Petroleum products shipment: Senate bemoans loss of $120m annually

By Ignatius Okorocha

Apparently disturbed by reports that the nation loses over $120 million annually to patronage of foreign shipping firms in the shipment of petroleum products, the Senate on Tuesday directed the Nigerian National Petroleum Corporation (NNPC) to initiate the processes of patronising and boosting the capacities of Indigenous shipping firms.

At a meeting between the Senate Committee on local content, the NNPC management and Ship Owners Association of Nigeria, it was disclosed that the overwhelming preference to foreign firms had resulted in huge revenue losses including some $120 million loss to demurrage.

Chairman Senate committee on local content, Tealim Folarin, in his remark after a marathons debate, directed that the NNPC should allow local ship owners operate in transportation of petroleum products

The committee equally stated that there is need to help build capacities among Indigenous shipping.

“It is very important we patronise indigenous shipping”

“The whole essence of this investigative hearing is not to trade blames. We understand that they don’t have enough vessels; they don’t have capacity and capacity cannot come from heaven. The GMD here has capacity to help build capacity. It is very important that we patronize indigenous shipping companies,” Folarin stressed.

The Senate panel decried the disregard to the local content act which stipulated among others that local firms be encouraged in the conduct of businesses of any public company businesses.

A member of the committee, Senator Solomon Adeola, who is also the chairman of the Senate Committee on Finance, disclosed that the failure to carry Indigenous shipping companies along had dealt serious economic blow on the country.

Adeola dismissed submissions that Nigerians do not own vessels that could be patronised.

“There are local vessels owned by Nigerians, it depends on the type of vessels we are talking about. There are two types of vessels.”

Group Managing Director of the NNPC, Mele Kyari , who had informed the committee earlier that there was no Indigenous vessels to patronise, assured the Senate that “I am going to work to support these companies. We will engage our partners”

In a presentation to the committee earlier, the Ship Owners Association of Nigeria (SOAN) led by its President, Dr. Mkgeorge Onyung, told the committee that the provisions of Nigerian coastal and local content laws with regards to the shipping of petroleum products in the downstream sector of the oil industry is being breached in favour of foreign vessels, a situation it stated had encouraged massive capital flight.

SOAN further noted that “in the 2019/2020 DSDP disposition, contract valued at 9 billion USD was undertaken. Freight expenditure on Import Tankers was approximately 60 million USD monthly or 720 million USD annually. This involved the average monthly importation of 2.4 billion litres (1.8 million metric tons) of gasoline in foreign-owned tankers of 35,000 to 90,000DWT capacity (approximately 40 ship loads monthly).”

“Between January and August 2020, 320 foreign tankers arrived Lagos offshore with imported PMS. This 100% foreign-dominated supply chain activity creates no in-country value for the Nigerian maritime industry with no multiplier-effect on other sectors of the economy. Foreign fleet is chartered by NIDAS Marine, NNPC subsidiary, via foreign ship brokers namely Clarksons, E.A. Gibson, Brassington, Braemer and Affinity”.

The Senate Committee was told that foreign ship owners account for 95% of freight spending associated with this downstream activity which is repatriated overseas as capital flight to the detriment of the local economy.

SOAN further claimed that NNPC’s policies give the lucrative marine services contracts to foreign shipping companies and allocation of marine-related job opportunities to foreign seafarers, thus encouraging massive loss of employment, capacity building opportunities and tax revenue accruable to Nigerian companies, maritime service providers and seafarers, including the federal government.

The indigenous ship owners decried inadequate enforcement of the Cabotage and NOGICD Acts in the downstream sector. This, the petition stated, hinders the maximization of in-country capacity for the promotion of technological innovation needed to drive productivity and economic activities, required to spur economic growth in other sectors.

“ NNPC’s non-adherence to Charter Party Agreements in favour of Nigerian shipping companies, render their investments financially insecure, while Vessel Hire Payment Arrears (averaging 180 days) is a protracted breach of NNPC’s charter party obligations making coastal shipping unviable for Nigerian-owned vessels.” the petition further stated.

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