How poor port infrastructure raises petrol landing cost

Akey elements of the landing cost of PMS when the PPPRA still published pricing template was Lightering Costs which accounts for about N2.75 on every litre. If Nigeria’s ports were functional, consumers could be spared this needless expense.

Lightering is the costs associated with the transfer of petrol from one vessel (usually the mother vessel) to a smaller vessel (usually called the daughter vessel). This is typically done in the open sea with the vessels positioned alongside each other, according to Ogechi Nkwoji, head, economic Intelligence research & Regulation, MOMAN in an article for the organisation’s newsletter.

The recourse to ship to ship transfer is due to the deep draft requirements (above 12m) of most of the mother vessels bringing the refined products from Europe.

But in Nigeria few jetties can successfully berth such vessel capacity as most jetties and channels are just about 7.0m. For example, at the Escravos chanel, the maximum draft at the channel during high tide is 6.2 meters, so large vessels wait for high tides to navigate across the channel.

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Some heavily-laden vessels have run aground requiring heavy machinery to get them out. Until they are towed, they clog the channel, obstructing vessels that follow draft rules on vessel capacity, and reducing how much revenue the Port Authority can earn as charges.

Ships conveying refined product from Belgium and Netherlands to Lagos cannot afford to deal with this challenge. So the only alternative is to transfer the refined product into smaller boats to allow for easy passage across the channels to the jetties.

There are 4 clusters of jetties and storage tanks in the Nigerian coastal areas: Lagos, Warri, Calabar and Port Harcourt. In the petroleum industry, draft determines the minimum depth of water a ship (or boat) can safely navigate.

According to Nwoji, Apapa, Tincan and Ijegun areas have some jetties with drafts deep enough to take between 20KT and 100KT vessels. The average draft in Warri can accommodate a 10-15KT vessel, Port Harcourt’s draft can accommodate a vessel of between 15-20KT and the draft in the Calabar coastal region can only take on a vessel of 5-15KT.

The Apapa jetty in the Lagos area, infrastructure deficit is the major reason why lightering of vessels is done, noted Nwoji.

“With a draft of only 7.5m, the implication is that the maximum of a 30KT vessel, depending on the vessel specification, can be berthed at the jetty. So, for every large vessel, for example, a 47KT vessel that plans to berth at the Apapa jetty, the product must be lightered into a daughter vessel with the marketers incurring costs of approximately $245,000 per lightering operation,” Nwoji noted.

Sometimes this might involve one or two lightering operations depending on the size of the daughter vessel and thus increasing the cost, a cost that is heavily dependent on the prevailing exchange rate.

Even though the process is subject to international standards and regulations, the need for product lightering, caused by poor, underdeveloped infrastructure presents several risks such as attack by sea robbers and environmental impacts such as potential oil spills and the need for added security, the report noted.

So though transshipment removes the high port berthing charges and also cuts short the time for berthing and mooring for a larger vessel, deal with the challenge of inadequate storage capacity restriction of a receiving terminal or even the financial capacity of the buyer, te process is expensive and prone to risk.