PPMC’s approach of tracking trucks has improved supply of products nationwide – Nnamdi-Ogbue

05 January 2015, Abuja – The Pipelines and Products Marketing Company is a critical player in the supply chain of petroleum products across the country. In this interview with Ndubuisi Francis and Chineme Okafor, the Managing Director of the company, Mrs. Esther Nnamdi-Ogbue outlined efforts to stamp out entrenched abuses and ensure seamless supply of products

Esther Nnamdi-Ogbue, PPMC MD

Mrs. Esther Nnamdi-Ogbue, PPMC MD

Congrats on your appointment. But so far, how has it been running the PPMC?

It has been different. It is a new turf, coming from legal background but that legal background has helped me, knowing exactly what Mr. President and the Honourable Minister of State have in mind-having a more transparent PPMC and having our systems and processes work more efficiently. But, the bottom-line is for us to supply and distribute fuel across the nation more efficiently and have fuel at the stations at all times. That is the major mandate.

What do you consider as the major challenges in terms of supply so far?

Let us start from the whole process of bringing in products. Basically, we were meant to meet about 48 per cent of the national demand of 40 million litres daily, but we have been faced with the challenge of having to meet more than 90 per cent of the national demand. The majors and other marketers are not meeting their quotas and we have had to cover for them. As you know, the PPMC is marketer of last resort. When everything has gone differently, you can always rely on PPMC, and so, the situation we have found ourselves in is that the federal government has approved and released subsidy claims. However, there is difficulty in accessing foreign exchange. Product marketing is dollar-based and without access to foreign exchange, the marketers still have challenges. What that has done is that it has continued to put a burden on the PPMC, a burden that we are carrying and have had to run trying to solve the issues of product diversion, and making sure that all products being loaded actually get to their destinations.
We have had to set up a war room and operated it for the past one month. Everybody is there tracking and making sure that every product that is being dispatched get to their destinations. Currently, we have a situation where about 218 trucks that were dispatched about a month ago have not got to their destinations and they are still outstanding. We are still doing the reconciliation because we have all the details. These are the sort of things we have to deal with, but we are committed to getting fuel to the filling stations.
We have other challenges in the pipelines , which are the most efficient way of transporting our products and that is why we have an integrated network of pipelines and depots that are interlinked. Once we had the pipelines stopped working, it also compounded our problems.

But once we have the pipelines working, we don’t have to converge at Apapa, we can now go to Kaduna, Kano, and Makurdi. We now have different depots that we can easily truck out from and the more efficient way is to go to the nearest depots; to states that you are supposed to service.
But we have had issues of pipelines being vandalised periodically. A pipeline like the Makurdi-Yola has not worked in the last 10 years and those are the pipelines that must be reactivated because with their reactivation, it reduces the challenges of distribution as it becomes more efficient for us in the distribution of products. We are not putting our hands up in the air and saying that there is nothing we can do because we are doing everything within our powers to make sure that these issues are sorted out and that started with the Mosimi-Atlas Cove-Satellite and then we have moved towards Ibadan. The push is for us to get to Yola and then Ore. Those are just strategies that we have put in place and which we have also supported with actions
We have had the joint task force on the lines but they have not been as efficient as we expected and so what we have done is to get private persons and call-up contractors to secure the pipelines for us and that has yielded results because I remember the first Saturday that we got private contractors on the Mosimi System 2B, that same night vandals were caught for the first time in a long time.
With refineries gearing up to come on stream, we are also working very intensely on the Port Harcourt-Aba-Enugu line and also pushing very intensely towards Makurdi, which has not worked for 10 years but we are hoping to get it back on stream because the push is to get to Yola.
Those are some of the things we are dealing with and then we have the gridlocks and the bad roads. There is a particular bad spot around Jebba and then the gridlock in Apapa. These are all issues we have had to grapple with but it is not a challenge that we are leaving. These things have to work and we are committed as managers to do them.

