Driving competition, efficiency in downstream operations

Despite being an oil producing country, Nigeria’s inability to refine fuel locally brings with it, distribution and efficiency challenges, leaving citizens at the mercy of middlemen who oftentimes seek to maximise their profits. With Pinnacle Oil and Gas’ $1 billion offshore subsea mooring petroleum terminal in Lagos, stakeholders are hopeful of improved efficiency in downstream operations. FEMI ADEKOYA writes.

For a nation that loses about N5 billion daily due to the gridlock at the Apapa port as a result of the inability to evacuate dry cargoes while also hindering the federal government’s ability to generate revenue by way of excise duties, getting a new player to address the monopoly is key.

Indeed, the freight cost of Nigeria-bound vessels appears to be ten times more because they spend days on the nation’s waters due to port congestion.

With the coming on board of Pinnacle’s $1 billion offshore subsea mooring petroleum terminal, stakeholders are optimistic that the dynamics may change and efficiency enhanced.

The facility constructed at an estimated cost of more than $1 billion has positioned the company as the leader in the industry both in terms of market share and volume of product supply.

The company controls about 23 per cent share of the downstream market in Nigeria. The terminal, which comprises the Single Point Mooring facility (SPM) and the Conventional Buoy Mooring facility (CBM) with the capacity to receive large import and export vessels, has addressed some major challenges facing the downstream sector. Specifically, the facility has reduced, if not eliminated, the inefficiencies and resultant high cost of operation occasioned by multiple handlings hitherto obtained at the nation’s port.

The efficiency and cost optimisation now brought into the petroleum products import and distribution system by the mooring facilities, signaling the berthing of bigger vessels directly at the Nigeria ports, and ending the use of daughter vessels to discharge, has eased the traffic congestion in Apapa.

With the berthing of bigger vessels at the Nigerian port where products are now discharged directly to storage tanks, the era of vessels taking about one month to completely empty their content has gone, as the discharge period has been reduced to just 48 hours.

In addition to the mooring facilities, the terminal has in it, storage tanks of 300 million litres combined capacity, and Pinnacle plans to ramp it up to one billion litres when the next phase of the project is completed.

According to the Chief Executive Officer, Pinnacle Oil and Gas Limited, Peter Mbah, besides the oil and gas markets facing complex of issues at the port, the port inefficiencies have resulted in significant negative impact on the Nigerian economy as it has translated to high final cost per litre of products and does increase the size of under recoveries done by the Federation.

He noted that the industry structure emanating from the operating model has also resulted in the congestion of the Apapa area with significant negative social impacts, leading to high volume of traffic on all access into Apapa with well-known effects on business life and health of residents along these routes.

“In deciding to take the challenge of transforming the industry, Pinnacle was driven by his mantra of being a company driven by innovation. We have always believed that the role of business and community is always to seek ways to make things better for the community.

“In line with this, in 2011, we started working on a concept to solve this problem which has resulted in the ultra-modern facility. To ensure the high quality of the resulting solution, we used some of the world’s best vendors from home and abroad in the design and delivery of this project,” he said.

He said the company has commenced the expansion of the size of the storage in two stages to the final designed capacity of 1 billion litres, while also diversifying its product range to include the capacity to store other products like LPG, ATK and other classes of Kerosene.

“We will also be incorporating the capability to blend products to produce various specifications of products to service other international markets. We are already in advanced conversations with the Dangote group regarding collaborations to complement the operations of the nearby Dangote refinery which is soon to come on stream, with a view to forming the nucleus of what we believe will become Africa’s largest energy logistics hub,” he said.

Securing government’s commitment
While inaugurating the facility on October 22, 2022, President Muhammadu Buhari had disclosed that the operations of the facility had eased congestion in the Apapa area, and reduced the cost of delivery of petroleum products to many parts of the country.

President Buhari, who has been championing reforms in the nation’s oil and gas industry, congratulated the Chief Executive Officer of Pinnacle Oil and Gas Limited, Mr. Peter Mbah, for establishing the terminal facility and providing hundreds of jobs to Nigerians.

Buhari specifically described the investment as a demonstration of the success of his administration’s agenda to transform the nation’s economy.

He urged oil and gas operators to take advantage of the ongoing reforms in the oil and gas industry as enshrined in the Petroleum Industry Act (PIA), adding that his administration is looking forward to more investments into the sector.

“I am happy today that Pinnacle Oil and Gas Limited leveraged the opportunities to establish this massive terminal facility. I am also aware that the operation of this facility would ease congestion at the Apapa area, would reduce cost of petroleum products distribution and ease delivery of products to many parts of our country while also creating job opportunities,” he added.

According to him, the success of his agenda for the development of the country is clearly demonstrated by this massive investment and obvious contributions it has made to the overall economic well being.

