Opportunities ahead for Nigeria’s bunkering sector

Nigeria

Chuck Nwapa and Jimi Oyelola, managing director and chief financial officer of Plus Petroleum, talk to The Energy Year about competition in the bunkering sector in Nigeria, opportunities in expanding gas activities and the company’s strategy for growth. Plus Petroleum provides end-to-end bunkering solutions for shipping, oil and gas, dredging, fishing and naval clients along the West African coast.

What is competition like in the bunkering sector in Nigeria?
Chuck NWAPA: The first aspect to consider is that the bunkering sector is very capital intensive, which creates a high barrier for entry into the business. With ICE Brent crude at over USD 120, if one intends to have 5,000 tonnes of supply on a vessel, the investment is very high.
When asking oil and gas producers, they all say that in terms of repetitive costs, bunkering represents the highest opex. This is in part due to the fact that there are only a few serious players in the Nigerian bunkering sector, such as Propetrol and ourselves. The sector is very difficult to compete in as the government is not clear about rules and legislation that govern the market, which makes it difficult for new entrants to rise.
That shows the opportunities that lie ahead for the bunkering sector, especially in light of the Dangote Refinery, which, once it comes on stream, will move the market towards the nearby Lekki Deep Sea Port and see the volume of activities rise exponentially.

How would you describe the role of Plus Petroleum in this sector?
CN: Plus Petroleum was created in response to our realisation that the supply of tanker fuel was very inefficient as orders would often be delayed by two or three weeks, causing disruptions in operations.
We analysed the industry and saw an opportunity in 2013 when Nigeria was licensing the bunkering industry again. Typically, Nigerians are told that they cannot operate ships or tankers, but we started doing business with companies such as Century Energy and, over time, we managed to build capacity. We now own two vessels and control four and manage our activities through our partnerships with our technical partners, Hellespont AG (an established technical management company).
In terms of contracts, we work with all major IOCs and NOCs, such as Addax Petroleum, Shell, TotalEnergies and ExxonMobil. However, not only do we operate by fulfilling direct contracts, we also see ourselves as a physical bunker supplier so we also assist other contract holders in fulfilling their contracts.

How does Plus Petroleum intend to position itself for Nigeria’s Decade of Gas?
CN: We obviously see a global trend towards the use of gas with LPG and LNG, and the maritime sector is no exception. We see ships moving away from petroleum and going towards gas-powered engines. We see an opportunity there and are looking to integrate infrastructural capabilities that will allow us to supply these products.
The market for gas, however, is thus far not properly priced. There is still some confusion due to current events such as the elections coming up and the PIA [Petroleum Industry Act], which recently passed into law. Once the market stabilises, we will witness massive investments in gas and we will manage to invert the import trend and be able to export.
We are having talks with NLNG in order to secure a contract which we believe we are well positioned for. However, we will need to contract some tanks as the infrastructure is quite different and we are giving ourselves two years before that relationship becomes fruitful.
To position ourselves for that trend, we have been approaching modular refineries in the hopes of acquiring equity in their business. Since modular refineries have been increasing in number lately and are facing financial constraints, we believe it to be the perfect timing to both develop their activities and secure a guaranteed output of LPG for us to supply.

What future opportunities are you aiming towards?
CN: We are established as a company in the Nigerian sector but we see ourselves growing. All of our products are IMO compliant, which is a competitive advantage. We’re also currently investing in three new vessels for about USD 15 million in total – two small ships and one 10,000-tonne newbuild tanker, which will be mainly used for deep offshore deliveries such as Shell’s Bonga and TotalEnergies’ Egina.
Any international company requiring bunkering services in Nigeria, such as BW Offshore, could benefit from contracting our services, as most global bunkering companies don’t understand the local market well and usually cannot provide their services here.
We are a local and reputable company, and we see an opportunity in securing partnerships with a global bunkering holding in order to provide high-quality services in the West African region.
Our growth is also marked by the recent acquisition of a tank farm in Warri to support our offshore services. We are planning to expand to 40,000 tonnes of capacity.

What is your regional expansion strategy?
CN: We have a five-year plan for our regional expansion. Like any major bunkering company, such as Monjasa, our business is usually spread across a couple of locations. We are an African-built business and intend to grow in Africa first. Ghana and Angola offer exciting markets which we could be aiming towards in the next five years.
Depending on the chosen locations, the strategy might differ. Looking towards Durban, we might not start physical operations right away but enter as traders. For other destinations we might open a local office first and once we have more insights on the market dynamics, we would start physical operations.

What role does technology have in bunkering activities?
CN: Technology can play a role, especially in terms of transparency and fraud control. We see Singapore having bunker delivery notes that are now completely digital, or ExxonMobil, which intends to deploy Coriolis flowmeters on its vessels.
We intend on our side to have electronic flow meter systems (EFMS) in order to digitally monitor the amount of product being pumped through our system, which will help increase efficiency and control.
Technology and digitalisation are inevitable and we are well positioned in order to best utilise the potential they offer. We already see the younger, more tech-savvy generations leveraging these technologies and monetising them in ways that hadn’t yet been developed.

What is your expansion strategy regarding funds?
Jimi OYELOLA: So far, we’ve been able to fund our trading expansion majorly by building up our own capital over the last few years by ploughing all of our profits into our trading business and increasing our trading capacity year by year.
In addition, we’ve had significant support from our suppliers and trading partners. We have a sizable open credit account with these suppliers which allows us to increase our trading capacity.
Finally, we have credit facilities with the local banks in Nigeria, which allow us access to credit very quickly after supply. For a trading and supply business, offering credit to our clients is paramount to us and so these multiple options or tools in our locker, as it were, give us the ability to not only trade more but offer longer credit terms to our clients.
To fund our expansion, we’re looking at a multitude of options as well. As an example, we’re working with some development banks in Nigeria to acquire a tanker vessel that will expand our business lines. We’re also currently seeking international financing at better rates as we possibly expand to other countries outside Nigeria.

What is your strategy in welcoming foreign and local investments across its operations?
JO: At this time, Plus is not actively seeking foreign and local investment, but we will seek foreign investments in the very near future. We are positioned to make this happen for many reasons:
At Plus, we’ve always operated best corporate guidance practices in all respects. We’ve had that corporate culture from the onset because we knew that eventually, we would need to seek local, but more importantly, foreign investments to really expand our operations.
We’ve kept clean and open financial books, hired what we consider to be the best talent for the available positions, and ploughed the majority of our profits back into the business. We’ve intentionally and strategically built financial history and track record by strategically partnering with local finance houses and banks on our trades. This was done in an effort to have multiple partners and options, putting us in a strong position.
We’ve acquired assets key to our business and are in the process of acquiring even more. All our clients are also strategic clients with impeccable repute and have gone through our rigorous KYC [know your customer] process. We also ensure that we trade with only the best traders in the market which gives validation and credit to the kind of company we are.
We feel that all these factors make us attractive and give confidence to potential finance partners in the long term, when we do decide to actively seek more local and foreign investments.

How is your company dealing with the FX issues currently plaguing the Nigerian economy?
JO: As we are an import-based economy, all businesses in nearly every sector need to find practical steps to deal with the FX issues to survive. At Plus, we have transitioned our prices to accommodate the FX volatility and its lack of availability.
Wherever they can, we encourage our clients to pay in US dollars, and as they are majorly oil producing companies, some are able to do so. We supplement that with FX purchased from the available CBN windows – currency exchanges with exporters on the Investor/Exporter window and FX allocations won from the available CBN bid windows. We are always actively seeking alternative sources of FX.

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