January 26, 2022

NNPC Is Not Broke

4 min read

A National media recently described the Nigerian National Petroleum Corporation (NNPC) as “Cash-hungry” and went further to say “the Corporation has done the unthinkable by selling off to an export company 30 million litres of slop oil reserved in Port Harcourt Refinery as a national strategic stock”.

What is Slop Oil? It is considered crude oil which is emulsified with water and solids rendering it a waste stream that cannot be sold down the pipeline. Slop Oil, or secondary oil, is found in evaporation ponds, sludge pits, storage tanks, and permitted commercial disposal facilities. Slop Oil is not environmentally friendly.

Current options for disposal are expensive and hard to find. This leads to Slop Oils being stored in pits or tanks, wherever possible, until a better solution presents itself.

It will be recalled that on Tuesday 26 January 2021, the NNPC Requested for Submission of key pre-qualification Documentations for Slop Oil Purchase from PHRC.

The pre-qualification conditions for buyers included, among others, “Department of Petroleum Resources permits for petroleum products and/or waste oil handling; evidence of previous petroleum products/ crude oil transactions; letter of comfort or evidence of capacity to pay; a brief description of the intended use for the slop oil; Memorandum of Understanding (MoU) or Purchase Order (PO) from reputable companies if any; and an acceptance to indemnify NNPC/PHRC (against all liabilities in transit or use of the slop oil) in the event that you emerge the successful buyer.”

Another document shows that on 30th March 2021, the PHRC Slop Sale Committee rolled out additional conditions for the second stage of the bid exercise. They included “provision of bank reference stating capability to issue irrevocable Letter of Credit (L/C) on behalf of the company; provision of tax clearance for the last two years with credit rating report on L/C; evidence of trade of 60,000 MT of petroleum products in the last 12 months; evidence of a minimum business turnover of $300 million, alternatively provide evidence of sufficient bank facility to cover L/C for the slop oil volume of 30,000m3; evidence of three (3) years audited accounts and financial statements and letter of assurance to handle all logistics and relevant permits issue from DPR, NOSDRA, NPA, Navy, NIMASA”.

The above conditions are the standard requirements for the sales of Slop Oil both at Domestic and International level.

Claiming that the Technical evaluations of the bid process show that the Slop Oil Sale Committee did nothing to input national interest as a consideration to protect local manufacturers in Nigeria, is total false

From investigation, there were no any technical bottlenecks introduced to skew the process against Domestic companies.

On June 22, 2021, Port Harcourt Refinery Company issued a letter of allocation of 30-million-litre slop oil to Sign Oil & Gas as the bid winner.

For the fact that a company is an export company does not stop them bidding for contract as far as they meet up the entire requirement for such business. The companies that won the bid can easily liaise with the local manufacturers who normally import LPFO and this will save them the stress of importation.

It is strongly believed that bid winner will not evacuate and export the slop oil when the market is readily available in the country and no industries would be the worst hit.

The same bid process were administered to both Domestic and Export Companies right from the technical bid to commercial bid; no domestic companies were told to slug it out with export companies.

Probably, the domestic companies that lamented, that there was no way they could outbid the export companies must have had issues with the bid requirements as the whole process was done in line with the TAPE agenda of the Group Managing Director of the NNPC, Mal Mele Kyari.

Even though the report says that there is the logistics involved in the local distribution of slop oil which, heavier than premium motor spirit or kerosene and making the costs of its transportation higher than those of other petroleum products, the bid winner will surely use its sophisticated technology to ensure the product get to the end users successfully.

For that fact that the Port Harcourt Refinery Company insisted the slop oil must be evacuated Ex Coastal for both export and domestic companies, the cost for domestic company to charter vessel (for those that don’t have), pay marine charges and in addition pay for storage facilities and pay for trucking to the final destination will probably be lower than those exporting it; it is a simple logic.

For the fact that the exporting companies will work with the domestic company in distributing to local manufacturing industries, boost operations and sustain employments with accompanying multipliers will add no value to the economy.

From available report, the GMD and the COO Refinery of NNPC did not give for approval, the export of slop oil and the NNPC is not broke and needs money as insinuated by the publication.

For the fact that the same NNPC budgets billions of Naira on Corporate Social Responsibility (CSR) doesn’t mean the Corporation has not been supporting local industries, who are even suppose to Corporate Social Responsibility as well.

The Corporate Social Responsibility done by the NNPC in the post Covid-19 economic recovery era in line with the current administration’s policy of supporting local manufacturing industries is out there for Nigerians to see.

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