March 28, 2016 - 7:16 PM EDT
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Fuel Scarcity to End Once and for All - Kachikwu

The Nigerian National Petroleum Corporation (NNPC) has again given a new timeline to end the lingering fuel crisis in the country, saying this time that normalcy would return within the next few days.

LEADERSHIP recalls that the minister of state for petroleum resources, Dr. Ibe Kachikwu, had told State House correspondents that the queues may linger till May, a statement that sparked strong reactions after which he then adjusted the timeline to end in weeks within the month of April, before this latest declaration.

This is as the Corporation also disclosed, in a statement issued yesterday, that President Muhammadu Buhari had approved the allocation of an additional volume of crude oil to the NNPC for domestic refining as part of measures towards finding a lasting solution to the challenge of fuel supply.

According to the statement signed by its spokesman, Garba Deen Muhammed, the NNPC will be burdened with the obligation to guarantee almost 100 per cent in the national supply since the current domestic crude oil allocation of 445,000 barrels per day (bpd) can only guarantee about 50 per cent of the national petrol consumption of 45 million litres.

The statement said that, "as a result of the challenges that major oil marketers face in contributing their supply quota due to constraint in accessing foreign exchange and outstanding subsidy obligations, NNPC is burdened with the obligation to guarantee almost 100per cent in the national supply, since the domestic crude oil supply can only guarantee about 50per cent of the 45 million litres national requirement for petrol. We have secured presidential approval to take additional crude oil volume to guarantee national supply of petrol."

It further noted that the current administration inherited many issues and problems in the downstream sector like arrears of subsidy payments to oil marketers, corruption and inefficiencies in the supply and distribution chain, incessant vandalism of pipelines, refineries poor performance, among others.

"A combination of these issues resulted in most oil majors completely pulling out from the importation business and NNPC assuming a near 100 per cent importation obligation without the necessary logistics put in place," it stated.

It further said that in line with the change agenda of this administration, the NNPC management had initiated and made progress on various key solutions to providing a lasting end to these issues.

In this regard, Muhammed stated that the unpaid arrears arising from the subsidy regime which had necessitated most oil marketers to stop all forms of involvement in petroleum products imports had been greatly reduced, even as he added that since January 1, 2016, the NNPC had been able to eliminate subsidy payments by managing prices at current levels through price modulation, which has resulted to savings of over N100 billion monthly for the nation.

Furthermore, he said nationwide petroleum supply and distribution had been ramped up to all states to ensure product availability in the country , adding that current supply to states is in excess of the normal consumption, especially in the five major consuming cities.

He also explained that monitoring had been intensified to ensure full compliance with approved prices, and warned that violations of approved prices and hoarding of petroleum products attract penalties which include dispensing petrol free to the public and sealing off fuel stations found to be hoarding petroleum products, as well as withdrawal of the affected marketers' licences.

"Any NNPC, Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) or government agent found conniving will be sanctioned accordingly in line with public service guidelines and procedures," the statement warned.

The Corporation further disclosed that the supply constraints due to foreign exchange challenges facing marketers are being resolved through collaboration with the Central Bank of Nigeria (CBN) through the adoption of innovative ways of closing the gaps in accessing foreign exchange.

Similarly, it said, as a result of credible leadership provided by Kachikwu, the major international upstream oil companies had indicated their willingness to support major oil marketing companies with some of the required foreign exchange.

The Corporation also noted that in resolving the crisis, it was vigorously pursuing an improved model for 'crude oil for refined product' exchange, the Direct Sale-Direct Purchase (DSDP) arrangement, which, it says, eliminates inefficiencies with an attendant cost-saving for the nation of about $1 billion, as well as the ability to guarantee sustainable product supply to the nation.

According to the statement, "In the medium term, NNPC is working on sustainable strategies to permanently address the issues and challenges facing the midstream and downstream sectors. The objective is to make

Nigeria
a net exporter of petroleum products as was the case in the 1970s.

"Our commitment to ramp up our local refining capacity and availability remains unwavering with the ongoing rehabilitation works targeted at running all refineries at a minimum of 70 per cent capacity utilisation within the next six to eight months.

