Forte Oil’s Sale of N50 Per Litre ‘ Buhari’ Kerosene
After the failed efforts of the Federal Government to ensure that marketers of petroleum products sell Dual Purpose Kerosene (DPK) at a pump price of N50 per litre, a leading Nigeria’s major marketer, Forte Oil Plc is pioneering a new initiative to sell t
Before now, Forte Oil Plc and other leading major marketers with track record of integrity in business had shunned importation and sale of Dual Purpose Kerosene (DPK) because of the high level of profiteering by some marketers engaged in kerosene business. Despite efforts by the successive administrations to ensure that DPK is sold for N40.90 at the depots and N50 per litre at filling stations, many marketers continue to frustrate these efforts.
Under the Federal Government’s subsidy scheme, the official ex-depot price of kerosene is N40.90 per litre, while the pump price is N50.
The Pipelines and Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), which is the sole importer of the product is mandated by the government to allocate to the marketers at N40.90, so that they will sell at N50 at the pumps.
However, except the NNPC Filling Stations, which sell at the government’s official price, all other retail outlets sell between N120 and N140 per litre, depending on the location and source of supply.
Several measures, including legislative probes by the past administrations could not check this trend as marketers continued with profiteering in the kerosene business, sourcing the product from the PPMC at N40.90 and selling at exorbitant prices.
THISDAY however gathered that many of those who got allocation whether major marketers or independent marketers ended up selling the product in the black market. The evidence of this becomes very clear from the fact the product was never available in the filling stations of many of the majors who regularly got the product even though some alleged that some NNPC officials didn’t quite play straight with them.
But rather than selling the product at the subsidised price of N50 per litre at filling stations, the beneficiaries of these allocations sell the product to middlemen at N95 or N100 per litre at the gates of the depots.
These middlemen, it was learnt, truck the product to the filling stations and sell between N120 and N150 per litre. Government’s apparent helplessness So, while kerosene continues to be imported by the PPMC and allocated to marketers as a subsidised product that is supposed to have a uniform price, it is sold in the market at different exorbitant prices as a deregulated product.
This frustration had prompted the late President Umaru Musa Yar’Adua to direct the late former Minister of Petroleum Resources, Dr. Rilwanu Lukman via circular SH/PSP/24/A/219 dated June 17, 2009 to eliminate subsidy on kerosene.
The directive, which was signed by the Principal Secretary to the late president, Mr. David Edevbie, hinged the decision on the fact that “subsidy payments by government on kerosene do not reach the intended beneficiaries.”
It is ironical that while the federal government continues to pay PPMC subsidy for allocating kerosene to marketers at the subsidised price of N40.90, the product is not sold to consumers at the subsidised price of N50 per litre.
Even the slump in the international price of crude oil, which has led to a drastic drop in the price of Premium Motor Spirit (PMS), otherwise called petrol, has not reflected in the price of kerosene as it is still being sold at high cost.
According to the latest pricing template by the Petroleum Products Pricing Regulatory Agency (PPPRA), even if kerosene were to be deregulated so that market forces dictate the price, the correct Expected Open Market Price at the moment should be N107.7 per litre and not N120 – N150 being sold by the marketers at filling stations.
Regulatory failure on the part of the Department of Petroleum Resources (DPR) accounts largely for the inability of the government to enforce its own price.
The agency recently set up a task force to supervise and monitor the sale of petrol and DPK in some depots, but the marketers have continued to sell above the official pump and ex-depot prices.
The then Executive Secretary of PPRA Mr. Reginald Stanley, had attributed the high cost of kerosene at the retail end to many factors.
Stanley identified some of the factors to include: long chain of handling; smuggling (because of the huge arbitrage in price); use of kerosene in diesel blending and fuelling aircraft, as well as blending cut-backs to produce emulsion used in road construction.
Explaining the complexity of the kerosene value chain, Stanley had stated that: “Kerosene, unfortunately, has one of the longest chains in handling and at any point it changes hand, it is at a premium; hence, the very high cost at the retail end.”
According to him, there are two grades of kerosene currently in the market: Aviation Turbine Kerosene (ATK) and Household Kerosene (HHK).
“ATK is used in fuelling aircraft, while HHK is used in domestic cooking and lighting homes,” he reportedly explained.
The former PPPRA boss said it was the global trend for refineries to produce mainly ATK for the aviation market, but added that Nigeria, Venezuela, India and Libya were among the few countries, whose refineries were still producing HHK.
Stanley had also noted that due to the inability of the Nigerian refineries to produce enough kerosene to meet increasing demand, it had become necessary to import the ATK grades commonly referred to as Dual Purpose Kerosene.
“This grade meets also the HHK, which actually is a lower grade of kerosene,” he said.
He described DPK as superior diesel as it blends perfectly with diesel.
“Just blending one litre of kerosene gives the marketer N100/litre extra profit.
Consequently, the temptation to blend DPK with AGO (diesel) is very high,” he added
Forte Oil’s succour
The recent commencement of sale of kerosene for N50 per litre by Forte Oil Plc will no doubt provide succour to the common people, who have been pauperised by the insensitivity of the marketers that have been frustrating government’s efforts to make the product affordable to the people.
Forte Oil’s effort is in line with the aspiration of the federal government for the product to be available at subsidised price.
The company’s sale of the product, which it officially called “Buhari Kerosene” in its retail outlets in Lagos will no doubt ginger other marketers to toe this patriotic line and help President Muhammadu Buhari in his efforts to ameliorate the sufferings of the people.
Residents of Lagos were excited by Forte Oil’s gesture, which the company has promised to extend it to other retail outlets across the country in the coming days.
THISDAY’s correspondent, who monitored the sale across Lagos on the first day, observed a huge turn-out of people mostly women in Forte Oil filling Stations Ikoyi, Victoria Island (Oniru), Aja road, Oba Akran, Agindigbi, Airport road and other parts of Ikeja.
An official of the Forte Oil filling Station in Oba Akran told THISDAY on condition of anonymity that the directive to sell kerosene for N50 came from the Chairman of the company, Mr. Femi Otedola.
“Chairman directed us to crash the price. This is Buhari Kerosene and you know that President Buhari wants kerosene to be affordable to the common people. We have no choice than to obey the last order. We have discharged one truck and we are expecting another truck this evening,” he said.
At Forte Oil filling station in Awolowo Road, Ikoyi, one truck of kerosene, which was yet to be discharged into the underground tanks, was seen parked at the station.
A good number of customers had gathered with containers, waiting to buy the product but no sale was going on.
An official of the station, who did not want his name in print also told THISDAY that the product would be discharged as soon as they finished repair works on the underground tanks.
“We have not discharged because we are working on the underground tanks. As soon as we finish the work, we will discharge this evening and start selling for N50 because that is the directive given to us,” he said.
At all the retail stations visited, long queues of end users were seen making their way to purchase gallons of kerosene.
A top official of the company, who spoke to THISDAY on the new initiative, reaffirmed the commitment of the company to best service delivery by being in the forefront of the pump price of N50 per litre for kerosene across its retail outlets.
“With this, Forte Oil has taken the bold step by making kerosene readily available at the official rate which is geared to impact positively on the lives of the citizenry as the average user now has the opportunity to buy directly from dispensing pumps at all Forte Oil retail outlets nationwide,” he added.
A housewife, who identified herself as Monsurat, however called for sustainability, saying that Forte Oil should be supported by the government to ensure that the sale is regular in all its filling stations.
However, the best way to sustain the sale is for PPMC as the sole importer of kerosene to ensure that Forte Oil alongside all major and independent marketers have regular and special kerosene allocations from all its imported cargoes.