1037 1037 Mapping and Spatial Distribution of Petroleum Products by ...

21st Century Human Habitat: Issues, Sustainability and Development

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Mapping and Spatial Distribution of Petroleum Products by Marketers in Nigeria 1*

Tata H., 1Ariyo T.O. & 2Omogunloye O. G.

1

Department of Surveying and Geo-informatics, The Federal University of Technology Akure, Ondo State Nigeria 2 Department of Surveying and Geo-informatics, University of Lagos, Lagos State Nigeria * [email protected]

ABSTRACT Nigeria is endowed with abundant natural resources of which petroleum resources play a dominant role in the economy. These resources can be effectively harnessed and managed for the benefit of all Nigerians. Unfortunately, the distribution of petroleum products in the Nigerian economy is fraught with complex problems resulting sometimes in petroleum products outages, inflated prices of products and contentions on the pump price of products. The aim of this paper is not only to evaluate the distribution of petroleum products in the country but to apply Geographical Information System (GIS) to highlight distribution weakness in the country. The research work was carried out using data acquired from NNPC, PPPRA and NEITI. These data was processed using GIS. The findings from the study show that the distribution system of petroleum products in Nigeria is ineffective and inefficient due to a number of factors which have been identified. To meet all this demand for these products without provoking market imbalances, the right supply levels are needed. Measuring this is always a challenge for the experts who work in the oil industry. Thus, the use of GIS should be employed in the downstream sector of oil industry. Keywords: GIS, NNPC, Petroleum Consumption and Distribution

INTRODUCTION Nigeria‘s economy is dominated by the oil and gas sector. In 2004, this sector accounted for about 80% of all government revenue, 90-95% of export revenues, and over 90% of foreign exchange earnings (Aluko, 2004). The country is Africa‘s leading oil producer and at a global level, ranks among the top 10 oil producers (Olokesusi, 2005). Most of the oil and gas is produced in the Niger Delta Region, presently defined by the political boundary of nine states: Abia, Akwa-Ibom, Bayelsa, Cross-River, Delta, Edo, Imo, Ondo and Rivers. The Nigerian oil and gas operations comprises of assets and infrastructure including 5,284 oil wells, 10 gas plants, 275 flow stations and 10 export terminals (Joab, 2004). All of these are connected by a network of pipelines that crises-cross the country. These developments often require a large chunk of the wetland to be reclaimed/ dredged. Oil and gas production has come at a great environmental cost to about 1,500 communities in the Niger Delta where the Nigerian National Petroleum Corporation (NNPC) oil venture partners operate. However, marketing of these petroleum products in Nigeria could be traced back to 1907, when kerosene was imported with an agency agreement believed to be the first was concluded by Secony Vacuum Oil Company (now Mobile) to market its ‗‘sunflower‘‘ kerosene. Thus, kerosene was the first petroleum product marketed in Nigeria and Mobil had the privileged of being the pioneer in this business (Nigerian National Petroleum Corporation, 1985). Distribution problem in general, is not a recent problem. The extractive/mining sector in Nigeria have, for the past decades shown comparatively slow rate of growth and have been, in the main, predominantly foreign-dominated. This reflects a fact that the sector is both

Tata, H., Ariyo, T. O. & Omogunloye, O. G. (2016). Mapping and spatial distribution of petroleum products by marketers in Nigeria. In Ebohon, O. J., Ayeni, D. A, Egbu, C. O, and Omole, F. K. Procs. of the Joint International Conference (JIC) on 21st Century Human Habitat: Issues, Sustainability and Development, 21-24 March 2016, Akure, Nigeria, page number 1037-1044


