The Nigerian Oil & Gas Storage Industry (“the Industry”)’s performance has maintained an upward trajectory driven by increasing demand for petroleum products. The demand for petroleum products has been driven by urbanisation and the expansion of the domestic and international air travel industry. In Nigeria, the import of refined products is solely carried out by the state-owned enterprise, the Nigerian National Petroleum Corporation (NNPC), through the Pipeline and Product Marketing Company (PPMC), and a number of licensed downstream operators. Petroleum products are largely distributed via pipelines or tanker trucks, in a process referred to as bridging. In addressing lengthy offload time concerns, the Industry is shifting towards Single Point Mooring (SPM) and Conventional Buoy Mooring (CBM) systems.
Owing to the COVID-19 pandemic and the consequent movement restrictions, the supply and demand of petroleum products declined in 2020. We estimate that the annual consumption of petroleum products including Aviation Turbine Kerosene (ATK), Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO) declined by 20%, 17% and 2% to 800 million, 15.6 billion and 5 billion litres respectively in the 2020 fiscal year. In the near term, we expect consumption to improve considerably as business activities improve, albeit below pre-pandemic levels. In the 2022 fiscal year, we estimate PMS consumption will be about 21 billion litres while for AGO, we estimate circa 7 billion litres. However, ATK consumption growth will remain moderate due to reduced air travel relative to pre-pandemic levels.
Overall, the industry’s growth and profitability are still dependent on operator pricing and quantity. Decreased profit margins, idle or underused capacity, and constrained ability to pay operating and finance expenses can be countered by higher throughput revenue, product diversification plans and efficient downstream company operation (retail).
The Oil and Gas Storage Segment report captures the following: