which is expected to grow from the current 7 per cent to double digit figure. The minister stressed that there was the need to increase the refining capacity of Nigeria, adding, “By 2020, the nation will need a significant addition to the number of refineries if the products supply capacity must rise with demand. Complimenting this refinery capacity increase is also a major investment in supply and distribution network to move products to the market.” On funding, Ajumogobia said the requirement needed to support the capacity expansion was enormous. However the minister has not told the nation how the government intends to increase the production capacity. Over 18 firms have been licensed to operate refineries in the country, as of today non is operational.
Scarcity of petroleum products returned last week as the Federal Government foot drag as to when to commence the implementation of full deregulation of the downstream arm of the petroleum industry. It has set up a committee which is yet to summit its report. But pronouncement from government agencies appear to be giving the public wrong signals that the down stream has been fully deregulated when in real sense no decision has been taken.The scarcity of petroleum products manifested because major petroleum marketers are unwilling to import petroleum products since the half hazard deregulation policy was announced.
Marketers were afraid that should they place orders to import products at the prevailing international rates and the government continued to dilly-dally on deregulation, they will not be able to recover their investment. The Executive Secretary, Major Marketers Association of Nigeria, Mr. Thomas Olawore, was reported as saying that the members were owed N60bn by the Petroleum Support Fund, being the difference on the cost of the products they had imported and the price they sold then in the local market. “They are owing us N60 bn. We are paying interest on it,” he said.
Marketers are also saying that the devaluation of naira, which has seen the exchange rate dropped from N 118 to about N 180, had caused the landing cost of imported petroleum products to skyrocket and the marketers said they could only recoup their investment if the deregulation policy was implemented.
The prices of crude oil they also argued has risen from about $40 to $52 thus resulting in higher price for imported fuel.
Interestingly as Nigerians battle scarcity, and prices of fuel at N65.00 per litre at pump head price of petrol, Nigerians are paying the highest price for the product among members of the Organization of Petroleum Exporting Countries (OPEC), and even some African nations that import crude and refine, like South Africa.
Price comparative analysis show that as at March 2009, Algeria sells at naira equivalent of N49.30 per litre of petrol, while in Iran and Iraq , a litre of petrol is sold at N4.50. In Kuwait, it is sold for N34.80, while in Libya, it goes for N20.30. It is sold for N31.90 in Quatar. Venezuela, another oil producing country sells a litre of petrol to its citizens for N2.20.
The most illuminating example is that of South Africa which does not have crude oil, but imports and refines; a litre of petrol is sold for N23.20.”
Commenting on this statistics, Reverend Oginnin, noted that PENGASSAN is aware that Nigerians pay higher price for petrol than any other member of OPEC and wondered why government would continue to deliberately punish its citizens.
Following the un-ending long queues at the filling stations and the accompanying scarcity of petrol, commercial transporters around the Lagos metropolis have continued to charge very high fares and indiscriminately too, across the state. Commuters now pay through their noses as commercial transport operators have continued to hike their fares indiscriminately in what they always attribute to fuel scarcity.
It appears that the federal government is confused as to how to solve the problem as the President has maintained dead silence and the NNPC to say the least is at a lost as to what is happening across the country in respect of fuel supply. It has lost total control. Contrary to the assurances of Dr. Mohammed Barkindo, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) that fuel scarcity in the country would have fizzled out by Tuesday, the situation on ground, as at Friday, across the country is that the scarcity has actually worsened, with motorists and other members of the public getting more desperate.
In fact, many Nigerians are now asking why they should pay more for petrol than their counterparts in other OPEC countries, as motorists and other users of the product are finding it extremely difficult to cope with the worsening scarcity as riotous situations now pervade the few filling station that still have petrol to sell. The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), has dismissed the Barkindo’s promise to end the fuel scarcity yesterday as mere rhetoric, noting that the corporation was just being economical with words. Dismissing the Barkindo’s assurance, Lagos Chairman of PENGSSSAN, Reverend Sunny Oginni, said there was no way the NNPC could by the word of amount wish away fuel scarcity without flooding the market with the product.
