NNPC signals optimal operation for local refineries

Jan 06, 2004 01:00 AM

by Hector Igbikiowubo

Mr Funsho Kupolokun, the new group managing director of the Nigerian National Petroleum Corporation (NNPC), comes across as “Mr Deregulation” to most people in the oil and gas sector who have kept track of his activities over the past ten years.
Following his recent appointment, the perennial issue of fuel supply and distribution nationwide has reared its ugly head, bringing into question the much talked about gains of the deregulation of the downstream sector of the Nigerian oil and gas industry.

What is however, undeniable is that he is a consummate oil and gas technocrat who believes very much in what he is doing.
In our encounter, he talks about plans to get the nation's refineries back on stream in the first quarter of this year, plans by major marketers of petroleum products to build a submarine pipeline linking the Atlas Cove jetty to the Apapa jetty, the cause of the recent fuel scarcity in Lagos and bares his mind on the re-introduction of the N 1.50 fuel tax, giving the assurance that the fuel tax may not necessarily translate to an increase in the local prices of petroleum products.

Here follow some excerpts of the conversation:

Question: Sir we understand a slippage in major marketers' import schedule is responsible for the current round of petrol scarcity in Lagos. What would you say caused the import schedule to slip?

Answer: Weather is a possibility, if the weather is rough, the vessel might not turn up. At least that is what the marketers have said. There is tightness between what we can receive and what we can dispense from Apapa each day. 10,000 tons is what is receivable on a daily basis. But whether you like it or not, you must dispense between 8,400 and 8,500 tons into Lagos if you don't want problems.
Therefore, there is a marginal difference, there is tightness there. Really, what is wrong is that you should have capacity to stock, you should have strategic storage. That storage is here, but because of the tightness between import reception capability and what must be dispensed on a daily basis, you are not able to utilise the storage capacity you have on ground. Everybody knew it, the marketers knew it all along, but they did not do anything about it because they did not want to commit to long term investment if cost would not be recovered.

Question: What is the submarine pipeline to be laid from Atlas Cove to this place (Apapa depot) going to cost?

Answer: They are at the engineering phase now. So that would be detailed out soon.

Question: You are calling for urgent repairs, how much would that cost and who is going to bear the cost?

Answer: It is their own facility, they will repair it. Of course they have insurance too.

Question: The current prices have put off the few supporters of deregulation, what is your reaction to this?

Answer: Now you come to it again. I have just told you that this problem has always been with us. But the only time the marketers have committed to doing anything about this is because deregulation came in October.

Question: So how then do you say liberalisation is not working?

Answer: If there is no liberalisation, they would never commit to doing something about it, this will be with us for another ten years and each time you have a slippage, you are always going to have this type of hiccup. The time you would not have the hiccup here again is when the submarine pipeline has been laid from Atlas Cove to Apapa and that will be between the second and third quarter of this year.

Question: Will this discharge ease up the scarcity we are having now?

Answer: I have just driven from the airport and you drove down here too, you can see for yourself. I am told that things are easing up and I could see that on my way from the airport and I know that you know that too.

Question: Please I want your reaction to the re-introduction of the N 1.50 fuel tax...

Answer: Now the toll gates are out of it. I think that is what I heard and I think you heard it. So we are replacing A with B. This has always been there, it is just a question of moving from A to B. Proceeds from the toll gates as it were, before now, were not getting to the central pool. This thing was going anywhere but the central pool and therefore, it is not for your own benefit and mine and the benefit of Nigerians. So we are saying let's find another way of collecting it so that it can benefit us all. But there is nothing that is new under the sun, no additional tax.

Question: Essentially, we expect that the price of fuel will go up in January 2004?

Answer: Hold on, hold on, hold on, you are telling me this, you are not even a member of the PPPRA.

Question: So why are you telling me so categorically that prices will go up?

Answer: I am a member of the PPPRA and I don't know that the prices will go up. When we meet, we look at the fundamentals and if it supports price going up, it goes up but if it doesn't, it won't go up. The fundamentals mean looking at C1F north west Europe, looking at what is absorbablehere and relating it to other issues and so on. So the decision might as well be 'let us stay where we are. It could even be let us go down'.

Question: What about NNPC import plans?

Answer: No problems about that, we have placed order for about 52 cargoes of PMS and AGO a month ago and they are all arriving.

Question: What about local supply?

Answer: Government has invested heavily in the FCC units in Warri, Port Harcourt and Kaduna refineries. By February this year, the Warri FCC unit should be on. By April-May, that of Port Harcourt and Kaduna should be up. By this time, we should be able to do 18 mm litres a day of PMS, out of the average requirement of between 25 to 29 mm litres. In essence, locally, we should be able to produce as much as 75 % of our requirement and that would be by April 2004.

Question: How much are you investing to revamp the refineries?

Answer: Government has invested $ 600 mm between 1999 and now, in the supply and distribution scheme. Marketers claim that it is in fact the PPPRA that has made it difficult for the deregulation exercise to work. There is a price ceiling.

Source: Vanguard
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