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DSDP: Evaluating issues in fuel import scandal

Nigeria’s fuel importation crises did not come overnight, but through initiatives introduced and implemented by the Federal Government, writes AKINOLA AJIBADE

 

For the Nigerian National Petroleum Company (NNPC) Limited, issues such as production, exploration, exportation, processing of crude into fuel and its subsequent importation into the country were by no means a hard task, as its carries out those activities with utmost sense of responsibility.

 

Under the direct supervision of the Ministry of Petroleum Resources and, by extension, the Federal Government, NNPC has not left anyone in doubt that it is capable of carrying out those duties and other oversight functions given to it by government or the country’s constitution.

 

Being the sole importer of fuel in Nigeria, following the dsyfunctional state of the four state-owned refineries, which have become obsolete, since they are unable to produce optimally, NNPC has not had any major hiccups on fuel importation until recently.

 

However, the ominous signs, which snowballed into the current scarcity of petroleum products, crept in when NNPC started implementing initiatives to improve fuel supply.

 

Through initiatives such as Onshore Loading Arrangements (OLA) and Direct Sales Direct Purchase (DSDP) arrangements, NNPC began to farm out some of its fuel importation responsibilities to other companies.

 

In the first place, NNPC implemented what it described as Onshore Loading Arrangements (OLA), a concept through which it allocats crude oil to refiners abroad and receive refine petroleum products in return.

Months after the Onshore Loading Arrangements came   into being, the concept failed, as it was overcrowded by middle men, who claimed to own refineries abroad, which turned out to be false.

Not wanting to add more to the problems of Nigerians who are daily bearing the yoke of poorly managed economy, NNPC decided to dump Onshore Loading Arrangements for Direct Sales Direct Purchase (DSDP).

What DSDP means

Through DSDP otherwise known as crude for fuel initiative, NNPC picked some consortia, which receive crude, refine and in turn import fuel into the country, in order to meet the premium motor spirit (PMS), jet fuel and diesel needs of Nigerians.

Introduced in 2016, DSDP proved not to be a failure, as it raked in huge revenues for government and also provided fuel to the teeming population in Nigeria.
Subsequently, the national oil company, in May 2021, picked another 16 consortia for the DSDP project.

In order to ensure compliance with local content standards, international companies have merged with their local counterparts under DSDP.

In the calculation of NNPC, the consortia are contractors that are assisting it to import fuel into the country.

Industry observers said that importation of fuel is being carried out by NNPC and oil firms (local and foreign) that are working under DSDP programmes.
The observers, mostly operators in the downstream sub-sector of the nation’s oil and gas industry, said that both NNPC and DSDP partners were likely going to share both the good and the bad developments in the Nigerian fuel importing scheme.

 

Operators’ views

The President, Major Oil Marketers Association of Nigeria ( MOMAN), Mr Clement Isong, said that marketers were not importing fuel, as many Nigerians were made to understand.

He said NNPC is vested with the authority to bring fuel in order to meet the needs of the domestic market.

According to him, the companies approved by NNPC to operate under the DSDP arrangements in conjunction with oil traders abroad are allowed to import fuel into the country.

He said the companies are known as Consortia, which have deep knowledge about crude refining activities, coupled with the fact that many of them owned refining plants abroad.

Similarly, the Chief Executive Officer, Petrocam Nigeria Limited, Mr Patrick ILO, said that NNPC remained the only importer of fuel in Nigeria, noting that the Company is vested with powers to import and supply fuel to Nigerians through its 21 depots.

He said the DSDP partners, which comprise of local oil firms and companies abroad, operated in tandem with oil traders to refine and bring fuel to Nigeria.

 

He said: “In principle, NNPC is the sole importer of fuel in Nigeria. Being a government-owned institution, coupled with the fact that it has the constitutional financial and industry might to import fuel, the corporation has the powers to choose contractors that will assist in the importation of petroleum products.

 

However, that does not remove the fact that NNPC is the sole importer of fuel.”’

 

DSDP’s Partners

NNPC said that 15 companies emerged successful to undertake the Direct Sales Direct Purchase exercise for a year, begining from  September 2019 to October 2020.

The firms, which operate both locally and internationally, are MRS Oil and Gas Limited, Sahara Energy Resources Limited, Matrix Energy Limited/Petraatlantic Energy Limited, Duke Oil Company Limited, Arsan Oil and Gas Limited/Eyria Energy Limited, Vitol S.A/Carlson Hyson, and Total Oil Trading/Total Nigeria Limited.

Others are Transfigura Limited/AA Rano Limited and BP Oil International Limited/AYM Shafa Limited, among others.

NNPC further said that the firms picked to operate under DSDP in 2019 and 2020 had impeccable records in the areas of marketing and refining of petroleum products abroad.

Success or failure

A former Country’s President, Association of International Energy Economist (AIEE), Prof Adeola Akinnisiju, said that every market or institutions had its own challenges, adding that there were occasions when the happenings in the environment may make or mar the success of an initiative conceived by government or its agency to better the lots of its people.

He said based on this, one could not say DSDP has failed woefully.

“The DSDP arrangements may not have achieved what Nigerians want 100 per cent, but I still believe that there are good and bad aspects in what a man does,” Akinnisiju added.

DSDP’s achievements

NNPC had saved $2.2 billion through the Direct Sales Direct Purchase import model.

 

The figure, released by the corporation, covered the transactions done between 2016 and 2019, a development, which suggests that NNPC is still looking for more profits through the crude-for-oil initiative.

A former Group Managing Director, NNPC, Dr Markanti Baru (now late), in the statement, said the organisation was expecting the companies listed under the DSDP model to deliver 14 billion litres of fuel annually. Besides, NNPC is looking to save more money through the scheme.

Fuel induced crisis

The current fuel crisis in the country has put a question mark on the roles of NNPC and the DSDP arrangements, which has been in operation in the last few years in the country.

Recently, the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA), in a statement, attributed the fuel crisis to the importation of adulterated petroleum products into the country.

The agency said that 100,000 metric tonnes of fuel imported in recent times were above Nigerian specifications, adding that the organisation, in connection with key stakeholders, including NNPC, were working together to remove the product from the market.

While this lasted, stakeholders have accused the consortia approved to operate DSDP arrangements as the cause of the present fuel crises in the country.
ILO was quick to say that companies under the DSDP should be held accountable for the problem.

Remedy

Government or NNPC should be firm on the issue of importation of fuel into the country.

When this happens, government, Akinnisiju said, would be able to monitor those who are importing the product and what they are bringing into the country.

 

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