What quantity of white products do you transport through the pipelines and trucks now?

Let us go through the promise we had made. We had said that in December we intended to bring one billion litres but we have done 1.3 billion litres and we intend to bring another 292 million litres of PMS. I would have to get details of the ratio of the quantities but once the pipelines are on, for instance, we discovered there was a fire incident at Oghere. We had to shut down the pipeline to control the amount of products that pass through and contain the fire. Those are the challenges and before that fire outbreak, we had two vessels of 30,000 tonnes waiting back-to-back to push through the Atlas Cove-Mosimi. But we had to stand down and once this happens, we shut down, repair the pipeline and continue to push forward, hoping that it stays on.
One of the things we have also done, going forward, is to make sure that the agreement we have with these private contractors is performance-based because there is no incentive if you keep doing the same thing.
If you said you can guarantee us the pipelines, there must be a price to it. We expect them to deploy all the technologies that are required; the sensors, fiber optics and all that is required, so that once the vandals approach the pipelines, there are sensors that will be activated and then an emergency response team that will immediately intervene so that we move from just reacting to vandalism to protection which is what we require to have free flow of products on the pipelines as required.

How many of the security outfits are engaged and what sections of the pipelines do they cover?

What we have done is on emergency basis and we have deployed to see their performances. We have given them like two weeks to see what they can do and that sometimes may not necessarily show us their capacities but for each of the pipelines, we have somebody on them and first we have no firm contract with any of them yet. Being a security contract, we are unable to advertise because you can advertise and vandals who have a lot of money will respond to that. But then, we have had to compare the performance of each of them and what we are doing right now is to get the contracts through due process. We are unable to advertise because we have our cost engineering department which will evaluate and tell us a cost per kilometre of what would be a fair price for each of the pipelines.
We also recognise that we have the Escravos-Bonny-Okrika line, which are offshore and in the swamps. It is the cost engineers that will give us the in-house estimate and they are working with the National Engineering and Technical Company Limited (NETCO) to give us the cost. In emergency situations, you may not get the most economic price but that we are trying to do professionally. While we are in emergency, we will still get the right price.

So, these peculiarities mean that you won’t have the contract open for bidding?

Security contracts are not advertised. I have never seen anyone advertise anywhere.

It appears from your analysis that virtually all the pipelines have been compromised?

When they were running, they were tampered with. We lost billions to pipeline vandalism and I need to give you the figure because most times we don’t realise that it is a big-time business for people who are involved.
For instance, from January to September  (2015) when we came on board, 2,055 vandal points were recorded on different sections of PPMC pipeline network and the most prevalent  been at the Atlas Cove because that was the more active line and which recorded an average of 50 vandal breaks a month.
During this period, we had a total loss of 531 million litres of PMS, which amounted to about N50 billion, that is the kind of figures we are talking about. If we are able to contain this menace, you can see the amount of losses that the country will stop. That is why for us in PPMC, it is a must to do and we cannot afford relax.

One of the most troubled spot is Arepo.  How have you been handling the spate of vandalism there?

Arepo has been contained substantially and the engagement with communities has been very helpful because they are the ones that intimate us of any unusual movement, just like the one we recorded last week. The truck had actually loaded and they have stations that they supply these products. These are the things we are going to follow up, we are not just going to stop at securing the pipelines. We are going to ensure that not only the vandal who is a foot soldier but to the people who actually receive stolen products. We will systematically follow up and identify the big kingpins behind them and we are hoping that the law enforcement agencies would be as efficient as it would be required to prosecute and bring them to book. With the EFCC coming in, we hope to see more prosecutions concluded and with lawyers in the background-I am a lawyer as well as the Honourable Minister of State, we know that it is not just enough catching a vandal but having your evidences protected before the court is more important.
In the past, maybe handling of the evidences had not been good enough, but with our legal backgrounds we would be able to guide the process, and ensure that little details that can be tendered as evidence in courts to get prosecutions are followed to the letter.