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technology and capital intensive, requiring a high level of sophisticated, expensive equipment and expertise, which are in short supply in Nigeria. Consequently, business features, irrespective of all glamours, gains and aspiration have their attendant problems as well. These problems associated with the business come in varied ways and takes different dimensions. The attendant problems may arise from logistics activities, inefficiency and mismanagement of the marketing mix. These problems plague the Nigeria oil sector in its effort to market petroleum products. These products are marketed by the multinational oil companies like Exxon Mobile, Total Finas etc. Despite the effort of government aimed at efficient distribution of petroleum products; the problems of inadequate and uneven distribution among others still threaten the marketing of petroleum products today in the country. As a result, these problems gave birth to independent marketers that served as panacea to the prevalent economic situation occasioned by inadequacy in petroleum products distribution in the country Independent marketers therefore were granted right to be involved in the industry as to bridge the gap created by distributors logistics, to ameliorate the suffering of Nigerians. Entry of independent marketers became welcomed and justified, in the oil industry. Prior to the birth of the independent marketers, petroleum product distribution was epileptic and unreliable. The Nigerian Petroleum Industry The petroleum industry can be classified by type of actors or by sector. The actors in the Nigerian industry consist of both private and public organizations. The public actors are the government agents and functionaries such as the Nigerian National Petroleum Corporation (NNPC) and its subsidiaries, the Department of Petroleum Resources pricing regulatory authority (PPPRA), among others. The private segment consists of both indigenous and foreign actors. The indigenous sector consists of private independent marketers. As far back as 1978, the concept of independent petroleum products marketing was introduced with a view to bringing indigenous independent marketers to that sector of the industry. According to Edoreh (1997), in 1979 a year after the scheme of independent marketers was introduced, there were not more than 20 (twenty) ―independent marketers‖. By 1993, the number had risen to 1,000. Today, the indigenous independent marketers are well over 7,948 (Petroleum Product Pricing Regulatory Agency, PPPRA, 2010). As a measure of the growing involvement of the indigenous petroleum products marketers in the economic development process of Nigeria, it is interesting that in 1981, they accounted for less than half – percent in terms of volume of petroleum products marketed in Nigeria. By 1998, they had captured about 25 percent of the market. Today, they account for nearly 40 percent of the volume of products marketed in country (NNPC, 2010). In terms of outlets, the major marketers have 2218 while the Independent marketers have 7948 outlets. The NNPC has 18 mega stations nationwide as at June, 2010 (Table 1.1). These indigenous independent marketers are competing with the established big (foreign) multinational enterprises usually referred to as the major oil marketers comprising: i. ii. iii. iv. v. vi.

Mobil Oil Nigeria Plc MRS Nigeria Plc Total Nigeria Plc Con Oil Plc Oando Nigeria Plc African Petroleum Plc


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These six major oil marketers control about 60 percent of the market. There are two major classification of petroleum industry by sector. These are the ―Upstream‖ and ‗‘Downstream‘‘ sectors. Table1. 1: Nationwide retail outlets 2009 census-summary distributed by zone Geo-Political Zone Marketer Type Marketer Type Total No of Outlets Major Independent North Central 355 1318 1673 North East 163 726 889 North West 265 1023 1288 South East 194 1227 1421 South South 224 1519 1743 South West 1017 2135 3152 Total 2218 7948 10166 Source: Petroleum Products Pricing Regulatory Authority Available at www.pppra-nigeria.org

In the downstream sector, activities are progressively falling within the control of private entrepreneurs, especially the indigenous independent marketers. It is the policy of the Federal Government that petroleum products be distributed by private companies. To this end, government divested a sizeable portion of its interest in oil marketing companies by selling some of its share to the public through the Technical Committee on Privatization and Commercialization (Christopher E and Adepoju A., 2012). The study looks at the various methods employed by the various marketers in Nigeria to distribute petroleum products from the refinery to the final consumers and types of channels involved. This reveals the extent to which the shortage of petroleum products as well as their adulteration could be traced to the distribution system.

Figure1. 1: Map showing the distribution of Depot in Nigeria (source: Pipeline product marketing company of Nigeria)

METHODOLOGY Data Collection Data used for this research work was gotten from PPMC (Pipeline product marketing company of Nigeria), NNPC (Nigeria National Petroleum Company), PPPRA (Petroleum Products, Pricing Regulatory Agency) NEITI (Nigeria Extractive Industry Transparency Initiative) and Internet wide searches. There were various methods that can be used to acquire data; the method adopted can be seen from the flowchart below Figure 1.1.

