By Charles Ibiang
The emerging fuel Scarcity and queues at filling stations across Nigeria today is gradually becoming worrisome. It’s taking the shape of another adulterated fuel saga that nearly threw the Country into an energy crisis at the beginning of last year, 2022.
Nigerians are so apprehensive and hope that the situation doesn’t degenerate into the recent ugly past of perennial fuel Queues at Filling Stations.
There are also fears, across board, by pundits that this resurgence of fuel scarcity and queues at Filling Stations is intentional and a clever way by Government and free market proponents, to increase prices or lay the basis for removal of Subsidy. In fact, as the 2023 election approaches, there are even a more sinister and dangerous narrative by some APC Stakeholders that the fuel scarcity is a deliberate sabotage by the leadership of NNPCL and Petroleum Ministry against them, in order to cause the electorates not to vote the Party Presidential Candidate.
However, this may not be the case, but a global refining crunch.
President Buhari has assured Nigerians, more than once, that; there won’t be subsidy removal for now, because of its effect on the general Nigeria Economy. He has showed this commitment by signing the MTEFF and the Budget, where Subsidy Payment Projections are clearly spelt out.
The Minister of State, Petroleum, Chief Timipre Slyva has equally throw more light on the challenges of Foreign Exchange on fuel importation and supply. Even our dilapidated roads and obsolete Pipelines system will continue to constitute a greater challenge for fuel distribution network nationwide..
In the same vein, Mele Kyari led NNPCL has consistently came out to give assurances of sufficiency in our National Reserve to meet the needs for Supply of Petroleum Products.
However, Nigerians are still wondering, what is truly happening at the filling stations.
Recall, the Government recently resolved the NARTO crises by a corresponding hike in the freight. Cynics were saying it will increase prices at the pump, which is yet to occur..
Again, the NARTO’s earlier protest due to the overwhelming cost of freights, and IPMAN grievances of getting the Petroleum products at a higher cost from private Depot’s, occasioned by high cost of diesel for transportation, point to one major problem, the world wide rising cost of Petroleum and Refined Products. Diesel is key!
The explanations, that freights cost issues with NARTO, who refused to ferry or transport Products to depots across the Country and IPMAN who are buying at higher prices off depot, yet expected to sell at Government regulated prices, is not at all the real situation.
Truly, NNPC Ltd is passing through a hell of difficulty getting Refined Petroleum Products globally due to a worldwide Oil Refining CRUNCH and foreign exchange challenges.
According to global downstream Experts, about 3.32 million bpd refining capacity has been lost worldwide since 2019.
The reasons for this global crunch is as a result of reduction in Refining Capacities of Refineries, that are finding it hard to secure funding or investment Capitals basically because of Climate Change concerns,& Paris Climate commitments which gave impetus to zero carbon campaigners against investment in Fossil Fuel (Crude oil) in pre-pandemic era.
The Pandemic era ushered with it, extremely harsh environment, where many Economies experienced Lock down in order to contain the new corona virus.
As the lockdowns in different Countries came into full effect, a lot of Industrial production units were downgraded so also was many REFINING Capacity Units of Refineries.
Restarting or reopening these production/ refining units has not yet been optimized after the pandemic because of lack of new Investments, slow Economy recovery, and disruptions in global supply chain and logistics.
The post pandemic environment, which has begun to show signs of recovery, has been characterized by rising inflation and high cost of heating and Energy inputs.
The Russian-Ukraine conflict has aggravated the Supply of refined petroleum products with its attendant logistics, because some of the Refineries are in Europe, Asia and Oil Tankers/ Ships used for conveying this white Petroleum products, take higher insurance risk /cost sailing through conflict Maritime Zones, and wary of incurring penalties from sanctions regimes imposed on vessels owned by Russia Oligarchs who are facing severe western Sanctions.
HOW IS NNPC LIMITED AND NIGERIA THE VICTIM OF THIS GLOBAL INTERPLAY OF FORCES?
Even though our situation is self-inflicted, the present crisis indicates that Nigeria, with four non-functional Refineries and a Crude Oil producing Country is shamelessly not Refining Petroleum Products for her domestic consumption and usage.
The reality is that Nigeria relies solely on Importation of refined petroleum products. This comes with its attendant implications associated with the vagaries of global Competition, high oil prices, shipping/logistics challenges and forces of demand and Supply.
Nigeria and NNPC are at the mercy of these Geopolitics forces, coupled with the challenges of militancy in the Niger-Delta, resulting in significant shortage of crude Oil supply due to theft, corruption, Pipelines Vandalism, smuggling and poor Policy implementation.
According to International Energy Agency, the World has a 100 million bpd refining Capacity, with 20 million unused capacities, mostly in Latin America and Africa.
In April, 2022, seventy eight 78 million barrels were processed daily, which is down sharply from the pre-pandemic average of 82.1 million bpd. The IEA expects refining to rebound during the summer to 81.9 million bpd as Chinese, Asia and Middle East refiners come back on stream. This is not too certain, but a function on how their ECONOMIES are recovering and responding to post pandemic activities. This is very instructive.
Therefore, IEA projected global refining capacity is said to expand by 1 million bpd per day in 2022 and hopefully, 1.6 million bpd in 2023, as reported by Reuters.
IS NIGERIA the only Country experiencing supply shortage and soaring prices of Petroleum Products?
The answer is NO especially when compared with the rising Fuel prices in UK, US and European countries.
Another factor, contributing to high prices is the cost to carry products on vessels overseas, which has risen due to high global demand, as earlier stated in this article, as well as sanctions on Russian vessels.
In Europe and part of Asia, refineries are constrained by high prices for natural gas, which powers their operations.
Similarly, some refineries also depend on vacuum gas oil as an intermediate fuel. The Loss of Russian vacuum gas oil has prevented certain Refineries from restarting certain gasoline-producing units, like India, that refine about 5million BPD but rely heavily on cheap Crude from Russia but impacted now by western Sanctions. The situation will get worsted, if Russia when ahead with their threat to withdrew 500 thousand barrels from global crude supply.
This will totally disrupt the global crude oil supply, refining and petroleum products supply to dependent Nations without refining capacities like Nigeria.
This is NNPCL and Nigeria dilemma today! Fuel Scarcity is not sabotage but a global phenomenon requiring a Strategic Leadership approach.
Let us pray!
Lord Charles Ibiang is the Chairman, Partners for Petroleum and Energy Sector Promotion Intiative(P-PESPI).
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