His words: “Let us be realistic about this thing. As at today, our daily consumption is about 31 million litres per day. Even if the four refineries in the country are producing at 100 percent, the total production is just 18. 2 million litres a day, it means we still have to import almost 13 million litres. The Kaduna refinery is undergoing Turn Around Maintenance (TAM), the while Port-Harcourt refinery (1) is completely down. That leaves us with just Warri and Port-Harcourt refineries.
“I do not have the actual volume of production now, but I can tell you that they are not producing up to 30 per cent installed capacity. Also, marketers are not importing because they claim government is owing them several billions of Naira. The immediate solution is for government to call the marketers and discuss with them on the immediate way forward. It is only massive importation that can end the scarcity now. The government we understand is reviewing the template which the Petroleum products Pricing and Regulatory Agency (PPPRA) is using for subsidy, but that should not be done to the detriment of the generality of Nigerians. What is happening now has exposed the dangers of full deregulation of the downstream sector that is not local refining based. I can tell you that Nigeria is not yet ready for full deregulation because our economy cannot cope with full deregulation of downstream that is import-driven.”
Meanwhile, The Petroleum Tankers Drivers (PTD)’s branch of the of National Union of Petroleum and Natural Gas (NUPENG), has blamed the un-ending scarcity of petrol across country on the federal government’s deregulation policy.
The oil workers argued that the scarcity may linger for a long time unless the federal government do the right thing first before its planned full deregulation policy in the downstream sector. The union called at a press conference yesterday called on the federal government to declare a state of emergency on the vandalisation of pipeline petroleum products, saying, “ why can’t the federal government deploy the military personnel to guide our pipelines especially now that there are no external attack on Nigeria?”
The Deputy Chairman said: “ If the refineries are made to work up to 80 per cent and new ones are established government can fully deregulate the sector to enable competition to strive. We hope that competition will even bring down the prices. But as it is now there is no way that the major marketers will import fuel at whatever cost and you still wants them to sell at regulated price it wont be possible. So the problem of scarcity will continue until government addresses the issues at stake.”
While suggesting ways of eliminating traffic congestion alleged to be caused by petroleum tankers in Lagos State, Comrade Salimon said “ Government should reactivate other petroleum depots like Ibadan, Ore, Kaduna etc since over 85 per cent of tankers in Nigerian have been forced to pick petroleum products from Lagos to service virtually the whole country.”
According to research findings the situation in the Nigeria refineries are pathetic to say the least. For instance the fuels section of Warri refinery (WRPC), with its pre-history of corrosion problems, and frequent shut-downs, ab initio, built by the military administration of General Obasanjo, is 28 years old. The petrochemicals section of the plant is comatose. Kaduna refinery on its part, built by the military administration of General Obasanjo, located over 600 km from its feedstock supply source in Escravos, Delta State, designed to process both Nigerian and imported Venezuelan, later, Arab Light crude oil for the production of fuels, lubricants, wax, residual fuel oils, and bitumen, is 26 years old, and frequently idle. The new Port Harcourt refinery, PHRC II, originally conceived as an export refinery, built by the military administration of General Babangida, is now 20 years old, over-stretched, and barely 60 per cent efficient.
These refineries all have very poor maintenance histories. Therefore, Nigeria’s state-owned refineries, like any state-ran enterprise, are technically inefficient, and are unreliable for uninterrupted domestic production of petroleum products, even at the very best of times.
Why is it that in Iraq, for example, even with over 12 years of sever economic blockade, including weeks of full-blown war, there have not been fuel queues like Nigerians have become accustomed to over the past decade? Clearly, the Nigerian paradox of “scarcity in abundance” is a betrayal of the scandalous paucity of the capacity to manage Nigeria‚Äôs human, material and natural resources effectively.
The way out is for the federal government to deregulate both the up stream and down stream sector of the petroleum industry,. Government should concern itself with taxation and royalty from the sector. If possible Aso Rock should be privatised for better management of the country’s resources since all governments in the last 49 years have failed thus reducing Nigeria to a failed state.

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