Mallam Mele Kyari, Group Managing Director and Chief Executive Officer, Nigerian National Petroleum Company (NNPC) Limited, on Wednesday said the company has filed liquidated damages against suppliers of methanol-laden fuel.
He also said that NNPC has taken measures to ensure that premium motor spirit (PMS) meant for Nigeria is methanol- free. Kyari said this is why the company had turned back five cargoes coming from the same place the methanol-laden fuel that came into the country originated from.
Speaking at an investigative hearing with the House Committee on Petroleum (Downstream), Kyari said queues at fuel stations in the country will disappear by next week, as the company has up to 2.1 billion litres of fuel that should last up to March, this year. He said: “What did we do? We have put all our suppliers who are our contacts or commercial angle on notice that there would be liquidated damages that will come from this.
And also it is typical practice that we compile liquidated damages that the direct supplier didn’t cost, he will transfer that to the next person until it gets to the originating supplier, so it’s a backto- back arrangement that is always done so that once you file on one of them it will get to the last one.
“I do not know how many people are in the chain. In this PMS supply business, in one cargo you can have three sellers, you can have two, and you may also have only one.
It is from further inquiry that will tell us from whose hands until it gets to us. Every one of them will transfer the liquidated damages to the last person until it gets to the originating supplier.
“This is what we are doing to see that these liquidated damages are settled and it is commercial process, it is also a legal process and I know it is not as simple as sorting it out.
What we did was to bring the originating terminal on the table and informed them that these products that we received originated from their terminal did contain methanol.
“In the circumstance, this is the only validation we can do and the rest are commercial engagements that we have to follow through with our partners,” he said. He assured lawmakers of measures to curb the scarcity and return normalcy in the system, saying that the company is not unaware of the economic implications of it.
“For this current situation, I assure you that we have taken every necessary step to restore supply into this country. We have placed orders significant enough for us to cross into March, with at least 2.1 billion litres of PMS in our custody.
“The situation you’re seeing today I can assure you that by next week it will vanish.
All things being equal because of distribution issues that we may not have control over including the movement of trucks, otherwise we have robust supply arrangement to make sure that we exit this issue”, the NNPC boss said. Kyari also told lawmakers that the current situation came about as a result of Nigeria’s lack of capacity to refine its crude for local consumption.
“Why do we have this challenge? First of all we import all the gasoline we use in this country, every petroleum product we use in this country is not locally processed except a few quantities, some of them I can also share with you are coming from sources that may not be illegitimate.
“Not a single litre of PMS is generated in the country, that means 100 percent of PMS you see in this country is imported.
Those imports are done on the basis of existing contractual arrangements that we have. It’s called the direct sale direct purchase process, which is simply with the best of practice to enable our suppliers supply products to us on agreed terms and conditions.
“We have been doing this since I came on board and it is part of our supply mechanism.
Even if all our refineries come up today, except Dangote Refinery, we will still be in short supply of PMS, because all of our refineries can only make 18 million litres of gasoline.
Consumption is certainly above 18 million litres,” he said. He, however, lamented the incidence of product diversion by marketers which makes actual evacuation to fall short of the actual supply needs of local consumers.
“Evacuation from depots, we know all the trucks that leave our depots, but we do not know where they end up. This is reality, there is no tracking mechanism to enable this.
We also know that some of these products find their way in places that may not be in this country. I don’t have statistics to back this up, but I’m sure smuggling takes place,” he stated. He added that specification has been updated with their suppliers to the effect that no product meant for Nigeria will contain methanol going forward.
“On the basis of those contracts, our suppliers bring products to us and reconcile with them regularly. Part of those supply arrangements is to give specification to your suppliers.
These specifications are bound by regulation and the latest that we are using is the one that is in place since 2006. The current specification we have is what is the subject of all our import arrangement. So all our partners were given those specifications and on the basis of this, those imports were made.
“Before a vessel leaves the load port, they have to declare that those vessels meet our specification, they will send it to COMD, the importer and confirm that this is the specification to do, this product that we are bringing to you meets this specification.
On the basis of that, you allow the sail away of the vessel,” Kyari said. “We are a law-abiding company. There is no way we could have known about the methanol presence. The only way we could have known about it is if our suppliers, in good faith, made the disclosure to us. In this particular instance, the discovery was made by our inspection agents who noticed the emulsification at the filling stations and brought it to our attention.
Subsequent investigation revealed that the four cargoes which are all from the same source also contained methanol-blended PMS,” the CEO added.
He pledged that NNPC would cooperate with the committee and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to get to the root of the matter.
The NNPC CEO also expressed deep empathy with Nigerians on the current situation and assured that adequate measures have been put in place to maintain supply sufficiency and prevent future occurrence.
The Chairman, House of Representatives Committee on Petroleum (Downstream), Hon. Abdullahi Mahmud Gaya, assured Nigerians that his committee will handle companies that imported methanol-blended premium motor spirit (PMS) into the country.
The chairman was responding to a question from one of the committee members in that regard. Gaya had earlier hinted the NNPC management that the reason for the session was to find answers to the lingering fuel queues, the circumstances surrounding the importation of alleged contaminated fuel into the country.
“The essence of today’s gathering is to elucidate the current fuel scarcity which has a negative impact on the people.
As we are all aware, fuel queues have recently caused gridlock in most of our major cities affecting traffic movements. Some fuel stations are locked while the few that are open have long queues of motorists waiting to buy fuel.
“This situation is not different in the capital city, Abuja, and our major cities where the majority of filling stations are shut and motorists spend hours in the sun struggling to buy from few that are open.
“It is a fact that these problem is as a result of the importation of adulterated premium motor spirit (PMS) which is confirmed to have high percentage of methanol.
“Even though methanol is a regular additive in petrol but it is usually blended to acceptable quantity.
The recent supply are in excess of this additive of which its resultant consequences is injurious to our fragile economy and the generality of our citizens.” Fuel Scarcity: Marketers To Operate For 24 Hours Everyday Again, the Major Oil Marketers Association of Nigeria (MOMAN) on Wednesday hinted that it would extend the opening hours of its jetties, depots and filling stations to 24 hours daily as one of the proactive measures to reduce the ongoing scarcity of fuel in the country.
Olumide Adeosun, the chairman of the group, who gave the hint in a statement made available to Daily Independent, said MOMAN members shall operate these extended hours until the excessive queues subside.
The Nigerian National Petroleum Corporation had disclosed that it had supplied additional one billion litres of fuel to the market to help reduce fuel queues caused by ongoing decontamination of bad fuel allegedly imported by four companies into the country.
Adeosun said members of MOMAN are working with the regulatory authorities and NNPC towards a resolution of the current fuel crisis.
According to him, MOMAN subject matter experts are active contributors to the technical and commercial committees’ setup by the regulatory authorities to re-stock fuel supplies, resolve the blending of contaminated product and identify losses suffered by customers, operators and third parties. He added: “MOMAN’s committee of chemists are also working with designated laboratories to double check the quality of product (re-blended or new) before they are released into the fuel supply chain.
Most importantly, MOMAN members have committed resources towards enhanced operations and associated activities to reduce the burden of the current fuel scarcity to our customers”.
He urged MOMAN’s customers not to panic buy as it might take a few days for normalcy to return, noting that panic buying increases the pressure on the supply chain.