"This is in addition to our initiative of increasing the combined capacity of the domestic refineries through co-locating smaller but cost efficient modular refineries within the existing refineries premises within a time frame of 12 to 24 months," the statement said.

Mohammed also stated that to curb storage and logistics challenges, the NNPC is working on a joint partnership with technically and financially capable investors to ensure that petroleum products transportation and storage facilities are efficiently operated on an open-access common-carrier user-tariff basis.

Some of these depots, he said, will be nominated as strategic reserves while the Corporation takes possession of a strategic reserve vessel in the next three months.

According to him, tangible results will be delivered within the next three to six months through this initiative.

In the meantime, the NNPC said it recognises the plight of Nigerians and the impact of fuel scarcity on the overall economy, but assured that it was focused and committed to bringing "an end to this situation within the next few days."

Senate Summons Kachikwu over Fuel Scarcity

The Senate yesterday summoned the minister of state for petroleum resources, Ibe Kachikwu, to appear before it today over the unending fuel scarcity across the country.

Kachikwu is also the group managing director of

Nigeria's
state oil firm, the NNPC.

The Senate Committee on Petroleum Resources (Downstream) summoned the minister after it carried out an on-the-spot assessment of the situation in major filling stations within

Abuja
metropolis.

Apparently angered by what they saw - long queues of motorists waiting under the scorching sun and many filling stations not selling product due to the alleged lack of supply from NNPC Depot, Suleja - the committee's acting chairman, Sen Jibrin Barau, along with two of his colleagues, said the petroleum minister must appear before them today to explain what led to this situation and the possible solution.

He said the pathetic situation forced the Senate president, Dr Bukola Saraki, to call on the committee to swing into action as a way of baling Nigerians out of the crisis.

"This situation is very bad and unacceptable, hence, the need for the minister to appear before us tomorrow (today), and unveil his plan of way out to us.

"Even if he doesn't have any plan out of the lingering problem yet, the Senate president and the entire members of the committee are more than ready to rub minds with him for that needed purpose", he said.

Senate minority whip and a member of the committee, Senator Philip Aduda , called on the federal government to arrest the situation fast by making fuel available to Nigerians, adding that "what Nigerians need is fuel and not blame game."

"The government should look for petrol and ensure that it is given to the people. It is unacceptable. We are Nigerians and it will be bad for us to continue remaining in queues. If the APC leaders like, let them blame themselves - that is their problem, but the most important thing is for us to have fuel in the Federal Republic of Nigeria.

"That is what we are looking for and that is what we want. We want to see all these queues disappear," Senator Aduda declared.

Meanwhile, petrol marketers at various stations have lamented that inadequate supply of petroleum products by the NNPC in recent time resulted in the product scarcity being witnessed across the country.

Specifically, a manager at Forte Oil, opposite Transcorp Hilton in Maitama District,

Abuja
, who did not disclose his name, said while only three fuel tankers are being supplied daily now, it used to be five or six before.

However, Isa Friday, manager of Oando Filling Station, Zone 4, Wuse,

Abuja
, disclosed that it had been a long time since the station received any supply from the NNPC depot in Suleja.

Oil Prices Edge Higher On Easter Monday Trading Holiday

Oil prices climbed slightly in Easter holiday trading yesterday, adding to gains in recent weeks as optimism holds that a production freeze among major producers may be implemented.

Brent crude futures LCOc1 were up just nine cents at $40.53 per barrel at 1107 GMT. Last week, the contract fell 76 cents, or nearly two per cent, in its first decline in five weeks.

U.S.
crude's front-month contract CLc1 was up 20 cents at $39.66 a barrel.

Oil prices have risen about 50 per cent from multi-year lows hit in January on glut worries.

Prices have been supported by disruptions to oil supplies in

Nigeria
and
Iraq
and plans by major producers to freeze their output at January levels.

Members and non-members from the Organisation of the Petroleum Exporting Countries (OPEC) are due to meet in the Qatari capital,

Doha
, on April 17 to discuss the plan.

"There is going to be pressure on the participants in the meeting to ensure they achieve something. Otherwise they risk the support-market sentiment that we are seeing now dissipate rapidly," said Victor Shum, senior oil and gas analyst at IHS in

Singapore
.

