How we are deploying technology to check product diversion, reform downstream – PEF(M)B

*Petroleum products supply & distribution in Nigeria – a chaotic affair.

…To launch ‘Aquilla 2’ next quarter
…Set to begin movement of products by rail

Oscarline Onwuemenyi

11 March 2017, Sweetcrude, Abuja – One of the major fallouts of the recent fuel subsidy brouhaha and the subsequent probe into the operations in the nation’s downstream sector was the case of illegitimate transactions in the downstream half of the petroleum sector. Through a number of machinations, it was discovered, the transportation of petroleum products has become far more lucrative for unscrupulous marketers who fleece government daily by way of claims.

As part of the measures to check fraudulent claims in the disbursement of bridging funds to transporters of petroleum products, the Petroleum Equalization Fund (PEF), an agency of the petroleum ministry, has introduced a new dimension to oil depot management, with the commencement of electronic tracking of fuel tankers across the country, tagged ‘Project Aquilla’.

This development came after the tracking device was subjected to a rigorous ten-month test-run which commenced on July 1, 2011, to verify its authenticity. PEF was established by the Petroleum Equalization Fund Management Board (PEFMB) Act, in 1973, to equalise the cost of transporting petroleum products from depots to filling stations in order to ensure uniform prices of the products in all parts of the country. So far it has tagged over 10,000 trucks under the scheme.

The Fund is of the view that the increasing level of unacceptable claims presented by marketers can be checkmated by its eagle-eyed tracking device code-named “Project Aquila”. Aquila is a Latin word for a bird known for its strength, speed and swiftness.

The General Manager, Corporate Services, of PEF, Mr Goddy Nnadi, said with the new system on ground, payments for transactions could be achieved within two weeks of product delivery. He noted that “Aquila removes inefficiencies in the system. We ensure that the truck that loads arrive at its destination; that products are not discharged on the way or diverted, and that government gets its due in terms of revenue.”

Nnadi stressed that the Aquilla technology deployed by the Fund has drastically curtailed sharp practices by some oil marketers, adding that, “Over the past two months alone, close to 50 oil marketers have been sanctioned for various infractions on business operations processes”, ranging from falsification and forgery of documents, tampering with DPM markings and tags, and detachment and physical movement of DPM marking and tags.

According to the agency, the Federal Government has saved over N700 million since the introduction of this project.

Now, based on the success of Project Aquilla, the Fund has announced plans to launch Aquilla 2, which would further enhance its oversight operations in the downstream sector of the oil industry.

“’Project Aquilla’ was meant to cover depot to depot operations of oil marketers. For instance, once you load from Mosimi depot enroute to Gusau depot, it is configured in such a way that only the equipment meant for Gusau can receive that product for Gusau; which means if you take it to any other place, it cannot be received and, therefore, we cannot reimburse you for that movement. And once product is dispatched from Mosimi depot the information goes two ways: one the PEF headquarters, from where we have a birds-eye view of all the operations, and it also goes to Gusau and awaits the arrival of the truck for reception, which goes into the system preparatory for payment and we see it has been concluded and anticipating payment on that transaction.

“With Aquilla 2, however, it takes the delivery from the depot straight to the outlet, and when the marketer gets to the outlet, we can see it from our system here. It is at the outlet that the quantity is determined and how much goes into the tank for onward sales to consumers. The technology enables the PEF to see everything happening in real time, so no marketer can come back and falsify information because we can see the exact quantity of product delivered to the outlet.”

Describing how the Aquilla 2 project eliminates diversion of petroleum products, Nnadi stated that, “Because we have a complete view of every operation from the loading point to the receiving point (outlets), that has given the Fund bigger and better control of the activities of petroleum products distribution across the country. The Aquilla 2 completes the entire cycle because it helps us determine the quantity of product that is moved, how many got to the outlets for sale to people, and, of course, that determines how much we pay.

“This completely takes care of product diversion because a marketer cannot say he has taking products to a particular location whereas our records show it was designated for a different location. In fact, we cannot even pay you for bridging, not to talk of MTA. Because of we don’t see it getting to an outlet complete, for sale to consumers, you don’t get any payment.”

He explained that the Fund has done a test-run of the new phase in Lagos and Abuja with success, and plans are on the way to launch in the zonal offices including in Enugu, Ibadan, Gombe, and Kaduna, before the final roll-out to all the states of the Federation, which would give the agency full coverage of petroleum product movements in the the whole country.