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21st Century Human Habitat: Issues, Sustainability and Development Georeferencing, and digitizing

Data acquired from existing map, image, Google earth and inventory

DataIntegration

Data Analysis Manipulation

Data display as Maps Charts Table

Figure 1.2: Flow chart for the research

PRESENTATION OF RESULT AND ANALYSIS The zonal petroleum product Consumption/distribution for year 2011 as seen in Figure 4.7 shows that South West has the highest consumption with 3,520,949 million litre consumed during the year, with the lowest consumption being South East with 254,437 million. Table 4.6 and Figure 4.8a below equally buttress consumption/distribution for the year. South West been the highest consumer, thus, could be as a result of the huge industrial activities taking place in this region while Southern East having the lowest supply of product shows that the level of industrial activities could be low. It is observed that the PMS and ATK product are consumed mostly in the South Western zone which again defined the kind of activities that can be identified in this region. South South region has the highest consumption of HHK and Brake Fluid in the country while North Central has the highest consumption of special products. However, Figure 4.15b show that South West 39% of the distribution, seconded by South South with 24%, North Central 17%, North West 7%, North East and FCT 5% and South East has just 3%. Table 1.2: Show the zones distribution of petroleum products in Nigeria (Petroleum Products Pricing Regulatory Authority Available at www.pppra-nigeria.org) Products

South West

South East

South South

North West

North East

North Central

3,640.69

20.40

0.08

20.00

80.30

4,841.65 5,688,450.2 5

FCT

Total

LPG

1,079.95

0.23

PMS

2,717,300.8 0

174,545.9 6

881,619.52

465,027.75

331,233.88

781,746.67

336,975.6 7

HHK

199,305.44

2,127.81

465,105.96

26,638.66

30,001.95

140,122.08

18,262.08

881,563.98

ATK

135,897.27

3,793.11

26,037.60

11,803.30

3,253.86

8,448.60

39,787.67

229,021.41

AGO

18,919.29

26,099.06

432,089.45

51,220.07

-

237,060.00

18,300.92

783,688.79

LPFO

967.28

-

102,063.98

-

434.21

216,415.35

161.17

320,041.99

4,598.43

951.77

1,788.65

957.04

1.87

2,109.48

555.93

10,963.17

45.93

0.98

8.41

1.51

-

9.14

1.80

67.77

Lubricating Oil Greese Pet. Jelly/Waxes

-

-

-

-

-

-

-

Bitumen

-

-

0.34

0.30

64.80

-

65.44

2.63

-

2.16

0.71

8.18

34,539.57

-

5,419.37

Brake Fuid

2.43

0.25

Others Total % Distribution

3,078,116.8 2

207,519.1 7

1,946,896.4 6

38.68

2.61

24.46

6.98

4.59

17.48

39,958.94 414,126.2 5

7,958,671.5 7

5.20

100.00

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Figure 1.3: Shows distribution/consumption of Petroleum Product by zone for year 2011 in Nigeria

Figure 1.4: Shows percentage of distribution/consumption of Petroleum Product by zone for year 2011 in Nigeria Table 1.3: Shows the contribution of major and independent marketers to the distribution of petroleum products distribution in Nigeria Marketers LPG PMS HHK ATK AGO LFPO Lub Oil Forte Oil

2,584.46

652,654.93

54,075.74

59,841.20

-

-

-

Conoil

-

934,743.04

68,551.31

169,180.21

-

-

-

Mobil

-

-

-

-

-

-

-

NNPC Retail Outlet

-

1,536,286.98

192,524.15

193,924.60

-

-

-

MRS

-

-

-

-

-

-

-

Total

-

-

-

-

-

-

-

Oando

-

-

-

-

-

-

-

29,257.15

2,564,764.58

585,555.79

-

-

-

-

-

-

-

-

-

-

Independent Marketers

Total

31,841.61

5,688,449.53

900,706.99

422,946.01

Table 4.7 and figure 4.10 below shows the contribution of major and independent marketer to the distribution of petroleum products in Nigeria. From the available data, both the major and independent marketer did not contribute to the distribution of AGO, LFPO and Lubricating Oil. This however, could imply insufficient supply of product to the Nigeria citizen. It also observed that independent marketers have contributed measly to the distribution of products in the country.