So far, 10 countries have confirmed their attendance at the meeting, with only OPEC-member

Libya
saying it will not attend.

Declining

U.S.
oil output and strong
U.S.
gasoline demand have also supported oil prices.

Investors will be looking out for monthly

U.S.
production figures for January to be released this week as a barometer for the resilience of shale producers.
U.S.
crude oil production fell for a third month in December to 9.26 million barrels per day due to declines in the biggest shale-producing states, although the fall was offset by a rise offshore, according to the U.S. Energy Information Administration (EIA).

The EIA said this month that

U.S.
shale oil production in April is expected to record its second-largest monthly decline on record at around 106,000 barrels per day (bpd).
China's
refined fuel stocks at the end of February were up 17.3 per cent from the previous month to their highest level in four years, while commercial crude oil stocks were up 1.1 per cent, the official Xinhua News Agency reported on Monday.

'Dangote Refinery Will End Fuel Crises'

As fuel crisis lingers unabated in

Nigeria
, the Dangote Group, which is currently building the world's largest refinery, has assured that when its refinery comes on stream, it would put an end to the recurring fuel crises in the country.

Speaking to newsmen in his office in

Abuja
, executive director, Stakeholder Management and Corporate Communications, Engr Mansur Ahmed, said by the time the refinery is ready,
Nigeria
will be transformed from a fuel importing country to an exporting one.

"That plant itself is the largest single refinery plant anywhere in the world. In addition to the refinery, we are also going to produce some petrochemical products from the same complex. These are polyethylene and polypropylene," he said.

According to him, the petrochemical plant, covering 250,000 hectares and located in Lekki Free Trade Zone in

Lagos
, is expected to gulp a whopping $14billion, and has the capacity to refine 650 million barrels a day.

He also suggested that government deregulate the downstream sector to encourage investors.

"One would prefer if it was deregulated so that we know that we are playing in the open market. The key issue is that if I buy crude whether from

Nigeria
or anybody, I buy at an international price. If I produce product and want to sell, I should sell that product at an international price.

"So, I would not be affected by the decision of local pricing; it is on that concept that we went into refining. We expect that we would buy our input, especially crude, on an international market price and that when we produce products, we will sell those products at an international price.

"The refining industry is a global industry. If you use those international benchmarks, you shouldn't really worry about price.

"It is about time

Nigeria
completely deregulated the downstream industry. The kind of reason that has compelled government to fix petroleum product prices has not been tenable.

"If, as it is said, that it is done because of the ordinary people, when you do the study, you do not see the ordinary people benefit from it; it is few people who benefit. This is the best time to deregulate," he advised.

Speaking on the ongoing reforms by the federal government, Engr Mansur said it is a continuation from past governments, adding that it is in the right direction.

"We haven't seen the full implementation of the reforms, so it would be unfair to make any judgment but, in my view, unless those independent units are clearly self-accounting and one can see whether these units are actually making profit or loss ... " he said,

'Concrete Road Now Cheaper'

With the fall in the value of naira and cement prices, it is now about 20 percent cheaper to use cement for road construction in

Nigeria
, the Dangote Group has revealed.

Speaking to newsmen in his office in

Abuja
, executive director, Stakeholder Management and Corporate Communication, Engr Mansur Ahmed, said it was time
Nigeria
switched over to rigid pavement.

"Based on the current cost of imported asphalt and given the high rate of foreign exchange, and given the fact that we are bringing cement prices down, we have established beyond reasonable doubt that, for the same length of road and for the same terrain, a concrete road today will cost anything between 15 and 20 percent lower than the equivalent cost of an asphalt road," he said.

Engr Mansur said it is just that

Nigeria
is so used to normal asphalt, but expressed optimism that in the next two years most road construction workers will opt for concrete roads.

A concrete road is far more durable than asphalt, he said, adding that while a concrete road can last for more than 50 years, the asphalt one may last only 20 years.

He said the durability of concrete roads will allow governments to use their funds for other projects rather than re-awarding contracts for dilapidated roads, adding that concrete roads are easier to maintain.

Only recently the Dangote Cement constructed a 24KM concrete road at Ibese in Ogun State where Dangote Cement plant is located.

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Source: Equities.com News (March 28, 2016 - 7:16 PM EDT)

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