CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Petroleum products marketing and distribution began in Nigeria at the turn of the century by society vacuum oil company (the predecessor of mobile) which marketed sunflower kerosene. Product marketing has expanded to the extent that seven major companies namely: AP, OANDO, and a number of independent are now in the state.
NNPC was established in April, 1977 as a marage of the Nigeria National Corporation and Federal Ministry of mines and power. NNPC by law manager the joint venture between the Nigerian Federal government and another of foreign multinational co-operation, which includes Royal Dutch Shell, Exxon Mobile, Agip, Total final EIF, Clevon and Texaco (through the marger with chevron) conduct petroleum exploration and development the lead of the Nigeria wing of transparency, international says salaries for workers are how low to prevent graft.
As for September 2007, Nigeria president Umaru Musa Yar’adua plans to the company into five (5) new companies. The NNPC tower in Abuja is the headquarter of NNPC. It is located on Herbert Macualay way, central business district, Abuja NNPC also has zonal offices in Lagos, Kaduna, Port Harcourt, and Warri and there is also an international office in London, United State.
In May 2009, the NNPC identified that the Niger Delta unrest, had no impact on its business despite fight between government and rebels in this oil producing areas.
Around 1975, the marketing and distribution of petroleum product was entirely in private hand, owing to the quick recover from civil war. The overall expansion of economic activities and unprecedented exploring in the 1970’s the private companies were able to cope with the domestic demand for product and the severe shortage that ensure all over the country constituted a major bottle neck to further development. Thus prompted government to venture into petroleum product distribution and marketing. Before 1965, all petroleum product consumed in Nigeria were imported. In that year, almost 35,000 barrels per day were produced. Port Harcourt refinery was built by federal government and British petroleum through the 1962 government which created the Nigeria petroleum products and exported some quantities of products to the United State owing to the economic expansion in the 1970’s.
The demand for premium gasoline and gas oil recorded an unprecedented average annual growth rate of 30% between 1947 and 1977. To meet the domestic need interim arrangement were made from 1975 to refine Nigerians crude oil.
In Curacae and Rolteram for importation of the product to Nigeria.As at 1978 about 175,000 concessionary high covering the whole territory of Nigeria. Their activities were again interrupted by the second world war, but resumed 1947. It was 19656. Therefore, the oil was discovered in commercial quantity at Olobiri in the Niger Delta after several years of search and an investment of over 30 million naira. Shell started oil production and export from its Olobiri field in 1958.
Oil production and export from Olobiri filed was first started in 1958 by shell at a production rate of 5,000 barrels of crude oil per day. The quantity doubled the following year, and crude oil exports from Nigeria, rose to 2.0 million barrels per day in 1972 and reach a pack of 2.4 million barrels per day in 1979. Nigeria attained the status of a major oil producer, ranking the seventh in the world by 1972. We have since grown to become the sixth largest oil producing country in the world.
A refinery with 35,000 barrels per day crude oil processing was established in Port Harcourt in 9165. This met the domestic demand for white petroleum products excess fuel was expanded. After the civil war, it was expected to process about 60,000 barrels per day of crude oil. However, from 1970 after the civil war, the nation witnessed a very rapid economic recovery and expansion strongly impelled by revenue from crude oil. As a consequence, the annual consumption of petroleum products escalated of rate parlayed only by very few countries. Premium gasoline and gas oil for example, recorded an average of 30% annual growth rate. Arrangement has to be made from 1975 to refine Nigeria’s crude oil in Curacao and Rolterdam for re-importation of products to Nigeria. As at April 1978, about 175,000 barrels per day were involved. An increase in products demand covers 290% in about seven years had thus been recorded.
The severe shortage of petroleum products in the country as at 1974 and 1975 were attributed to inadequate distribution network for petroleum products. Shortage facilities provided by the seven petroleum product marketing companies could not hold sufficient stock for the nation’s consumption. To solve the problem therefore, government through the ministry of petroleum resources embarked on the planning for the construction of a country wide petroleum products pipeline network totalling of about 3,000 kilometres linked to shortage terminals (deposits) 17 towns. Four “white” products namely. Premium motor spirit (petrol) five star motor spirit dual purpose kerosene and automobile gas oil (diesel) were handle by this transportation and shortage system. Contracts were awarded between 1976 and 1978 to international pipeline constructors, at an initial cost of more than 500 million naira. Survey and preliminary work for project staned in 1977. The bulk of work was execute in 1978 and some sections of the pipeline system were commissioned in 1979, the major function in the 1980 and the rest were commissioned during 1987/82.