Buhari said: “Provision of energy security is one of the cardinal points of our administration. We have recognised that the seamless supply and distribution of petroleum products is challenged by infrastructure deficit and complicated by the congestion in the Apapa areas of Lagos since the start of our administration in the year 2015.

Lagos State Governor, Babajide Sanwo-Olu, said the commissioning of pinnacle oil Lekki petroleum products terminal in the Lekki free trade zone is another landmark private sector investment in the center of excellence, saying that Lagos is open to business and investment.

“And this is yet another demonstration of that. As the nation’s largest sub-national economy, we understand what our responsibilities are, to lead by example, to create that enabling environment that is most conducive for investment across all sectors,” he said.

He said that the petroleum products terminal has been designed to make possible the direct transfer of products from large vessels to the Conventional Buoy mooring (CBM) and the Single Point Mooring (SPM) facility.

“What this means is that vessels that wouldn’t come around here, 90,000 deadweight (DWT) tons, and 150000 DWT can conveniently berth here and discharge their products effectively within the minimum turnaround.

“There is no need for smaller ships to be deployed to transfer products to and from larger vessels which was often very necessitated at many other parting locations, which I’m told can take as long as 30 to 45 days.

“This facility will not only serve Nigeria. It has also been positioned to look at the opportunity of export on the West African corridor. Curating that single market, which Lagos will continue to remain the commercial and logistics hub of the entire West African region,” he said.

The road to energy security
For the Nigerian National Petroleum Company Limited (NNPC), the Pinnacle Oil’s facility would be handy to it as the state oil company grapples with delivering on its mandate of guaranteeing energy security for the nation.

The Group Chief Executive Officer of NNPCL, Mallam Mele Kyari, described the facility as the largest exit point for petroleum products currently in Nigeria, adding that Pinnacle’s facility has demonstrated capacity by easing the delivery of petroleum products in many parts of the country and during difficult situations.

Kyari said, “We have transformed, we are a commercial company, we have partners, and one of the great partners that we have is Pinnacle Oil and Gas. Without mincing words, this is the largest exit point for petroleum products that we have today.

“We will always remember that the exit point that will work for us in recent times is the Pinnacle facility. I congratulate you Peter for great work done, and for us at NNPCL, we will continue to partner with you and other stakeholders, other investors in this space as we continue to provide energy security for our country, which is very critical for all of us.

“All these wouldn’t have happened except there is an enabling environment. That enabling environment was surely created by Mr. President in the last seven years by allowing regulation to work, by allowing investors to have access to financing, supporting them in every way, and also bringing a framework which culminated in the Petroleum Industry Act (PIA) coming in place to make sure that business works in the energy sector.”

He noted that NNPC sees a great opportunity unfolding, particularly for Lagos with growth in population and as well as the substantial growth in energy requirements despite the conversations around energy transition.

According to him, the massive growth in today’s Nigerian economy requires energy, adding that facilities like the Pinnacle terminal would become very primary in the journey towards energy sufficiency and security.

Kyari noted that the largest concentration of downstream facilities was in Lagos and that they rely on Lagos to have energy security in the coming years while they continue to diversify in the best interests of Lagos because of the associated challenges, which the Pinnacle facility has helped to resolve.

On his part, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, described the terminal as a major breakthrough in instilling efficiency in the downstream sector.

He said the facility would significantly transform Nigeria’s downstream sector having addressed the challenges hitherto experienced with multiple handlings associated with discharging products from mother vessels through Daughter vessels with attendant delays, high costs and gridlock in Apapa.

Assuring Pinnacle of the agency’s collaboration and support for investing in the sector, Ahmed enjoined the company and other investors to always come to the Authority for support and assistance.

“I’m indeed delighted to be here to witness the commissioning of this huge facility. It is indeed a breakthrough in instilling efficiency in the downstream sector of Nigerian oil and gas. We are delighted to be here.

“We assure you that NMDPRA will collaborate with you and all those who are interested in investing in the mid and downstream sector of Nigerian oil and gas. We will support you and we will be collaborating with you.

“And if there’s any area that you need support, please, by all means, do not hesitate to come forward. I also wish to acknowledge the contribution of Lagos State towards this project, as well as others that will eventually make this area the hub for Nigeria oil and gas,” he said.

Noting that the inauguration of the facility was an exciting moment for the agency, Ahmed pointed out that Lagos Free Zone would be a major hub for not only West Africa but Africa as a whole and that Nigeria would benefit greatly from the economic benefits of these investments.

Also baring his minds on the transformational terminal, the Chairman of the Lekki Free Zone Development Company, Mr. Abiodun Dabiri, said the successful actualisation of the construction of the ultramodern terminal would go a long way in transforming Lagos into a world-class mega city.

As part of this modern industrial hub evolving in Lekki Peninsula, he added that Pinnacle’s successful completion of the terminal facility was particularly satisfying on account of the levels of perseverance required to bring it to fruition.