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Fuel scarcity: Supply gaps and inland ticket sales as a panacea

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January 11, 2023
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4 min read

Energy is power derived from the utilisation of physical or chemical resources to provide light and heat for machines and transport. Sources include biomass, hydropower, geothermal, wind, biofuel, solar, nuclear, coal, natural gas and oil or petroleum, which despite the world transitioning to renewables, is the biggest source of all. 

Crude oil and its derivatives drive the industrial revolution, and it will take some time to move this from top spot. While Nigeria is not in the top 10 oil producers, she has the 10th largest reserve in the world. Typically, crude oil in its raw form needs to be refined to create energy value. 

The Oil and Gas sector can be broken down into:

  1. Upstream, which are the processes of drilling, exploration, and production of crude oil and gas;
  2. Downstream, which are the processes that take place after production to the point of sale. 

What is the supply situation like?

While this write-up is synonymous with the supply and distribution of all products, including Diesel, Aviation fuel, Petrol(PMS) and Liquified Petroleum Gas(LPG), we will single out PMS to hone in on our subject matter. 

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The Nigerian National Petroleum Company Limited (NNPC), as of 2016, was importing 90% of PMS and became the sole importer into Nigeria in 2017. This was after Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association, and Independent Petroleum Marketers Association of Nigeria stopped importing due to the inability to access foreign exchange as well as overdue/unpaid subsidy payments.

NNPC claims it supplies about 60 million litres of PMS daily. While this postulation can be contested, there is a difference between what is supplied and what is sold. Normally, a daily supply is the number of trucks or vessels that are discharged into a filing station underground tank (UGT) or into depot tanks from vessels and held as stock for the day; while a daily sale is what is dispensed from pump nozzles across retail outlets and commercial pumps daily.

Fuel scarcity and perennial supply gaps experienced in Nigeria are caused by some reasons highlighted below:

• Pressure on the NNPC as crude oil prices rise in sync with subsidy payments

• Delayed shipments and reduced deliveries

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• Increase in vessel cost

• Shortage of foreign exchange (FX) for import

• Sole importer risk

• Reduced distribution to retail outlets in terms of volume and regularity, leading to fuel queues at outlets.

Third-party Inland Depot Sales (Tickets)

To aid supply and distribution, the NNPC uses the following models to ensure the product is adequately distributed to retail outlets and points of sale:

  1. Coastal deliveries: A vessel is loaded and delivered to a depot.
  2. Pro forma invoice (PFI):  A company buys an allocation from NNPC and brings her vessel or uses NNPC vessels to transship its paid-for volumes to her tank farm.
  3. Inland or third-party liftings (Tickets): In this scenario, the NNPC used to move product to national depots via pipelines and then allocate tickets to customers based on the sharing formula, which hinges allocation on a number of stations, depots and spread.
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Enters TradeGrid

Pipelines as a mode of transporting products to depots has ceased due to aged infrastructure. Currently, the products are supplied by ships to third-party depots, where NNPC seeks throughput and then allocates tickets for onward loading and distribution.

Driving this deeper, the current model for third-party ticketing is an opportunity to digitise large ticket supply and distribution through ticket allocations uploaded onto the TradeGrid app and then paid for, thereby making it available to deliver to retail outlets on a self-collection basis. This is more so as a lot of companies who have allocations often do not have retail outlets that are functional.

How the ticketing process works with TradeGrid

As eCommerce grows in leaps and bounds, the need to simplify difficult and complex problems with digital solutions for ease of access to information, transactions and faster processing turnaround time is what the TradeGrid, a B2B marketplace platform, is poised to do across Africa.

TradeGrid has grown to become the largest network of independent retail stations and Large-Ticket trading by solving this problem through a seamless application of proprietary technology. Our solutions allow customers to achieve: 

  • Low-cost credit: a formalised and easily accessible credit option which will allow traders and operators to purchase as much product as they need and pay back as they sell.
  • Increased margins: Traders need to increase the margins on their products by cutting out redundant processes and signing up on Boost – our flagship Non-Fuel Revenue product. 
  • Reduced order fulfilment time: This is greatly important considering that efficiency and value is lost in the current long waiting time it takes for traders and operators to join long queues at the depot for new products offtake. Reducing this time will optimise their operations and cash flow.
  • Transition to a cleaner energy mix: One of TradeGrid’s Boost products is transforming the forecourt experience from simple fueling stations to holistic multi-experience centres. Making it robust with alternative energy mixes like natural gas, EV charging etc., wholesome retailing like grocery marts, auto parts e-stores etc., while also monetising its high footfall traffic and other latent assets through LED advert boards.

Written by Jide Pratt - Country Manager, TradeGrid Nigeria

TradeGrid
Author
We are Africa's leading B2B Marketplace platform having operations in a growing number of countries across the globe. In each of these countries, we partner with more than 80% of the leading product marketers, refineries, and mid-stream players, to deliver exceptional buying experiences through our digital platform. Our global and regional teams are comprised of world-class professionals, some of whom are top-tier strategy consultants, O&G experts, and supply chain managers, who are collectively striving to build additional efficiencies to the platform, with an ultimate aim of enhancing the TradeGrid Buyers benefits and experience.
TradeGrid
Author
We are Africa's leading B2B Marketplace platform having operations in a growing number of countries across the globe. In each of these countries, we partner with more than 80% of the leading product marketers, refineries, and mid-stream players, to deliver exceptional buying experiences through our digital platform. Our global and regional teams are comprised of world-class professionals, some of whom are top-tier strategy consultants, O&G experts, and supply chain managers, who are collectively striving to build additional efficiencies to the platform, with an ultimate aim of enhancing the TradeGrid Buyers benefits and experience.
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TradeGrid
Author
We are Africa's leading B2B Marketplace platform having operations in a growing number of countries across the globe. In each of these countries, we partner with more than 80% of the leading product marketers, refineries, and mid-stream players, to deliver exceptional buying experiences through our digital platform. Our global and regional teams are comprised of world-class professionals, some of whom are top-tier strategy consultants, O&G experts, and supply chain managers, who are collectively striving to build additional efficiencies to the platform, with an ultimate aim of enhancing the TradeGrid Buyers benefits and experience.

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