General strike over fuel hike paralyzes Nigeria

General strike over fuel hike paralyzes Nigeria
General strike over fuel hike paralyzes Nigeria
its may interest us to note that, this "NIGERIA HARMATTAN" has provided a rare window of opportunity for us to really understand what's been happening in our oil and gas industry and also to normalized those anomalies.
So since the release of this cable by wikileaks, it has continued to generate ripples within the public domain as it clearly exposes the level of rot and corruption in that sector.
So lets find out:
Reproduced below is a secret
cable of the
United States Government on the fraud in the
oil sector in Nigeria as published by Wikileaks.
C O N F I D E N T I A L SECTION 01 OF 02 LAGOS
000767
SIPDIS
NOFORN
E.O. 12958: DECL: 04/07/2014
TAGS: EPET EINV EFIN PGOV NI
SUBJECT: SCANDAL BREWING OVER NIGERIAN
FUEL IMPORTS
Classified By: J. GREGOIRE FOR REASONS 1.5 (B),
(D), AND (E).
¶1. (C) SUMMARY. A scandal is brewing in
Nigeria over prices paid by the government
for imported fuel. International fuel traders
have been falsifying the dates of bills of lading
to reflect particularly high market prices,
overcharging the Nigerian National Petroleum
Corporation (NNPC) by $300 million or more.
END SUMMARY.
¶2. (C N/F) On April 2, Chris Finlayson,
Chairman and Managing Director of Shell
Petroleum Development Corporation of
Nigeria (SPDC), told Consul General and
Econoff that a scandal is brewing within the
NNPC over payments made to international
fuel marketers. Finlayson said some marketers
have been changing the dates when fuel
shipments bound for Nigeria were loaded in
order to take advantage of particularly high
market prices. He said the total overpayment
by NNPC may be as high as $330 million.
Finlayson noted that Shell is not one of the
marketers in question, but is becoming a
leading fuel supplier for NNPC.
¶3. (C N/F) On April 6, Femi Otedola, President
and CEO of Zenon Petroleum and Gas, the
largest supplier of diesel fuel in Nigeria,
essentially corroborated Finlayson's report.
Otedola said over $300 million has been
overpaid by NNPC for fuel imports, and that
many leading international traders are
involved. According to Otedola, NNPC
contracts to pay its suppliers the market price
on the day a ship is loaded with fuel. He said
NNPC recently discovered, however, that bills
of lading were altered to reflect loading on
days of high market prices. Discrepancies
were found when comparing dates on the
bills of lading with dates of landing in Lagos.
¶4. (C N/F) Pointing to examples, Otedola said
that while a tanker loading fuel at a refinery
in Bahrain usually takes four weeks to arrive
in Lagos, comparisons between the bills of
lading and dates of arrival of some shipments
reflected only a four-day difference, and in
other cases, if taken at face value, indicated
the journey took nine months. Otedola said
73 shipments from refineries in the Persian
Gulf, England, and Venezuela listed delivery
times of only one day. NNPC is attempting to
get compensation for the over-charge.
Otedola went on that most of the fuel traders
supplying Nigeria are implicated in over-
charging NNPC, and showed a list of 17
companies that supplied fuel in the first
quarter of 2004, several of which, he said, are
significant players in international markets,
such as Trafigura and Vitol. Otedola added
that three companies clearly not involved in
the scandal are British Petroleum,
ChevronTexaco and Shell.
¶5. (C N/F) Otedola recommended that NNPC
stop contracting with international fuel
traders and negotiate purchases directly from
refineries worldwide. According to him, such
a move would have two positive effects.
Otedola calculates that NNPC would save some
four billion dollars a year in expenditures on
imported fuel. (Note: Prior to deregulation in
October 2003, NNPC, then the sole importer of
fuel, lost two billion dollars per year because it
sold stock to retailers below purchase price.
After October 2003, NNPC initially stopped
subsidizing fuel sales, letting marketers
import fuel to be sold at market prices.
However, sources agree that NNPC is back in
the business of subsidizing gasoline sales
while it maintains a facade of deregulation by
encouraging private marketers to import fuel
that NNPC purchases at market price. NNPC
then sells the fuel to marketers and retailers
at a reduced price to ensure that those
companies maintain a profit margin while
holding consumer prices to informal caps set
by the Department of Petroleum Resources.
End Note.)
¶6. (C N/F) Otedola added that by cutting out
the international traders, NNPC would also
enhance the environment in which Nigeria's
refineries could be restored and operated.
Otedola said he believes international fuel
trade "mafias" are behind the failure to bring
Nigeria's refineries back on-line and to
capacity. Otedola is convinced these traders
arrange for the vandalization of crude oil
feeder pipelines, which keep the refineries at
Port Harcourt, Warri and Kaduna closed or
under-capacity. He said the international
traders generally receive at least one million
dollars per shipload of fuel to Nigeria and
have grown accustomed to the easy money
Nigeria offers as long its refineries remain
down.
¶7. (C N/F) As an example, Otedola described
an arrangement the National Electric Power
Authority (NEPA) had with Sahara Energy for
the provision of diesel to an emergency
power generation plant in Abuja. He said that
while a pipeline was under construction to
deliver fuel to the main power plant,
NEPA paid some five billion dollars to Sahara
over four years for diesel to the back-up plant.
It was later discovered that NEPA had received
only about one billion dollars worth of fuel,
according to Otedola. Otedola said that he,
too, was contracted to deliver diesel fuel to
the plant on occasion; however, he petitioned
the president to investigate the matter after
becoming suspicious of NEPA's ongoing
contract with Sahara and the fact that the
pipeline for the power plant was never
finished. He said his intervention led to an
investigation that ultimately resulted in the
cancellation of NEPA's contract with Sahara.
¶8. (C N/F) COMMENT: The allegation that
international traders bilked NNPC of hundreds
of millions of dollars is yet another example of
the poor management of Nigeria's energy
sector, and highlights the complex links
between crude sales, fuel importation,
refinery maintenance, and energy production
here. Otedola is probably right in suggesting
that long-standing sweetheart deals between
the NNPC and a variety of fuel traders is
keeping the system inefficient. That may also
explain why the GON just can't seem to get its
refineries running even after spending a
billion dollars or more on maintenance
contracts over the last four years. Otedola said
he initially bid to purchase the Port Harcourt
refinery offered for privatization, but he
recently told President Obasanjo he will not
invest in the refinery so long as NNPC
purchases fuel from traders instead of
negotiating directly with refineries in other
countries and leasing ships itself to deliver
fuel to Nigeria. It is not clear if Otedola's
assumption that the international traders'
stake in Nigeria's current fuel market is the
main driver behind the country's refinery
woes. But it is clear that the fundamentals of
infrastructure security, interim supply stability,
and transactional transparency must still be
addressed if the GON is to be taken seriously
about its efforts to deregulate and largely
privatize Nigeria's downstream petroleum
sector.