He explained that the deployment of the Aquilla 2 technology fits into reforms recently introduced by the Fund, such as the rigorous background activities currently undertaken by PEF, including on-site visits by its staff to physically inspect outlets to ensure they meet specific requirements and capacity approved by the Department of Petroleum Resources (DPR).

And, with the recent effort by the government to resuscitate rail transportation in the country, PEF has announced it would soon begin rail equalisation for petroleum products transported by rail.

“We are moving into a new terrain, which is rail equalisation, so that movement of products would not be by road alone. We are working with the Petroleum Products Marketing Company (PPMC) and a company, RailConnect, to develop the modalities for the initial roll-out of the rail equalisation. We are using the EDZ Map, a mapping technology that will give you the distances which will determine how much you are going to pay per litre if moved by rail. We expect to start it by June, with the movement of products from Lagos to Kano. The committee, which includes PEFMB, has done the preliminary work; the IT people are now working on how to develop the transportation differential zones, and the amount to be reimbursed to marketers when they move products by rail.”

He added that “The Nigerian Rail Corporation (NRC) has a lot of rail tanks that are lying idle; if you go to Apapa there are lots of these tanks along the rail lines but because nobody bothers to use them they are there. If we switch to rail, the pressure on our roads will be reduced.”

He noted that in 2005, Oando Petroleum Company tried the rail option to transport petroleum products, but the exercise was not successful. “I think they are willing to try again. A lot of marketers including Pipelines and Products Marketing Company are collaborating with us.”

The GM explained that the rail option would not make tanker drivers redundant, adding that it would instead complement their jobs. He said, “The Nigerian economy is growing and the more it grows, the more you need the rail option. In the next one or two months, we hope to kick-start the project. “It will not be very fair to say that the country’s rail service is not effective. Trains have been moving from Lagos to Abuja so cargo trains will be useful.”

However, even as the idea by PEF to install tracking devices into petroleum haulage vehicles deserves to be commended, some stakeholders have wondered if it will really solve the problem of effective and equitable distribution of petroleum products throughout the country. One major problem in Nigeria has been the persistent inequitable distribution of petroleum products, even with the establishment of many depots and pipelines interconnecting them. With a total pipeline network of about 4500Km, and oil tankers (trucks) running into tens of thousands, littering major highways across the country, one would think the supply of petroleum products would not be an issue. But as with every other sector of the economy, the efficient distribution of petroleum products has been marred by round tripping perpetrated the marketers of the products.

Globally, pipelines have been the most preferred method of transporting petroleum products and industry players having recognised that pipelines have more advantage of economy of scale compared to truck transportation, have exploited it in transporting refined petroleum products.

Most countries, Nigeria inclusive, have thus built an extensive network of pipelines, with the singular objective of delivering refined products from one point to the other. This supply mode has however over the years, demonstrated its inability to guarantee adequate supply due to factors including sabotage, vandalism, and poorly maintained infrastructure.

Regardless, pipelines are most cost-effective means of transportation of petroleum products. Trucking costs escalate sharply with distance, making trucking the most expensive mode of petroleum transportation. In addition, of course, the logistics of truck transport for high volume/long distance shipments are so daunting and impractical. A trip from the Mosimi Depot in Lagos to a filling station in Maiduguri, Borno State, using an oil tanker would cost far more, compared to pipeline transportation.

The phenomenal increase in the number of operators in this sector of the petroleum industry and their sustenance can be traced to the easy money they make from an inefficient system. One may not be too far from the truth pointing accusing fingers at the regulatory agencies whose officials connive with marketers to short-change the government. So the issue goes beyond just vehicular tracking, but devising more effective means that would ensure better consumer access to products nationwide.

In the meantime, the agency has stated that payment for marketers claim for transportation of refined petroleum products were being carried out on a constant and continuous basis, adding that regular payments are being made to oil marketers across the country.

Nnadi stressed that the adoption of an automated system of petroleum products equalisation has greatly enhanced the freight payment process and thus eliminated problems of the past wherein marketers queued at the PEF premises waiting to be paid. He added that the PEF Board would ensure uninterrupted and improved service delivery always. It, however, stated that any complaints shall be looked into and appropriate sanctions applied.

“Efforts have been made to communicate our new policies and guidelines to marketers while the board further pledged to improve on its communication strategy with all stakeholders.”

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