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Refineries’ $2.4m crude transport in vessels stalled

The approximately $2.4 million deal for transportation of crude oil from terminals to refineries through vessels have finally hit the rocks.

The Nigerian National Petroleum Corporation (NNPC), it would be recalled, resorted to marine for supply of about 445,000 barrels per day allocated crude oil to refineries after total failure of pipelines, which were hitherto used for the purpose.

These contracts, checks by this newspaper showed at the weekend, have been messed up following near total collapse and inefficiency of the refineries.

Instead, government, a top management staff at one of NNPC subsidiaries told this newspaper, had increased the volume of crude originally meant for local refineries for its Direct Sale Direct Purchase (DSDP), also known as crude swap, contract.

The process follows a simple logic. The refineries are not working again. The crude meant for them is swapped. There is absolutely no need for any such contract like crude supply to the refineries,” he said, after his anonymity was guaranteed.

A document of NNPC sighted by New Telegraph at the weekend also showed that vital energy supplies was the major reason for the marine supply contract awarded at a cost of $3.87 per barrel. A separate dedicated surveillance contract for the provision of six security boats was awarded to OMS for an average cost of $1.5 per barrel. Making the total cost to be $5.37 per barrel.

NNPC, in year 2000, the source continued, invited PPP Fluid Mechanics (PPPFM) and Ocean Marine Solutions Limited (OMS) to widen its operations to cover the much larger 210,000 barrels a day Port Harcourt refinery (where pipeline losses are estimated at 70 – 80 per cent), with new mandates that included offshore sea protection, offshore compulsory terminal pilotage, and dedicated security surveillance.

The enlarged contract was undertaken at a cost of $5.68 per barrel, according to data from the NNPC.

Within the Delta, about 5,280 oil wells are linked by 7,000 kilometres (2,700 miles) of pipelines.

“It is perhaps not well understood by outside observers how diverse and complex the region is. There are about 40 different ethnic groups speaking 250 languages and dialects, living in over 13,000 settlements. According to GTZ estimates based on National Population Commission data, the overall population of the Niger Delta stands at over 30 million people and is expected to exceed 45 million people by 2020,” Ildar Davletshin, an oil and gas analyst at Investment Bank, Renaissance Capital, said in a report.

The Federal Government’s decision to award marine transportation contracts for crude oil movements from terminals to the refineries, NNPC argued in another report, is not only cost-effective but equally in tune with best environmental practices.

“To bypass daunting security and environmental challenges, NNPC, in December 2010, awarded a contract to PPP Fluid Mechanics (PPPFM) and Ocean Marine Solutions Limited (OMS) for the transportation of oil by marine vessels from the Escravos terminal to Warri refinery through an international competitive bidding exercise that included 13 other companies.

“Nigeria’s Warri and Kaduna refineries were shut for 48 months before the engagement of PPPFM due to a lack of supply of crude oil feed stock,” the report read.

Using the existing pipelines had, according to the report, become uneconomical for NNPC, which spent an average of $121 million to maintain and repair the Escravos to Warri broken crude oil pipeline that had an unusually high and environmentally damaging 40 per cent loss of crude oil pumped through it.

“From 2011 to 2015 a total of 65.59 million barrels of crude oil have been delivered to Nigeria’s refineries by PPPFM and OMS.

“Nigeria is estimated to have saved up to $3.2 billion from the PPPFM/OMS intervention, based on a calculation of between 40 and 80 percent loss, if the crude oil was pumped through the pipelines,” it added.

The cost savings from lack of environmental degradation are probably 10 times more.