* 10 million barrel surplus of fuel waiting offshore
* Glut caused by government over-ordering of products
* Attempts to crack down on fraud has put imports in
* Oil import halt will hit European refiners
By Julia Payne and Tim Cocks
LONDON/LAGOS, Oct 17 The trading arm of
Nigeria's state oil company has suspended gasoline imports,
market sources in the region said, after over-buying in the wake
of a fuel subsidy scandal last year.
Gasoline gluts have occurred in the past off Nigeria, but
the scale is far worse than usual and a suspension of import
deals is very rare. Traders say it is possible the suspension
may extend until the end of the year - which will hit European
refiners that supply the market.
The Pipelines and Product Marketing Co (PPMC) has cancelled
cargoes and told traders it will make no gasoline purchases in
November, as it tries to work through a 10.2 million barrel (1.2
million tonnes) surplus of the motor fuel waiting offshore.
"All previously agreed laycans (deliveries) have been
cancelled," one regional trading source said, "Nigeria has about
1.2 million tonnes offshore waiting to discharge."
PPMC spokesman Nasir Imodagbe said by telephone he was not
aware of any cancellation of orders, but that a decision to
suspend imports that would be that of the regulator, the
Petroleum Product Pricing Regulatory Agency (PPPRA).
"Whatever volume the PPPRA allocate to us, we ensure to
deliver it. If there's going to be any suspension it should come
from the PPPRA," Imodagbe said.
PPPRA spokesman denied there had been any suspension, but he
added "we are regulatory body, we don't import ourselves."
But ship tracking data on Reuters showed around 45 oil
products cargoes anchored off the coast of the port of Lagos,
where the fuel comes in, waiting to discharge.
The import halt will likely hit oil refineries in Europe,
which supply most of the fuel to Africa's most populous nation.
At least 3.8 million barrels (450,000 tonnes) of gasoline is now
expected to be looking for new buyers in the coming month.
Nigeria normally imports around 7.6 million barrels (900,000
tonnes) of gasoline each month, with PPMC responsible for
roughly half of the buying.
The PPPRA, which allocates the other 50 percent of gasoline
imports to private traders, has not yet announced its final
requirements for the fourth quarter.
Market sources said the companies allocated imports by PPPRA
are not expected to book any gasoline purchases before December.
Industry sources said the glut had been created by a
crude-for-gasoline swap programme that was expanded by the
Nigerian government last year in the wake of a fuel subsidy
"It's a direct consequence of the crackdown on fuel subsidy
fraud," an official working for a major Nigerian fuel marketer
"A lot of marketers are not being paid subsidy, so the
government had to order the fuel itself. To do that, they had to
sub-contract to a lot of people to bring the fuel in. They
ordered too much."
Industry sources said the over supply had been exacerbated
by low wholesale prices of gasoline in Europe, which had
encouraged refineries and traders to do crude-for-gasoline deals
Traders in Europe had moved to dump a surplus of gasoline
into West Africa in return for barrels of crude oil. Despite
being Africa's largest oil producer, pumping 2.11 million
barrels per day, Nigeria is reliant on imports of products like
gasoline and kerosene due to an ageing refining system.
Parliament and the finance ministry last year both probed
Nigeria's fuel subsidy programme, which provides gasoline and
diesel to the population at prices well below international
The probes exposed a web of corruption and fraud by
government officials and fuel marketers that had cost the state
billions of dollars, with much subsidised fuel never being
ordered or being diverted to Nigeria's neighbours.
That led to the expansion of the crude-for-gasoline swaps
programme, in a bid to remove cash payments from the system.
"When NNPC proposed to switch to a system of swapping crude
for gasoline, everyone thought it was a brilliant idea as you
deliver gasoline, get your crude and don't face payment
problems," an executive at a trading company said.
"But then somehow, allocations went to too many people, who
kept delivering gasoline even before getting crude. So as a
result the issue of oversupply arose."
(Additional reporting by Dmitry Zhdannikov in London, Emma
Farge in Geneva, editing by William Hardy)