Tunde Falasinu, Chief Operating Officer of AP plc speaks on the current fuel scarcity with MICHAEL MUKWUZI
Q: Why are we back to problem of fuel scarcity at a period when we thought we had overcome the problem?
A: As far as we have read from the newspapers, NNPC, PPMC combined have been saying that there are enough product around and I can corroborate that by saying that there are enough cagoes around, what has happened was that after the Oando ethanol saga the Department of Petroleum Resources, DPR, came up with the directive that all cargo coming into Nigeria must be ethanol-free. But in the whole world today, fuel with five percent or 10 percent ethanol, that is E5 and E10 are being allowed. In fact, in the whole of Europe, E5 has been approved. But Nigeria specification is different from others. Nigerian spec says zero ethanol but there is no PMS that is produced without Octane booster. The Octane booster could be Ethanol or other booster agent but for the product coming to Nigeria ethanol is the boosting agent, the percentage is what has to be approved by the DPR and all the refineries. The challenge is that it is very difficult to produce for Nigeria. But that is not the only reason why we have this crisis. The problem is that we had a situation where ethanol-free and ethanol containing vessel are in queue for loading. So those vessels that are having ethanol are supposed to pull out first before you can attend to the ethanol-free vessels. Now the supply gap between pulling out and doing all the documentation for others to come in, is responsible for the shortfall in supply. For AP, I can tell you we have been pro-active. Every month we bring in up to three to four cargoes. Fortunately enough we are very strict in terms of quality control and we told our suppliers to stick to the Nigerian spec, so most of the cargoes that come in for AP are zero ethanol. At AP stations, they may be queues but we are selling. I think the solution to the problem is to look at the Nigerian spec again and come up with a spec that is produceable worldwide.
Q: At what point did the issue of Nigerian spec become the question?
A: Nigerian spec has been there all along. But may be there is mistake somehow, because we have always been buying from these refineries and suppliers from those traders. Maybe the level of ethanol in those suppliers were not as bad as what we have with the Oando supply. Once the ethanol is over 20 percent it would affect a lot of vehicles. But remember in the manual of most of the cars they specify that this can work on E5 or E10. which means there are so many cars that can run on ethanol at a particular percentage.Q: How long do you think it would take to rectify this problem?
A: Almost immediately the crisis began we withdraw all the bad fuel in circulation back to our depot. We quarantined them in our tank and definitely that has affected storage opportunities. And now we are back loading, in fact the vessels are almost through at the Apapa jetty. After that we now have more storage facility to put in products. We hope that NNPC too can also improve on the cargo that they are buying.
Q: Maybe the solution would be in sight. How much of these fuel that we consume are produced locally?
A: I think you know better than me on that subject. We all know that for PMS alone Nigerian market consumes almost 30-31 million litres a day. The four refineries at full production capacity can not do more than 18 million litres. That is to tell you that no matter what we do we must still import 12 million litres. So importation continues despite the refineries working, because today Port Harcourt is producing, Warri and Kaduna yet we cannot make the consumption level which means we must continue to import.
Q:What is the attitude of the local refineries towards the Nigerian spec?
A: We have never had crisis, which means they have adapted to Nigeria spec. but the international refineries cannot adapt to Nigerian specification because the consumption is not enough to sustain the market. If I have a refinery in Europe for instance, I would not be producing for Nigerian market alone which means I can’t adapt my equipment to fit Nigeria specification alone. So what they do is to produce for you and you take it somewhere for re-blending. But if DPR and Standard Organisation of Nigeria can come boldly and say we have looked at the specification and we must conform with the international standard.
Q: What would be your long term prescription to solve this crisis?
A: My long term solution is to free this petroleum market we have to deregulate. When we do that there would be better people coming into the market. Today, you cannot come and set up a refinery when your margin and pricing is regulated. Nobody can make profit under the current arrangement. And all of us believe that we have the oil and we must enjoy the benefit. But if you have palm tree in your father’s compound it does not mean that it would turn to oil automatically. There are processes. That’s why 18 licenses for refineries were issued yet none has taken off till date. So nobody wants to go to refining business because you are not sure of recouping your investment. The market is slightly liberalised, that’s why we don’t have problem with diesel import. It is purely market-driven. But that’s not the case for PMS, government has come to say that even if I sell at N1 billion I must sell at N70. Though I am supposed to collect subsidy from PPRA but the funds are not paid on time.