Nigeria Loses $1Bn To Illegal Bunkering Annually

Nigeria Loses $1Bn To Illegal Bunkering Annually

Nigeria loses an estimated $1 billion yearly in the West African bunkering market valued at over $3 billion as some oil companies operating in the country patronise cheaper petroleum products sourced from illegal bunkering activities to fuel marine vessels and Floating Production Storage Offloading vessels, THISDAY's investigation has revealed.

In the global petroleum and marine industries, oil bunkering is a legitimate business that involves the process of supplying vessels with fossil fuel products such as diesel, Heavy Fuel Oil (HFO) and Low Pour Fuel Oil (LPFO), which are also used by oil firms largely as bunkers for their vessels and to power their drilling rigs for exploration and production.

Investigation showed that most leading international and indigenous oil and gas companies, through their procurement process, have continued to patronise illegally refined products and products obtained from vandalised pipelines, thus aiding and abetting crude oil theft and robbing the country of revenue from genuine bunkering operators.

It was gathered that the loss of revenue by the country from illegal bunkering is worsened by the fact that foreign vessels that come to Nigeria choose to refuel offshore Cotonou and Ghana for security reasons.

But in a swift reaction to the menace of illegal bunkering in the country, a spokesman for the Department of Petroleum Resources (DPR), Mr. Paul Osu, told THISDAY that the agency was determined to ensure that Nigeria becomes an attractive bunkering hub, stressing that "a viable bunker trade operation in the country is capable of spawning quite a few other activities that revolve around vessel bunkering with correspondent multiplier effect."

It was further gathered that as the market shrinks for local licensed bunkers trading companies, they still have to battle with illegal bunkering operators, who have now penetrated the mainstream consumer base by offering very low prices, against the principle of superior product quality and evidence of genuine sourcing.

Some of the bunkering operators told this paper that oil companies' procurement system is designed in such a way that price is basically the sole criterion considered in awarding contracts for the supply of petroleum products.

According to these operators, 'briefcase' companies that source products from illegitimate sources are awarded contracts because they are the lowest bidders. One of the operators told THISDAY that the trend is to quote as low as possible to win the contract, "despite the facts of the trade, and thereafter resort to illegally refined products, stolen products and products obtained from vandalised pipelines to service the contracts."

A source said: "Unfortunately, the off-taking companies will accept such products without scrutiny to determine the source, thereby patronising illegally refined products and by extension, causing gross loss of revenue to the federal government. The current price of gasoil at Intercontinental Exchange (ICE) is about $500 per metric tonne. Granted that gasoil is deregulated in Nigeria, the local price for imported cargo is derived from and determined by the international market as published on the ICE or Platts.

"So, the price of an imported cargo of gasoil is a factor of ICE or Platts plus contractor's premium to take care of freight and other associated costs. An importer cannot successfully import gasoil into Nigeria at a cost lower than ICE or Platts price converted to Naira at parallel market exchange rate or CBN intervention rate or at a price lower than fixed refineries' price."

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