People & Money

Contaminated Fuel: Nigeria Losses N14.5 Billion, Faces Two Weeks Scarcity

The Nigerian National Petroleum Corporation (NNPC) has said that it will take about 8 to 15 days before consignments of Petroleum Motor Spirit (PMS) that are safe for use reach parts of the country affected by adulterated fuel supplied by the Swiss firm, Litasco. Nigeria has recorded a total loss of N14.5 billion from the contaminated fuel supplied by the Swiss firm.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) have ascribed the looming fuel scarcity currently experienced in some parts of the country to the withdrawal of petrol discovered to have contained methanol above safe specifications.

Unscrupulous marketers blend quantities over and above safe specifications into petroleum to increase their margins. Apart from Litasco, firms like Vitol and Gunvor have been found to supply deliberately supply “low-quality and harmful fuels” to African countries. Public Eye, a Swiss accountability group, describes this practice as a “business model” to increase profits.

Notice from NMDPRA…15 Days To Normalise Supply of Petrol

NMDPRA in a press statement on Tuesday night informed the general public that, limited quantity of Premium Motor Spirit (PMS), commonly known as Petrol, with methanol quantities above Nigeria’s specification was discovered in the supply chain.

According to the statement, “Methanol is a regular additive in Petrol and usually blended in an acceptable quantity.

“To ensure vehicular and equipment safety, the limited quantity of the impacted product has been isolated and withdrawn from the market, including the loaded trucks in transit.

“Our technical team in conjunction with NNPC Ltd and other industry stakeholders will continue to monitor and ensure quality petroleum products are adequately supplied and distributed nationwide.”

It stated that the source supplier has been identified and further commercial and appropriate actions shall be taken by the Authority and NNPC Ltd.

It disclosed that NNPC has intensified efforts at increasing the supply of Petrol into the market in order to bridge any unforeseen supply gap.

But from all indications the fuel scarcity will continue for a few days, precisely about 15 days before the supply situation would normalize in the country. New NNPC order is said to start landing in 8 days’ time.

Cost Implication

Going by the current landing cost of N290 per litre, the dirty fuel will also cost the country a huge sum of financial loss, estimated to be in the region of N14.5 billion.

The vessel which brought the fuel in is said to have a capacity of about 50,000 metric tons. These 50,000 metric tons equal 50 million litres, which when multiplied by the N290 landing cost equals N14.5 billion

Government headache

NNPC is the sole importer of fuel through its direct supply and direct purchase agreement it engages some contactors to import fuel on its behalf. The process of selection of the contractors is often faulted by industry watchers who alleged that the process lacks transparency. It is not yet clear if NNPC’s contract with MRS and MRS’s contract with Litasco would allow the NNPC to claim or sue to be reimbursed the N14.5 billion that has been lost through sharp practice.

Chasing Mega Profits…Too much methanol

Nigeria normally does not use Methanol as fuel; however a very low percentage of the product like five percent of it is understood to be usually allowed to blend the fuel, perhaps just to shore up the profit margin of the importers.

The 5% does not have any impact on the quantity of the product brought in. But when it is higher than that, such as 15 or 20 percent, the resulting fuel becomes unsafe. The mixture of Methanol and water results in “sludge” which can damage engine vehicle. The dirty fuel that MRS has brought into the country through Litasco is said to contain near 20% methanol.

Are There More?

This 50,000 metric tons is said to be just one of the many vessels with various quantity of methanol content that have queued up to discharge their contents into Nigerian facilities.

The remaining vessels hovering around on the Nigerian seas have to look elsewhere to offload their contents. There is unverified information that there are about 7 to 8 of such vessels waiting to discharge.

Panic buying making the queues longer

People who used to buy half tank of fuel or less now try to fill their tanks because of uncertainty. Some people are also buying in containers to store. This means that more fuel has to be supplied before a semblance of normality appears.

Other affected companies

Aside MRS, other companies that have suffered from this incident are majorly Total, OVH, Ardova and Pinnacle.  It was learnt that Nipco plc, also received some of the product which is yet to be evacuated from it facilities.

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