Solving Nigeria’s Perennial Petrol Scarcity Through Private Sector Initiative — Leadership Newspaper
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Solving Nigeria’s Perennial Petrol Scarcity Through Private Sector Initiative

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Fuel Scarcity

Stakeholders in the oil and gas industry are debating key components of the Petroleum Industry Governance Bill as Legislature tinkers with its passage, while concern about critical issues rages. CHIKA IZUORA looks at various positions of some players.

Nigeria currently has a pipeline network of about 5,120 kilometers, 22 loading depots and 19 pumping stations, yet it is facing challenges in the distribution of petroleum products.

This is partly because these pipelines are aging as they were laid more than 40 years ago, following the discovery of oil in the late 50s and apart from the fact that the pipelines were laid on the surface, based on industry’s standard then, they have become old and corrosion has also set in.

The pipelines are now failing integrity test because of corrosion induced leaks, and vandalism, forcing the Directorate of Petroleum Resources (DPR) to abandon them.

The long-term effect of the poor state of the pipelines is the use of haulage system in the distribution of petroleum products and this has inflicted untold hardship on road users, especially in Lagos where tankers have taken over the roads, due to indiscriminate parking especially along the Apapa corridor.

Apart from corrosion, the activities of vandals have made the pipeline and petroleum depots to be out of use, to the extent that there is no alternative to petroleum haulage business.

Again, Nigeria has continually relied on imported fuel as local capacity is unable to meet demand. The total daily Premium Motor Spirit (PMS) capacity of the Nigerian refineries is put at 19 million barrels per day (mbd). The total local demand is estimated at 40mbd at the moment. This means that Nigeria will still rely on importation of PMS to meet local demand even if all the refineries operate at full capacities. At the moment the refineries are producing at below installed capacity as these refineries are considered old and maintenance cost is currently high and may not operate at full capacities under government management.

However, private investments in refineries is raising hope of the country meeting its demand requirements, as the planned Dangote Refinery is expected to start production around 2018 or 2019 which could make Nigeria to be self-sufficient in refined products.

While the Dangote and few other refineries are being awaited, no doubt reception facilities to hold products imported into the country by marketers remain most viable option to contain the recurring petrol scarcity in the country.

Though, unstable fiscal regulations appear to have discouraged investments in the sector, however, some investors have taken critical steps to close the infrastructure gap especially in reception facilities which is expected to build confidence and strengthen the downstream supply and distribution chain.

Late last year, Petrolex Group an indigenous conglomerate focused on industry-defining investments across critical sectors of the economy took a giant step to unlock sustainable value well into the future of the industry.

As part of this vision, Petrolex built a Mega Oil City in Ibefun, Ogun State, Nigeria, which was commissioned by vice president Yemi Osinbajo.

The $330 million Mega Oil City houses the largest petroleum products storage facility in Sub- Saharan Africa and was considered a major part of the company’s plan to transform the downstream sector across Africa.

The storage facility is designed to bridge the petroleum products supply gap in the West African sub-region and reduce dependence on importation of these products. Presently, West Africa consumes about 22 billion litres of PMS and 11 billion litres of AGO annually, with imports accounting for 90 per cent and 70 per cent of these respectively.

The project according to Osinbajo holds the key to unlocking greater social and economic value in West Africa as it would enhance the availability and supply of energy resources that drive business, health, education, power generation, technology and transportation in Africa as well as provides a lasting solution to recurring problem of scarcity.

The legacy investment has a capacity of 300 million litres with the ability to turn out about 7.2 billion litres of petroleum products annually and with 30 loading gantries with a scheduled truck loading and fuel management system, the stagnant Apapa facilities which causes unbearable traffic would begin to wind

A 4000-truck capacity trailer park with an automated and well monitored truck movement plan, within the facility would make distribution of products more seamless.

It is strategically located to provide access to the Atlantic Ocean for distribution of products along the West African coastline and the full operation of this facility will provide over 10,000 new jobs in the short term (direct and indirect) and deliver over 500 per cent improvement in throughput capacity for distribution of petroleum products.

The company plans to increase the capacity of the Petrolex tank farm to 1.2 billion litres for full capacity utilization and its proposed lubricant plant and gas bottling facility would effectively cater to about 15 per cent of the lubricant and Liquefied Petroleum Gas, LPG distribution market in West Africa, and in addition, the company is planning to roll out 1500 state-of-the-art retail outlets across Africa to ensure that all these products are readily available.

Speaking on the future of the Investment, Segun Adebutu, chairman of Petrolex said, the Mega Oil city  was set to create over 10,000 new direct and indirect jobs in the short – term and would also guarantee improved and efficient delivery of products to retail markets.

“It would lead to over 15 per cent reduction in retail cost to stations, a massive decongestion of the Apapa and Ibafo tanker traffic and elimination of hazards associated with storage and transportation of petroleum products in these areas of high population density,” Adebutu said,  adding that apart from this petroleum products bulk storage; distribution, retailing and refining, were the main links in Petrolex’s medium-term drive for growth as the company plans to deploy a fleet of at least 150 vessels, barges and tugboats to provide a litany of services across Africa’s waters. Petrolex currently has 16 barges, 8 tug boats and a 30KT vessel.

“Our unique sustainability model includes a comprehensive environment conservation and reforestation programme and a successful host-community engagement framework whilst its corporate social investments continually add value to millions of lives.

“One of the challenges the oil and gas sector has faced in Nigeria is the issue of sustainability. Another is the entire range of problems surrounding local content and participation. We are committed to our responsibilities as corporate citizens. We have inaugurated local support groups to aid our community intervention schemes, through the Olusegun Oladiran Adebutu (OOA) Foundation.

“Our interventions focus on provision of food, clothing, shelter and education. We have also prioritized the development of a host-community engagement framework, child education, environmental protection and community enterprise/skills development as the major focus of our social investments. We believe the full economic and social impact of this project will facilitate growth and sustainable development. We are taking energy solutions to doorsteps, empowering enterprise at different levels and touching lives in various ways. We proudly welcome Africa to a new world of possibilities,” he added.

He further stated that Petrolex Oil and Gas Ltd was focused on delivering value across the oil and gas landscape, with cross-functional subsidiaries delivering superior service in the industry and the company was well positioned to achieve the goal of being a leading oil and gas conglomerate in the near future, with plans to provide a lube plant and a gas processing plant for a more robust portfolio.

“We are investing in Nigeria and offering energy solutions across Africa to move our people forward and accelerate sustainable development. Our game changing strategy is built around the development of the ultramodern Petrolex Tank Farm that allows for effective and efficient storage of products. The 300million-litre storage facility was conceptualized to serve the West African energy supply chain.

“Petrolex is negotiating the purchase of 100 retail outlets that will kick start its chain of retail stations in 2016. The goal is to have over 400 fuel stations in Nigeria and to deploy 1500 across Africa,” he said.



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