Do you have a timeline when you expect these measures to begin to really impact?

Definitely, we are hoping that by the first half of 2016, we will see tremendous benefits from all that we are doing now. One of the things that we hope to do in 2016 is having strategic storage on land. What has happened in the past is that we have strategic storage offshore and so the logistics of bringing them onshore can sometime be cumbersome but with pipelines coming back on stream, that is a more efficient way of moving products. Haulage and moving trucks all around would be a nightmare but with pipelines working, we would be able to store products and we have actually been pushing crude to Kaduna through the pipelines since Kaduna came on stream and then products to Kano. That actually relieves our haulage system and we think that within the first half of the year, tremendous changes would be seen and Nigerians should take it for granted that they will drive into filling stations and won’t see queues piling up everywhere.

In the last couple of days, there has been increased products distribution to retail outlets. What do you attribute this to, and is this sustainable?

Like I told you, we have been in the war room; we didn’t send any more volume than we sent before. But what we have done is to have a more effective way of tracking the volumes that we are getting in. The first time was about last week when I raised the alarm that 487 trucks had been dispatched for about four or five days but they hadn’t arrived at the destination depots. I heard that money is made for the rest of the year around this time and we said that our preparation was in expectations for what normally happens at this time as a routine and we were bent on breaking that backbone. What we have done is to track more closely and once we can confirm the missing trucks, we will publish it so that Nigerians can know the people to hold responsible.

Going forward, we will publish daily details of trucks bearing products so that all of us can track them together and when people know that there is no hiding place, they will tend to be more honest in their transactions because there is already profit but unreasonable profit is not acceptable because the template already provides for the profit margin. But when you want to, at the expense of Nigerians, make inordinate profit, we have to step in and say that it is not acceptable. We are also in close contact with Department of Petroleum Resources (DPR) to ensure that the pump price is maintained.

But isn’t the Petroleum Equalisation Fund (PEF) responsible for such tracking. What role do they now play?

Yes, but what PEF does is to measure the distance that the truck drivers had made and pay for the mileage, that is the bridging cost and that is basically what they do. They do not track the trucks real-time but from point to point maybe from Lagos to Suleja. But what we are interested in is tracking you via satellite from the depot if you leave there to the exact filling station that you are designated to offload. And not just offloading one compartment but to ensure that you offload the entire products at the beneficiary filling stations.

The PPPRA has ceded to the NNPC 78 per cent of first quarter 2016 products import allocation, how do you intend to manage this volume?

We have been spoon-feeding all the other marketers for a while because basically when they do not import, we stood in. But going forward from February, we will just maintain our NNPC retail outlets and affiliates.

Having 78 per cent of the import, we are poised to meet our own obligation. We have done over 100 per cent and so that perhaps gave the advantage of being considered for higher volume because in PPPRA’s estimation, we have coped and done well for them to entrust us with higher volumes, increasing it from 48 to 78 per cent, and I believe that it is this performance that has recommended us for higher volumes.

The Minister of State has often spoken about a plan to unbundle the PPMC, how is this plan going now?

We are actually already at an experimental stage at the PPMC right now. What we have here is the PPMC Pipeline with an executive director, PPMC Storage, PPMC Supply and Distribution and then PPMC Shared Services, all with executive directors in charge of them.
What that does is that you have people that are held accountable for different functions in the PPMC. If there is an issue with the pipeline; supply and distribution, there is someone to hold responsible and you have your line of responsibilities for which you are held accountable.

If there is an issue with the pipeline, I don’t have to contemplate on who to call but I know exactly who to hold responsible and that is what the unbundling tends to do. If we can work the pipelines properly and they become profitable, we spin it off as a company, same as the storage and supply and distribution. They ought to stand alone as commercial entities that are viable and profit-oriented so we move away from just looking ourselves as a ministry that just incurs loss but you are all fighting to see how you can actually make your own entity become a profitable commercial going concern.