The pipeline network was divided into five system made up of (8) pipeline sizes, ranging in diameter from 6 inches and 16 inches. The terminal which was commissioned in 1981 will handled import of refined products from local or overseas refineries and is connected to the mosini deport by pipeline.
There are four single products pipeline from Mosini to the Lagos depot, an aviation kerosene pipeline from Mosini to llorin depot via Ibadan deport; all is the system 26 network.
Government share of crude oil as a result of various joint venture agreements with the international oil producing companies is highly 70% of total oil produced. This oil is sold for government by NNPC and the proceed are paid directly into federation account. As a member of policy, NNPC sell oil to customers without any intermediaries the customers are mostly direct oil users and crude oil our joint ventures partners. The only authority on who should be in control of Nigeria oil is the government sales are made to all customers at exactly the same price i.e the official price (OSP). There is no discrimination policy in customers relations. Government has directed that some of our neighbouring should have extended credit facilities of 90% days instead of commercial 30 days credit. The 90 days of credit from government to poor developing countries is the only area of inequality with regard to other customers All oil sold by NNPC was on long – term contract speculation in the sport markets were not part of Nigeria sales activities so a member of OPEC, Nigeria jointly with other members to determine the minimum price various members country should sell their crude oil.
When these price are balance sales pattern are determined by the desire of uses for specific crude oil distance to buyer and logistic of acquisition. In these days of over supply, there are needs for discipline amongst members both in maintaining the price balance and production allocations. The alternative is for the market to collapse in a price war, at the end, OPEC total sales will remains what it would have been if the rules lay down were observed. The joint venture normally put the 30% oil share through their system for down-stream operations.
1.2 STATEMENT OF THE PROBLEM
Three things are the main pillars on which the economy of any nation depends upon namely; water supply, fuel and electricity. These are relatively scarce in Nigeria. Petroleum product scarcity come to stay in Nigeria and these effect the economic life of our nation.
Moreso, along these lines are other associated problems namely mismanagement, inflation, price discrimination hoarding is exploitation incessant fire out break along with loss of lives and properties have the problems of Nigeria national petroleum corporation.
Also poor marketing and distribution of product is another problem since 1974/1976 until pipeline network. Depot and refineries were constructed and commissioned. Here are some other problems that may lead to problem in distribution of petroleum product in Nigeria and they are as follows:
Bad rates i.e not motorable road, mismanagement of deport and using of old and out-dated petrol and vandalisation of pipelines.
1.3 PURPOSE OF THE STUDY
The main purpose of the study is to find a way of reducing or solving the problem of fuel scarcity in Nigeria and make fuel available to all Nigeria at a convenient and affordable price. This study is also to examine the problems and prospects of marketing and distribution of petroleum products other purposes are as follows:
- To examine the level and performance of NNPC in the marketing and distribution of petroleum products.
- To make recommendation as to know if the problems can be solved.
- To identify and explain the problems associated with the marketing and distribution of petroleum products in Nigeria.
1.4 SIGNIFICANCE OF THE STUDY
The study will serve as a guide to Nigeria in obtaining utility from the purchase of petroleum product at all time. It will also stimulate other recorder with the attempt in finding out more specialised work in the area of distribution. Pattern and management especially in the marketing aspect of the organisation. These are yet to receive enough attention from management. It is therefore hoped that the result of this study will contribute significantly to the development of corporation and better wing of the society.
Also the result obtained from the study will provide knowledge for good policy formulation and better management of petroleum product marketing and distribution which will greatly help in reducing the present suffering experiences as a result of petroleum / field fuel scarcity.
1.5 RESEARCH QUESTION
The following research questions will be examined in the study.
- What are the prospects of petroleum products distributions in Nigeria?
- What are the holding capacities of NNPC depot for the “white products”.
- What are the various components of petroleum products?
- What are the NNPC convenient (internal and external) factors that create problems to petroleum product distributions?
1.6 HYPOTHESIS
In order to design this study in a proper research perspective, it is considered necessary for formulate this following hypothesis;
Hi: The marketing of petroleum product in Nigeria has a negative impact on Nigeria society.
Hi: The marketing of petroleum product in Nigeria has a positive impact on Nigeria society.
Where HO is null hypothesis and Hi is the alternative hypothesis.
1.7 SCOPE OF THE STUDY
The research study will majorly focuses on examining (3) major marketers and distributors of petroleum product in llorin Metropolis. Thus the NNPC as the major marketer and distribution as well as the independent marketer which as follows: OANDO, TOTAL AND MOBIL
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