Thursday, 16 January 2014

Oil bunkering: Harnessing opportunities in Nigerian waters



Despite the misconceptions about the business, the resuscitation of oil bunkering operations in the Nigerian territorial waters has huge economic benefits, DAYO OKETOLA writes
Oil bunkering is an operation involving the fuelling of ships of all kinds on the high seas, inland waterways and within the ports. However, this line of business has suffered serious misconception in Nigeria. What comes to mind whenever oil bunkering is mentioned in Nigeria are thoughts of illegal oil bunkering, oil theft and pipeline vandalising. Indeed, the line between crude oil theft and oil bunkering has become very blurred in the country due to a misunderstanding of what oil bunkering operations entail. This, according to experts, is largely connected to the proliferation of crude oil theft that is already denying the country huge revenues in trillions of dollars.
The Executive Director, Anyiam-Osigwe Group, the parent company of Nuel Energy Limited and PSTI Oil & Gas, which is involved in bunkering operations, Mr. Michael Anyiam-Osigwe, said, “The bunkering business was suspended for quite some time because there is a misconception about it in Nigeria. When we talk about bunkering, people think it is an illegal activity and this is not correct because when you steal crude, that is not bunkering, it is crude oil theft. If you are doing illegal bunkering, it means you are engaged in bunkering operations without a licence.”
In an attempt to explain what led to the widespread misconception about oil bunkering in the country, Anyiam-Osigwe, said, “What I suspect is that when people steal crude oil, they use vessels to sell it to other ships on the sea. So, that becomes illegal bunkering because you are not licensed. It is also oil theft because you have stolen the crude and you are selling to users as though you are bunkering. This is because once you are doing a ship-to-ship transfer, it is called bunkering. In other words, once a smaller ship is pumping petroleum product into a bigger ship, that is how bunkering operations work.”
According to him, bunkering is like running a gas station on the sea to provide fuel such as marine diesel, lubricant and others to vessels. He added that bunkering companies sometimes provide fresh water to vessels on the sea.
When the Federal Government approved the return of oil bunkering operations to the country’s territorial waters recently, some people criticised the government for ‘legalising’ oil bunkering as if it was illegal in the first place.
Conveying President Goodluck Jonathan’s approval to stakeholders in Lagos recently, the Director, Department of Petroleum Resources, Mr. George Osahon, similarly described bunkering as a downstream business involving the fuelling of ships of all kinds on the high seas, inland waterways and within the ports. Usually, the fuels supplied include Automotive Gas Oil or diesel, Low Pour Fuel Oil and recently, Liquefied Natural Gas.
“Bunkering as a legitimate business line should not be confused with illegal trade in stolen crude for which the same term has been freely used in the Nigerian lexicon,” he said.
Osahon said bunkering was introduced as a legitimate business activity with licences issued by the DPR in 1979, adding that not much record of bunkering activities were recorded in the country prior to that time. However, owing to some abuse of the system, he said bunkering operations were limited to five major oil marketing companies in 1984.
“In 2000, bunkering operations were again put on hold by the government on account of the subsidy on petroleum products, which more or less, gave the operators windfall profits that did not trickle down to the government,” he said.
Thirteen years after, the Federal Government approved the resuscitation of bunkering activities in the country and Osahon said this development would generate revenue for the government and create employment opportunities that would buoy the economy.
According to the Chief Executive Officer, Ships and Ports, Mr. Bolaji Akinola, an average of 5,000 sea-going vessels berth at various Nigerian ports every year. With the suspension of bunkering operations, these ships, according to marine experts, go to neighbouring countries such as Senegal, Cape Verde and Cote D’Ivoire to refuel.
But the DPR director said the resumption of bunkering services in the country would save oil, gas and marine operators the stress of going to these neighbouring countries to fuel vessels operating in Nigerian territorial waters.
He said, “From structured supply of bunker fuels to various vessel types operating in the country; licensing of bunkers including licence renewals, registration of vessels for bunkering business annually by the DPR will generate about N250m. The economic benefit is huge because this will be a stimulus for growth in other sectors of the economy, including inland ports and waterways.”
Osahon foresaw an increase in marine activities in the country, stressing that the nation might become a hub for bunkering operations in the sub-region.
Potential beneficiaries from the resumption of bunkering operations, according to him, include fishing trawlers, LNG tankers, Very Large Crude Carriers, Ultra Large Crude Carriers, coastal tankers, bulk cement cargo carriers and bulk wheat cargo carriers.
Others include General Cargo Carriers, container carriers, Floating Production Storage Offloading vessels, FSO, rigs supply vessels, tug boats and marine support vessels and other offshore oil facilities.
Anyiam-Osigwe said, “Bunkering is a hospitality business in that when a vessel is coming into Nigeria and knows that it will get bunkered easily for fuel, lubricant and water, then freight will be cheaper.
“This is because the vessel will take less bunkers and carry more load. So, when they come here, they will do the refuelling and this will also pay the country better. Freighting goods to Nigeria will be cheaper and the consumers will benefit from this.”
Explaining the requirements for bunkering operations, Osahon said, “All bunkering operations in the country will be licensed by the DPR. Guidelines have been prepared by the DPR to regulate the business in accordance with the provisions of the Petroleum Act. The guidelines recognise two types of bunkering operations and licences will be issued in accordance with the nature of operation, which requires different qualifying criteria.”
According to Osahon, the DPR is responsible for the licensing and supervision of bunkering operations in the country, while the Nigerian Maritime Administration and Safety Agency is responsible for qualifying vessels for bunkering in accordance with local and international standards
He said, “The Nigerian Navy is in charge of security and enforcement of bunkering regulations. The Federal Ministry of Fisheries will identify vessels fishing under NIMASA. Nigerian Ports Authority, Customs, Nigerian National Petroleum Corporation and Ministry of Transport all have major roles to play to ensure successful bunkering operations.”
The DPR boss said the quality of fuels for bunkering operations in the country is as specified by the International Maritime Organisation and agreed between the buyer and the bunkering operator.
“Bunkering companies are to source their products independently and are, therefore, responsible for the quality of such fuels. For an effective bunkering operation, participating companies are enjoined to maintain reasonable bunker fuels stock as only product availability guarantees hub patronage by vessel owners,” he added.
The Director in charge, Directorate of Marine Services, Nigerian Navy, Navy Captain S. O. Ayeni, warned that any ship that must bunker in the country’s territorial waters must fulfil the requirements of the Navy.
 “The operator will be expected to present to the Nigerian Navy headquarters an application for bunkering clearance detailing the vessel involved, location of bunkering operation or discharge point, quantity of bunker fuel and duration of the operation,” he said.
Ayeni further explained that the operator must disclose the source of his bunker fuel, adding that in view of the poor state of the refineries, the product must not come from the country; otherwise, it would be regarded as stolen oil.
He also said the operators must obtain licences and certifications from the DPR and the NIMASA on the quality of the products and the vessels.
“All these conditions will be verified at the Directorate of Marine Services in Lagos for validity and correctness; and if they are in order, recommendation is made to the Naval Headquarters for prompt approval of a particular bunkering operation as captured in the application,” Ayeni added.

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