Oil marketers have expressed optimism about the rehabilitation of Nigeria’s 21 depots by the Nigerian National Petroleum Company Limited following the recent revival of the Port Harcourt and Warri refineries by the NNPC.
Although the national oil company has promised to get the depots running, dealers in the downstream oil sector said that it is important to hasten the revamp of the facilities, as this would increase the gains of having functional refineries in Nigeria.
They urged the national oil firm to take immediate and decisive steps to restore all inactive fuel depots owned by the company across the country.
The national oil firm which currently incur extra costs in payment to private depots for handling its products was tasked to revamp the 21 idle stations for the benefit of Nigerians.
Dealers under the aegis of the Independent Petroleum Marketers Association Nigeria said the operational commencement of the 210,000 barrels per day Port-Harcourt refinery and the 125,000bpd Warri refinery is enough reason to bring back the moribund depots and further reduce petrol costs.
The marketers also noted that the pipelines that supply or evacuate products to the depots were either vandalised or obsolete for many years without repair, stressing that this was why the NNPC had been employing the services of private depot owners.
Between 1976 and 1989, the Federal Government, through the former Nigerian National Petroleum Corporation, built three refineries in Port Harcourt, Warri, and Kaduna.
This was in addition to an existing one in Port Harcourt, which was built by Shell and BP in 1965 (later bought over by NNPC).
The NNPCL installed a network of pipelines across the country, totalling over 5,120km in length, to facilitate crude supply to the refineries and product evacuation from them.
The depots and pipelines operated by the Pipelines and Product Marketing Company, a subsidiary of the NNPC, were built to enable the distribution of products by pipeline to depots to make the journey to retail outlets easier and cheaper.
However, the decline in domestic production and the shift to fuel imports led to the neglect of many NNPC depots, causing the country to increasingly rely on private tank farms and road tankers for the supply and distribution of products.
Investigations showed that the idle depots are in Aba, Benin, Enugu, Gusau, Gombe, Ibadan, Ilorin, Jos, Kano, Makurdi, Maiduguri, Minna, Ore, Yola, Warri, Port Harcourt, Ejigbo, Mosimi, Kaduna, Calabar and Suleja depots.
An analysis of the NNPCL’s 2023 financial statement also showed that the company has been spending on pipeline maintenance and costs to private depot owners.
The report disclosed that N434.65bn was spent as costs to maintain oil, pipeline, and storage depot plants between 2022 and 2023.
The sum of N44.274bn was paid as a throughput charge to private depot owners for handling petroleum products on behalf of the group at the terminals within the same period.
The IPMAN National Publicity Secretary, Chinedu Ukadike, said the revival of depots is crucial to reducing operational hazards and fuel costs.
He noted that pumping products from the pipeline would cost less and reduce unnecessary road accidents, wear and tear of vehicles, and the consumption of diesel.
He said, “Yes. Since the operations of our refineries have commenced, they are meant to feed fuel depots nationwide. For instance, the Port Harcourt refinery is meant to feed the Aba depot, Port Harcourt depot, Makurdi depot, Enugu depot, and even up to Yola, through the pipeline. So, with this depot system, products can be able to get to all these depots without trucking, and it can be within their operational costs.
“And it also helps in reducing prices. You know, pumping products from the pipeline will cost less and reduce unnecessary road accidents, wear and tear of vehicles, and the consumption of diesel. The Warri refinery is also designed to take care of the Middle-belt area. We also have the Kaduna refinery which is supposed to take care of fuel supply to the northern part of the country.
“Even from Lagos, the Mosimi and satellite depots can take care of Owerri, Ilorin, Ibadan depot, and the rest of them. These are the way the pipelines have been designed, both systems 2A, 2B and 2E.”
According to him, the depots were built to receive products from the refineries and efforts must be put in place to restore the facilities.
“These are the ways they have all been designed to be able to take care of some of these depots because marketers can be able to take products easily, you know, from those depots and go to their filling stations.
