The Nigerian National Petroleum Corporation (NNPC) has done sold off selling off 30 million litres of slop(dirty) oil dumped at Port Harcourt Refinery, signifying that the corporation might be broke.
According to Premium Times, the sale was carried out under a controversial bid process, and supervised by the Chief Operating Officer (COO) Refinery, Mustapha Yinusa Yakubu.
SIGN Oil & Gas, an export company emerged as the preferred bidder.
The paper quoted industry players Industry players as saying that slop oil has never been exported in the history of the NNPC and consider the action a taboo transaction capable of precipitating disastrous knock-on effects on local industries thereby sabotaging the economy.
For local manufacturers in Nigeria – particularly those in labour-intensive industries like textiles, cement, rubber processing, food and beverages – slop oil is the only alternative to Low Pour Fuel Oil (LPFO), a product of fractional distillation that keeps the boilers of manufacturing industries running. The LPFO is also used in power generating plants to get around the challenge of acute gas shortages.
However, 24 months ago when the Port Harcourt, Warri and Kaduna refineries completely halted the refining of crude oil to give room for major rehabilitations slated to last 44 months, LPFO as a corollary went off the market.
Owing to the harsh economic reality, slop oil has become a stop-gap arrangement and a last-ditch measure to keep the many local industrialists from moving their operations to neighbouring countries.
Slop oil is a sludge mixture of crude oil, water and solids obtained in the course of cleaning oil tanks and used to fire boilers or incinerators. It is also found in evaporation ponds, sludge pits, storage tanks and commercial disposal facilities.
While it can be mixed with crude oil and processed in the refinery, the solids are used for asphalt, construction and maintenance of roads, airport runways, parking lots, railway tracks, seaports, sidewalks and sports arenas.
The report showed that the limited stock of slop oil in the country at the moment has elevated it to a commodity critical to national security. The Port Harcourt Refining Company (PHRC) Limited, a subsidiary of NNPC, utilizes bonny light crude oil to produce Liquefied Petroleum Gas (LPG), Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO) and High Pour Fuel Oil (HPFO).
The LPFO produced by Port Harcourt and Warri refineries were largely off-taken by international oil traders, particularly Vitol Energy Limited, for export to overseas refineries.
In 2017, as the Cement Manufacturers Association of Nigeria (CMAN) decried low capacity utilization caused by inadequate gas and LPFO supply, domestic demand for LPFO was estimated at 30 million litres per day. The corresponding demand for slop oil in 2021 becomes a no brainer and indeed explains the outrage that has trailed NNPC preference to sell to an export company, yet setting up a bid exercise to beguile local end-users.
Documents show that on Tuesday 26 January 2021, an email was sent out by a committee on slot oil sale of the Port Harcourt Refinery to prospective buyers. It was headed: “Re: Request for Submission of key pre-qualification Documentations for Slop Oil Purchase from PHRC.”
The pre-qualification conditions for buyers included, among others, “DPR (Department of Petroleum Resources) permits for petroleum products and/or waste oil handling; evidence of previous petroleum products/ crude oil transactions; letter of comfort or evidence of capacity to pay; a brief description of the intended use for the slop oil; Memorandum of Understanding (MoU) or Purchase Order (PO) from reputable companies if any; and an acceptance to indemnify NNPC/PHRC (against all liabilities in transit or use of the slop oil) in the event that you emerge the successful buyer.”
The mail required the bidder to “submit these documents in electronic form not later than 4:00 pm on Wednesday, February 3, 2021, by email to phrcslopoilsale@NNPCGroup.com.”
It added the warning that “it will be considered a fatal flaw which attracts outright disqualification from the exercise if a prospective buyer fails to provide any of the above-listed documents” or “provides misleading or fictitious claims”.