Will this grant you complete autonomy from the NNPC and how soon do you expect to conclude this?

Autonomous? Once you are a subsidiary, you still have your shareholders and parent company and so it is nothing alien from existing ventures that are seeking to expand because once you are all jumbled together, efficiency is not really evident. But once every segment is compartmentalised, you can hold somebody responsible because that person has the responsibility of making sure that the entity he is overseeing is viable and it becomes his business. We have timelines and in 2016 we will look at the bottom-lines to know how viable they are because it is not to spin them off for the sake of spinning off but to make sure that they contribute to the bottom-line.

How are you going to manage forex challenges in your Q1-2016 importation?

We have the direct-sale-direct-purchase arrangement being finalised. We are coming from the era of offshore processing, which was publicly advertised. However, what we saw were a mixture of different people who put in, maybe because such arrangement had never been advertised before and people did not really know what we had in mind. What we have in mind is to have refineries refining our crude and we get products in place and so, the advert for the tender was modified to direct sale-direct purchase so that the middleman who makes profit at the expense of the NNPC is cut off and we get best value for our crude and maximum returns in terms of products being imported.

What is the status of that arrangement now, how soon is it kicking in?

The approval for the companies to participate after the tender had been reviewed, and has already been approved and so it is working.  What is left is the legal framework and the agreement between the parties.

How many companies have you selected in this process?

The crude oil marketing department would make the necessary announcement just the way the tender was announced. Our job at the PPMC is to make sure that we get the products and so we have a committee that is working on it.

Would that be ready enough for the Q1 2016?

These are reputable companies with established processes and so negotiating agreements with them will take a while, but let me not speculate, however, I know that it will happen very soon.

Does that then leave you with the challenges of accessing forex for Q1 2016?

No, because we have already extended the Oil Purchase Agreements (OPAs). When we came in and discovered that the OPAs were skewed against the NNPC, we had an amended modified OPA and so that has been rolled over to cover for the period until the new direct sale-direct-purchase come into place.

What about kerosene which most Nigerians use? You talk about PMS alone but a good number of Nigerians go through tough times to get kerosene for use.

We are looking at kerosene and LPG. We have been asked many times if they are competing fuels but there are massive drives for the use of LPG. Kerosene would be available, we have had issues when it was subsidised but going forward it may not necessarily be so because what we want is for the persons in the village to have access to kerosene.

One of the things we have also heard is that the DPK has been used as aviation fuel, so from January, we are saying that it is household kerosene so that there is no confusion on what sort of kerosene that is brought in and that is the only purpose it is meant for.

However, we have a more efficient and cleaner fuel in the LPG which we will soon roll out plans for in collaboration with the private sector, which we believe should be in control of this effort of having LPG.

With me as the managing director, I don’t want a show, I want it on the ground and there is strategy to ensure that it actually impacts. Background works are going on, massive background work. So that it is not a fanfare but that the villagers actually get convinced to use LPG because there will be access to different sizes of containers and refill plants. Those are the sort of background work we are doing and that is why we have been silent because we want to have a roll out that is efficient. Everything is happening in 2016 because we don’t have the time to explain, this is the time to work.

What about repeated scarcity of Jet-A1?

There is no scarcity since we got here and I can talk about it because we have made it a priority that as vessels are coming for PMS, DPK, they are also coming in for ATK (Aviation fuel). One just left last week, it is a priority and that is why you have not heard the airlines complain because it is all about programming. We have sat down at the PPMC to say that there must be a scientific way of approaching all these imports coming in. we have to have a scientific way of knowing when the stock level is running low and replenishing on a rollover basis, back to back.

Have you now concluded the scientific review of Nigeria’s daily domestic PMS consumption?

That study is still ongoing because it is not only the PPMC that is involved, we have the PPPRA which is involved. It is a multi-disciplinary approach and it is ongoing.

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