“So, we would be very glad if the pipeline subsidiary of the NNPCL would be able to revamp this pipeline because most of the pipelines have been vandalised. So, if they are being restored, it will be able to ease the transportation of petroleum products. Products will get to their destination faster, safer, and with less cost,” he added.
On the current state of the depots, he stressed that, “They are all moribund, they are all moribund. Only a few of them are operating at an epileptic level. The pipelines have been vandalised by vandals and bunkers. For instance, if you pump products from Port Harcourt to Aba, you might not receive all the quantity of that product. Because over time, vandals have perforated the pipeline to ensure that they can take petroleum products out of the pipeline.
“So, it requires the government to be able to look at the product and put up security and drones to monitor the pipeline and also see where most of those pipelines have been perforated, arrest the vandals, and discourage people from vandalising the pipelines.”
Similarly, an oil and gas expert, Olatide Jeremiah, who spoke on the issue said the depots stopped working due to a lack of refined products for transportation.
Olatide, who runs a platform on petrol pricing said, “Most of the NNPCL depots are not operational.
In Lagos, the Ejigbo depot has been abandoned for more than a year now because of the core pipeline services and they don’t have access to products just like other depots scattered around the country.
“Another reason is that their pipeline services are bad and haven’t been working. so those private depots have been functional. But the problem with the private owners is that they take advantage of situations for their profit.”
Last year, the national oil firm said it had commenced a process to comprehensively rehabilitate 5,120km of pipelines transporting crude oil and other petroleum products. It stated that the preliminary stage of the process was ongoing.
Meanwhile, the Petroleum Products Retail Outlet Owners Association of Nigeria expressed confidence that the fuel depots would soon be revived.
The National President of PETROAN, Billy Gillis-Harry, said the NNPCL had mobilised its officials to the depot in Port Harcourt in the past weeks.
“The NNPCL depots are going to work. It’s not a one-month thing. Everything has its process and its time. The NNPC in Port Harcourt has already deployed officers to the depot. What does that tell you? The depot is ready for operation. It was not there in the last nine to 10 years. Warri will be deploying staff to the depot. Once the depot managers and all of them are in place, it means they are ready for business.
“Then, of course, you still have to go through processes. It’s not like if you open the refinery today, tomorrow you start buying products,” Gillis-Harry submitted.
In his view, an expert in oil and gas, Professor Emeritus, Wumi Iledare, believes that revamping the refinery should bring back the moribund depots.
However, he advocated for private participation to fund pipeline infrastructure.
“The depots will come back to life again, but it will require what I call maintenance. Infrastructure is key because the logistic structure is the link between what the people want and what the people want to sell. The logistic situation in Nigeria, if corrected, can even make petroleum products cheaper and more cost-effective.
“For example, moving petroleum products from the south to the east, to the west, to the north has a logistic problem. Nobody in this current state of economic development should be moving petroleum products by road. No! Even in Ghana, you don’t see inter-regional movement of petroleum products by trucks. That should be limited to distribution within cities or inter-cities, not inter-state or inter-region. Those are the issues,” Iledare stated.
The don emphasised that when it comes to making the downstream petroleum sector effective and efficient, the midstream is key, but the midstream requires a lot of infrastructure investment.
He added that nobody is ready to invest in the midstream without a guarantee of some acceptable minimum returns on investments.
“If I bring my money, I want the value to be added at a specific proportion. Even though the infrastructure fund is targeting natural gas deliverability, we need to think in terms of those people in different parts of Nigeria, the petroleum product can move by rail or by pipeline.
“That’s why the idea of private partnerships and consultations can come into play; supported by the government, but not dominated by the government. As for vandalism, instead of putting the pipelines on the surface for now, you bury it. That would be more expensive but by the time you do a time value analysis on it, you’ll find that you’re going to be having a lot of savings if you don’t have to repair them because of vandalism.
“Second, this is where you make community stakeholders and let them get some type of reward for being a safeguard. You need to get society to buy into the value system so they don’t tolerate fraud.
“Right now, the government should pay attention to the midstream development to make it attractive, so that investors can come in. That’s what they should be spending money on, not on exploration and development because that is already a mature business in Nigeria,” Iledare enunciated.