Another document shows that on 30th March 2021, the PHRC Slop Sale Committee rolled out additional conditions for the second stage of the bid exercise. They included “provision of bank reference stating capability to issue irrevocable Letter of Credit (L/C) on behalf of the company; provision of tax clearance for the last two years with credit rating report on L/C; evidence of trade of 60,000 MT of petroleum products in the last 12 months; evidence of a minimum business turnover of $300 million, alternatively provide evidence of sufficient bank facility to cover L/C for the slop oil volume of 30,000m3; evidence of three (3) years audited accounts and financial statements and letter of assurance to handle all logistics and relevant permits issue from DPR, NOSDRA, NPA, Navy, NIMASA”.
On May 10, 2021, PHRC released the “Instruction to Bid” in a new document. It gave a submission deadline of May 24, 2021, at 4:00 pm and instructed bidding companies to submit original copies to the Chairman/Secretary, Slop Oil Sale and Evacuation Sub-Committee, at PHRC Alesa-Eleme, Rivers State; and the photocopies to The Manager, Commercials & SCM at NNPC Towers Abuja.
A box labelled PHRC SLOT OIL SALE 2021 was positioned outside the door of the COO Refinery in NNPC Towers while a similar box was placed in the open foyer of PHRC New Admin Building.
Technical evaluations of the bid process show that the Slop Oil Sale Committee headed by the COO Refinery, Mustapha Yinusa Yakubu, did nothing to input national interest as a consideration to protect local manufacturers in Nigeria. Technical bottlenecks were indeed introduced to skew the process against them.
On June 22, 2021, PHRC issued a letter of allocation of 30-million-litre slop oil to SIGN Oil & Gas as the bid winner. SIGN Oil & Gas is an export company. In fact, the second and third-placed bidders (Synthesis Integrated Pure Oil and Kurpo Energy) are also export companies. The overall bid price is N3,330,000,000:00 (Three Billion, three hundred and thirty million naira).
Sources within the NNPC scoff at the bid process saying PHRC has no business inviting export companies to the bid in the first place at a time when shortage crisis is forcing local manufacturers to import LPFO to keep them from shutting down and laying off workers.
In making their case against economic sabotage, the sources pointed out that if the bid winner is allowed to evacuate and export slop oil, industries in the North would be the worst hit. Some manufacturing concerns in the South can consider using gas because of proximity to source while northern counterparts can still not access gas until gas pipelines from South to North are ready.
At the beginning of the bid process, the COO Refinery created two categories – Domestic and Export Companies. The criteria for the technical bid were done separately for the two categories. However, when it was time for commercial bid, domestic companies were told to slug it out with export companies.
Virtually all the domestic companies that participated in the bid lamented that there was no way they could outbid the export companies who industry insiders say are proxies of foreign oil traders. Then, there is the logistics involved in the local distribution of slop oil which, heavier than premium motor spirit or kerosene, makes the costs of its transportation higher than those of other petroleum products.
The PHRC insisted the slop oil must be evacuated Ex Coastal for both export and domestic companies. This means that while the export company charters vessel, pay marine charges and sails out of the country, the domestic company must also charter vessel, pay marine charges and in addition pay for storage facilities and pay for trucking to the final destination.
Also, while the domestic company will distribute to struggling local manufacturing industries, boost operations and sustain employments with accompanying multipliers, exporting the slop oil will add no value to the economy.
Industry players said the only reason the GMD and the COO Refinery of NNPC can possibly give for approving the export of slop oil is that the NNPC is broke and needs money.
They pointed out that the same NNPC budgets billions of naira on Corporate Social Responsibility (CSR) and wonder why a fraction of that cannot be discounted for the sake of the survival of local industries, in line with the current administrations’s policy of supporting our local manufacturing industries more especially in this post Covid-19 economic recovery era.
Efforts to speak with the first three preferred bidders were unsuccessful.
On Monday, when the newspaper reached out to Sign Oil and Gas and Synthesis Integrated Pure Oil, their known telephone numbers did not connect. That of Kurpo Energy rang out endlessly without a response. A text message sent to the number was also not responded to.
The NNPC spokesperson, Kenni Obateru, could also not be reached Monday afternoon as his known telephone contact failed to connect on a number of occasions.