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Figure 1,5: Showing petroleum products consumption/distribution by marketer in Nigeria for year 2011

Furthermore, Figure 1.6 below shows the trend movement of petroleum/consumption by state for the past 3 year from 2009 – 2011. The trend shows that the consumption of petroleum products is higher in 2009 than 2010 and 2011.From the movement it is observed that the consumption is slightly higher from Edo to Kebbi State in year 2011 than in year 2010. Many factors could be responsible for this gap in consumption. However, one of the factors that might be able to result to this gap is change in price of petroleum products which could reduce the purchasing power of the people within the states and the country at large which is in conformity to Law Demand and Supply. Supply and demand is perhaps one of the most fundamental concepts of economics and it is backbone of a market economy. Demand is how much quantity of a product or services is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; this shows the relationship between price and quantity demanded (demand relationship). Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between prices and how much of goods or services is supplied to the market (supply relationship). Thus supply is a reflection of supply and demand which implies that more quantity of petroleum products will be demand if the price is reduced.

Figure 1.6 shows the trend movement of petroleum/consumption by state for the past 3 year from 2009 – 2011

DISCUSSION OF FINDINGS From the available data, the local refineries received a total of 40,405,605 barrels (5,284,675 mt) of (dry) crude oil and condensate and processed39,408,108 barrels (5,088,208 mt) into various petroleum products. The total production output by the refineries was


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5,379,854metric tons of various petroleum products. The combined average refining capacity for year 2011 was 24% as against 22% in the previous year. PPMC evacuated 5,208,930 mt of petroleum products from the refineries and it also imported 759,681 mt of PMS,AGO and HHK for distribution. Total value of imported products was $0.802 billion. PPMC sold a total of 13.21 billion liters of various grades of petroleum products through depots and coastal lifting. During the year, 1.37 billion liters of petroleum products worth about N141.13 billion was exported. A total of 8,199.02 million liters of petroleum products was distributed nationally giving an average daily consumption of 15.58million litres of PMS, 2.68 million litres of AGO and 2.47 million litres of HHK. The total petroleum products distribution of8, 199.02 million litres is about 3% lower than 2010 total volume of 8,476.99 million litres. This is due to nonavailability offigures from major retail companies namely MRS, Mobil, Total and Oando. The quadruple usually account for more than 50%of total petroleum products distribution. The distribution by zone shows the South-West with the lion share of 40% followed by the South- South with 24%, North Central with 17%, North West with 7%, FCT with 5%, North East with 5% and South East with 3%. Thus, scarcity of petrol has continued to prevail in the country, despite this significant increase in importation. Conclusively, with government claims that the landing cost of a litre of imported petrol put at N152.44, making it to pay about N55.44 on every litre of petrol as subsidy since the control price for her citizen is put at N97 per litre. When the N55.44 per litre is multiplied by a daily consumption of 40.32 million litres, it amounts to a daily subsidy expenditure of N2.235bn. The figure adds up to N69.29bn monthly. CONCLUSION i. With the current trends at which Nigerian economy is growing, the Country needs more pipeline distribution network. ii. From the analysis, trend movement of petroleum/consumption by state for the past 3 year (2009 – 2011), shows that the consumption of petroleum products is higher in 2009 than 2010 and 2011. iii. Finding also shows that South West has the highest zonal petroleum product Consumption/distribution for 2011 with 3,520,949 million litres while South East has the lowest consumption with 254,437 million litres (Figure 1.3). iv. Further findings from this research work, shows that depot within the country are not evenly distributed (Figure 1.3). v. Finally, the use of GIS should be employed as planning tools for proper and effective distribution.

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