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New rule on cleaner fuel by July may spark off pump price hike soon—Survey

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The chances of the Nigerian National Petroleum Corporation (NNPC) to begin to import less sulphur content come July, the agreed terminal date for end of dirty fuel are looking very slim considering paucity of fund which may force it to revert to old order.

Otherwise, indications are rife that NNPC, the current sole importer of PMS may keep buying cheaper, lower-quality gasoline as the Federal Government has yet to circulate new rules forcing the switch to cleaner fuels.

The Minister of State for Petroleum Resources, Dr. Ibe Kachukwu had earlier in the year announced to raise standards for gasoline and other fuels imports from July 1, a move backed by the U.N. Environment Programme which has pushed for using cleaner fuel in the sub Saharan Africa and Nigeria in particular.

Industry analysts say with the government yet to issue rules that specify new fuel standards, traders said NNPC was likely to pick the cheaper fuel grades with more sulphur after the July deadline has passed.

Besides, the absence of clear government’s guidance raises issue of trust on the readiness of the NNPC in particular, to import cleaner fuel for the rest of the year as it was under no obligation to buy the more expensive gasoline after all especially in a recession economy.

Observers say if Nigeria’s goes ahead to buy cleaner fuel, it will be a shocker for refineries, particularly in Europe, which still export to the region fuel that contains levels of sulphur that has been banned in the European Union and United States.

Environmentalists argue that Sulphur is a major air pollutant particularly in cities.

Last week, NNPC sealed oil swap deal with 10 groups of trade houses and local companies included options for three different grades of fuel, one with a sulphur content at Nigeria’s current maximum allowed level of 1,000 parts per million (ppm), one at 500 ppm and one at 150 ppm, the limit that had been promised by the Environment Ministry.

Sources close to NNPC revealed that it had taken 1,000 ppm as a baseline, and would have to pay an extra $1.50-$2 a tonne for 500 ppm and up to $25 a tonne more for 150 ppm.

The 1,000 ppm grade pricing was based around a small premium or small discount to Platts pricing assessments of 1,000 ppm barges cif Lagos, with pricing varying between contracts.

When the government announced plans for new fuel standards, industry experts had questioned whether cash-strapped NNPC could afford better quality fuels. Nigeria, like other oil producers, has been hit by a fall in crude prices since 2014.

Already, the Standards Organisation of Nigeria (SON), the body responsible for setting requirements for imported goods, said in May that new quality rules would come into force on July 1.

However, stakeholders are apprehensive as the Department of Petroleum Resources (DPR), another regulator in the industry is yet to issue a list of revised specifications, so importers could stick with existing standards for now.


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