The cost of berthing a petrol-laden ship in Nigeria is five times higher than that of its West African neighbours – a development that is pushing up the country’s petrol prices, BusinessDay’s findings have revealed.
Analysis and expert opinions show that exorbitant ship berthing costs at Nigerian ports are contributing to the high lightering expense, a key element of the country’s landing cost of Premium Motor Spirit (PMS), popularly called petrol.
Average cost in W/African neighbours five times lower
Industry data seen by BusinessDay showed that bringing a 30,000-tonne vessel of PMS to berth is currently $299,069, while the average cost in Ghana, Benin Republic, Senegal, and Tanzania stands at $52,472.
“The high cost of berthing a ship in Nigeria, which is often aggravated by unreceipted extortions by port officials when vessels arrive in the country are unavoidable costs in Nigeria’s petroleum,” said a senior energy expert close to Nigeria’s shipping sector.
“If Nigeria’s ports were fully functional, lightering cost would be a needless expense,” he added.
Lightering cost is 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 a downstream industry newsletter.
Findings by BusinessDay revealed the recourse to ship-to-ship transfer is due to the deep draft requirements (above 12m) of most of the other vessels bringing the refined products from Europe.
Further findings showed few jetties can successfully berth such vessel capacity in Nigeria as most jetties and channels are just about 7.0m.
Moses Adasu, a petroleum engineer exposed to Nigeria’s shipping industry, said ships conveying refined products from European countries cannot afford to deal with peculiar challenges surrounding Nigerian ports.
“So, the only alternative is to transfer the refined products into smaller boats to allow for easy passage across the channels to the jetties. This process, which is heavily dependent on the prevailing exchange rate, is an unavoidable expense scaling up the landing cost of Nigeria’s petrol,” Adasu said.
Oil marketers who spoke to BusinessDay on Thursday said the high landing cost of petrol, currently hovering around N720, has led to many petroleum products depots being deserted.
“Reducing landing costs by being cost-efficient ought to be a priority for government regulators,” Tunji Ademoye, an energy analyst, said.
He noted that even though the lightering 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.
Industry data showed there are four clusters of jetties and storage tanks in the Nigerian coastal areas: Lagos, Warri, Calabar, and Port Harcourt.
According to BusinessDay’s findings, Apapa, Tincan, and Ijegun areas have some jetties with drafts deep enough to take between 20,000-tonne and 100,000-tonne vessels. In the petroleum industry, a draft determines the minimum depth of water a ship (or boat) can safely navigate.
Findings showed the average draft in Warri can accommodate a 10,000-15,000-tonne vessel, Port Harcourt’s draft can accommodate a vessel of between 15,000-20,000 tonnes and the draft in the Calabar coastal region can only take on a vessel of 5,000-15,000 tonnes.
“The subsidy era gave the green light to lots of inefficiencies and avoidable expenses; now that the subsidy era is over, Nigeria needs to run a more efficient programme on how it delivers petrol,” Ademoye said.
Petroleum product dealers indicated that filling stations were closing down in huge numbers on a daily basis because the industry was getting increasingly difficult to maintain.
Speaking at the National Executive Council meeting of the Natural Oil and Gas Suppliers Association of Nigeria in Abuja, Benneth Korie, its national president, said many depots were either dry or out of stock.
He said: “Depot owners are so terribly affected by the increasing cost of crude oil and exchange rate, to the extent that many depots are practically deserted as their owners are unable to secure bank loans to fund their business due to high-interest rates.
“Banks are not willing to guarantee funds release to stakeholders as a result of the difficulty, instability and galloping rates of foreign exchange and high cost of the dollar. Many depots are presently dried up or out of stock, and this is no gainsaying as it is evidently verifiable.”
Korie said the worst hit is filling stations whose owners find it difficult to secure funds to procure products for their retail outlets. “Both the independent and major marketers are so terribly affected.”
He added: “As of today, filling stations are shutting down in great numbers on a daily basis and dealers are going out of business, with many more on the verge of bankruptcy because of their inability to secure funds to facilitate orders for their stations.
“The high dollar exchange rate against the naira rate was killing its businesses, requesting that foreign exchange for importing fuel should be pegged at N600 for the next three months.”