Fuel imports flow to Nigeria amid recall row
By Melissa Akin and Tume Ahemba
LONDON/LAGOS, March 11 (Reuters) - Nigeria, a buyer of refined fuels on global markets despite its vast oil wealth, is seeking to quell anger over a recall of imported gasoline as the country lines up fresh deliveries, trade sources said.
Nigeria relies on a handful of global oil majors and European trade houses, as well as a growing number of Nigerian trading companies, to make up for a shortfall in domestic refinery capacity with supplies from European markets.
But late last month, as traders were putting in offers for the latest round of potentially lucrative fuel deliveries to the West African oil exporter, the industry regulator linked a spate of engine damage to one cargo of imported gasoline.
Officials at the Department of Petroleum Resources told Reuters it had ordered the supplier of the imported cargo, Oando Plc UNIP.LG to compensate motorists for the damage and take back 14,000 tonnes of fuel that had yet to be distributed.
ETHANOL AT ISSUE
The Department of Petroleum Resources linked the damage to the 20 percent ethanol content of the fuel. Nigeria recommends its suppliers blend no more than 5 percent, its officials said.
Oando, for its part, said it would sue Russian trade house Gunvor, which blended the cargo at its Amsterdam facilities, saying Gunvor concealed the ethanol content.
Gunvor said in a statement the load was tested at loading and met all necessary and contractual specifications, and was tested again before discharge and accepted by Oando.
"At no time was a limit on the proportion of ethanol in the gasoline agreed nor was the company asked to declare the composition of the cargo," Gunvor said.
"Had it been asked, it would have done so. Gunvor remains confident about the quality of product supplied."
Ethanol has a tendency to bond with water, raising the risk of engine damage if it ends up in a tank of gasoline.
Traders say that risk can be high in Nigeria, where heat and humidity can cause condensation in the distribution network, though ethanol has regularly entered the retail fuel system when it has been profitable for suppliers to blend it into cargoes.
"It seems that this quality of cargo has been supplied and is being supplied," a trader at one company that has delivered gasoline to Nigeria told Reuters, echoing Gunvor's suggestion that water contamination may have occurred in pumps or storage tanks.
OUTRAGE, BUT IMPORTS FLOW
The recall has renewed outrage at Nigeria's dependence on gasoline imports, prompting one newspaper reader to complain the oil rich country should "hang its head in shame."
Trade sources said the regulator was under pressure to avenge motorists, but imported fuel would keep flowing into the country.
"The people who pay for the whole chain of our business are suffering," a regular supplier to Nigeria told Reuters. "So something has to be done."
The head of the DPR was quoted by local and international media as saying Nigeria would not accept Gunvor cargoes, but privately DPR said a ban on Gunvor, a large supplier to the West African country, was unlikely to materialise.
Gunvor said it had not been formally notified of a ban, nor had several suppliers surveyed by Reuters.
Gunvor said in comments emailed to Reuters that none of its clients had asked to return product it supplied, or cancelled any orders.
Another trade source said he was waiting to discharge fuel and suffering no delays, though he said the DPR had stepped up testing of fuel that had already been discharged and was waiting in tanks and entering the retail network.
"I have not heard of cargoes being diverted," he said. "That would be a sign there is a problem." (For full Reuters Africa coverage and to have your say on the top issues, visit: africa.reuters.com/) (Editing by James Jukwey)
