As Oil Majors Hint of Another Fuel Price Hike...
Traders Give Conditions for Importation
Stock level drops to 14 days
By Mike Oduniyi
The on going controversy over appropriate pricing for domestic fuel has put the Nigerian National Petroleum Corporation (NNPC) product import plan in jeopardy as oil traders now demand payment before handling contracts for the corporation.
NNPC fuel imports account for about 80 percent of the total petroleum products distributed in the country. Already the stock level of petroleum products in the country has dropped to 14 days from the 30-day level at the beginning of the year.
Major oil marketing companies, which abandoned the importation citing inappropriate pump price of fuel in the country, hinted yesterday of a possible increase in fuel prices given the landed cost of the petrol they had imported, expected to arrive early next month.
THISDAY checks revealed that two weeks to the beginning of the third quarter (July - September) of this year, the NNPC was yet to issue oil traders tenders to import fuel.
Authoritative sources attributed the delay to the traders demand that the NNPC would have to provide performance bond and bank guarantee before agreeing to participate in the bidding for the fuel contracts.
This is a departure from previous process where the oil traders were only required to open Letters of Credit on behalf of the NNPC. The corporation makes payment after delivery.
Originally, the NNPC issued tenders for fuel imports at least one clear month before the commencement of a new quarter. Contract holders are then required to commence delivery on the first day of the new quarter.
"It is getting late to place orders for third quarter (2004) imports," said a senior official of the NNPC, who added that as against the earlier procedure, the traders were "practically demanding for down payment.
The official, however, told THISDAY that the NNPC might call tenders this week for the imports.
Some of the oil traders contacted said the growing fears about NNPC ability to pay for the imports, as well as lingering face-off between NNPC and Labour over fuel prices, informed the demand.
The operators said NNPC was still owing on deliveries for the second quarter (April to June) this year.
According to a source in one of the trading companies, the firms lost huge sums of money to the last Labour-led nationwide strike as many vessels were caught up on the high seas unable to berth.
"NNPC wriggled its way out by pleading a force majeure on the cargoes caught in the strike, which meant the traders bore the losses," said the source.
Force majeure meant that a party could not honour a contractual agreement for reasons not of its own making.
The traders include Vitol, Arcadia, Addax, Shell, ChevronTexaco, Trafigural, Petroleum Projects International, Sahara Energy and Ocean and Oil. "One must be certain of being paid before putting in for the tenders," another official said.
The NNPC Group Managing Director, Engineer Funsho Kupolokun, said in Lagos last week that the corporation was losing between $2- $3 million subsidising imported fuel.
Contacted, NNPC spokesman, Dr. Levi Ajuonuma, said the current development further calls for dialogue between NNPC, all stakeholders and Labour, "so as not to create chaos in the system.
"All what we are saying is that the NNPC is increasingly being left to undertake fuel supply and distribution alone, which it does not have the capacity.
"Labour's stiff opposition is gradually wiping away the gains recorded in the sector in the last eight months, the vibrancy in the sector is dwindling," Ajuonuma said.
He said that the heavy loss sustained on imported fuel was not a fluke, adding that it was for the main reason major marketers have abandoned the trade.
Meanwhile, major oil marketers said in a public notice yesterday that the cargoes of fuel they had imported, indicated a landing cost of N45 per litre of petrol. Current retail price of petrol is between N42.70 and N42.90 per litre.
While the marketers did not state what the retail price would be, the notice, however, stated that the blending price of the product with the N33.50 per litre of fuel lifted from NNPC depot will give an average price of N41.78 a litre.
"Naturally, the minimum margins for operating expenses, overheads and marketers' return on investment will be added to the final procurement costs," the marketers disclosed in the statement.
Kupolokun had said last week that after much pleading, the marketers agreed to import two cargoes by end of this month. Marketers said they were now targetting importing 30 percent of their requirements.
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