By Clara Nwachukwu

Many independent operators have criticised recent pronouncements by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, on petroleum products distribution. They accuse him of instituting monopolistic policies by favouring some players over the rest. However, Dapo Abiodun, the Managing Director, Heyden Oil and Gas Ltd., and Chairman, Depot and Petroleum Products Marketers Association, DAPPMA, told Vanguard that the minister is highly misunderstood, saying that based on the plans most of the downstream challenges will soon be over and attributed most of the problems to the scarcity of foreign exchange. Excerpts: 

Dapo Abiodun, the Managing Director, Heyden Oil and Gas Ltd

ON minister’s recent   comments on petroleum products distribution?

It is the press themselves that are causing all the panic buying by their misinterpretation f what the minister said.

Basically, what the minister was trying to explain was that when he said the issue of supply of petroleum products will linger for a bit, he didn’t mean that what you see today will linger for a very long time. He was referring to a point when the problem will be resolved in the entire country, in every nook and cranny of the nation. This means that from Lagos to Port Harcourt, to Maiduguri and just resolving them in Lagos, Port Harcourt, Kano and Kaduna only but for the problem to be resolved in every village where there is a filling station. That was what he was referring to, but you will find out that over the next two week, about 80-90% of these problems will be solved.

The reasons for what you see presently are very simple; there is what we call the summer and winter months in petroleum template. The government also has tried to shift from what obtained in the past to something that identifies with the change that the president promised us, which is predicated on prudence.

In the temperate part of the world like the North America, Europe, when it’s winter time they don’t drive as much so much refineries are focused on blending petroleum products for the West and other African sub-regions that are warmer, so a lot of petrol come this way. But between mid-March and April, that changes because they now go into the summer months and the demand for petrol increases in those countries.

You suddenly see a shift from those who used to bring petrol to Nigeria suddenly take the petrol to North America, Europe etc. also, you know that our specs are different and they begin to blend the specs for those areas thereby reducing the volume that comes to West Africa and Nigeria is the largest consumer in this region. That I the first factor he (minister) talked about between the months of March and April.

Coupled with the fact that the minister has now changed the dynamics in terms of getting refineries to actually come and bid for crude and bring back refined products through the DSDP. When you look at the new process starting from April 1, coupled with the summer and winter trading of petroleum products, the combination of effects is what you see in everything happening. That explains why if you look at Africa, there are no ships carrying petrol to the region, but by the end of the last week in April, a lot of ships will begin to arrive.

Strategic storages

The minister has also put in place moves to have national strategic storages to keep petroleum products because if you have them or if the previous administrations had done that we would have been able to ride the storm during this period when we don’t have mush supply, we fall on our reserves. So with this strategic storage, even if anything happens like this again for one month there will be enough petrol to consume without anybody feeling it. Indeed, it’ll be difficult to have this kind of situation again for one month…

But we’ve been in it for months now…No, no, no, it’s just been epileptic. But the end is at sight. I can guarantee that by the second week of April we will begin to get some reprieve.

It’s good to hear you say such glowing things about the minister’s plans for downstream petroleum. However, your colleagues, especially the independent operators are not so enthusiastic. They believe the minister is ignoring the independents and focusing only on the majors.

No, no, no, that’s absolutely false; they’re just ignorant of what is happening. In downstream marketing, you have the majors, depot owners and the independents. The independents only own filling stations, while the depot owners and the majors bring in the products.

This is what the minister has done, beginning from January 1, he decided to incentivise the independents. How did he do that? Because the independents own more of the filling stations, he said he will make more money available to the retailers on the PPPRA template, so they tweaked the template in favour of those who own filling stations.

The cause of all the distribution problems we have in Nigeria is because we don’t have enough retail outlets. If you look at Lagos Island, Ikoyi for example, how many filling stations do you have there? You have a few on Awolowo Road, One on Kingsway Road and that’s it. How many are in V.I.? Very few also. But if you go to other countries like London, you have a small filling station on almost every street. In Dubai, you’ll see filling stations in every other place. But our cities were not designed to have enough filling stations to cater for the emerging population; the population has grown much more than was originally planned for. That is part of the major problems that we have.

What the minister did, and I’m not being patronising, because I am one of the captains of the industry, we speak to him and he listens; he has shown good faith till date. So the minister decided that, even against what some of us believe in, he decided that the transporters and the retailers must have the benefits more than the importers so that more people can go and invest in filling stations.

So they tweaked the template and increased the transporters margins because they were complaining about the margin and saying they will not move products. He asked them why they said they were not making money; the depot owners were making more money.

Transporters on  the template

So he increased their margin, and right now, it is better for you to have a filling station and that is why many of us are now investing in more retail outlets because that is where the money is.

If a minister has come in and has increased the allowance of transporters on the template, he has increased the allowance of the retailers by incentivising them, how can the independents be complaining? I really don’t understand and that is why I said that some people are not informed.

Really, the biggest problem we have had up till now is because there is no foreign exchange. This is the origin of the problems itself. Normally, they give us allocations we go and import. But they gave us allocations and we can’t import because the ones we imported before, we have the Naira we can’t find dollar to buy. Most banks today have what we call PBOs, past bill obligations to their corresponding banks abroad. They’ve opened LCs but they are not able to fund the LCs because there is no dollar.

It was this same minster, who said, you know what, we will use our dollars from NNPC to support marketers. Of course they have only so much input so they cannot support so much. This is the origin of the problem but they’ve tried to manage that by saying if you don’t have dollars, we will give you some and the rest we do direct sales, direct purchase, for the refineries to take crude and bring back products.