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MARKETING OF PETROLEUM PRODUCTS

ABSTRACT

This project is aimed at examining how petroleum products are marketed and the problems associated in doing so. The objectives of this work among others are to examine if petroleum products in Benin depot are adequately to be distributed to sales outlet, and if favourism and corruption affect the distribution of these products. To resolve these contention issues, data were collected through questionnaires and oral interview and these data were analyzed through chi-square. When the hypotheses formulated were tested and analyzed, it was observed that, petroleum products are inadequate for distribution at Benin depot NNPC controls the distribution of the product and there is too much favouritism and corruption in the distribution of the products. Based on the above findings, some recommendations made are that, government should invest more in the petroleum sector, private marketers should make contentious efforts to implement governments efforts, but to mention a few. 

CHAPTER ONE

INTRODUCTION

1.1  Background to the Study

Petroleum product marketing and distribution began in Nigeria at the turn of the country by simony vacuum oil company (the producer of moils) which marketed such flower kerosene product marketing has expands to the extent that seven major companies namely, AP, OANDO and a number of independent are now in the trade. NNPC was established in April 1st 1977 as a manager of the Nigerians National co-operation and federal ministry of and power NNPC by law manager the joint venture between the Nigeria federal government and another of foreign multinational co-operation, which includes vagal Dutch shell, Exxon Mobil, Agip total final ELF, chevron and Texaco (through the merge with chevrons) through collaboration with the Nigeria government conduct petroleum exploration and development. The lead of the Nigeria wing of transparency international say salaries for workers are too low to prevent graft.

As from September 2007, Nigeria president Umaru Musa Yar’adua plans to split the company into five (5) new companies. The NNPC tower in Abuja is the headquarter of NNPC. It is located on Herbert Macaulay way, central business district, Abuja NNPC also has zonal office in Lagos, Kaduna, Port-Harcourt and worried there is also an international office located in London, united state.

In May 2009, the NNPC identified that the Niger Delta unrest, and no impact on its business despite fight between government and bevels in this cil producing areas. Around 1975, the marketing product was entirely in private hand, owing to the quick recovery from civil war. The overall expansion of economic activities and unprecedented exploring in the demand for petroleum product in the 1970s the private companies were able cope with the domestic demand for product and the severe shortage that ensure all over the country constituted a major be title neck to further development. This promoted government to venture into petroleum product distribution and marketing.

Before 1965, all petroleum product consumed in Nigeria were improved. In that year, all most 25,000 barrel per day were produced, Port Harcourt refinery was built by federal government and British petroleum through 1962 government which created the Nigeria petroleum refinery company. The refinery initially met the domestic need for white petroleum product and exported some qualities of product to African countries and high pure fuel oil do the united state owing to the economic expansion in the 1970s.

The demand for premium gasoline and gas oil recovered on unprecedented manage annual growth rate of 30% between 1947 and 1977. To meet the domestic need interior arrangement were made from 1975 to refine Nigeria’s rude oil in curacaos and Rotterdam for importation of the product to Nigeria. As at 1978 about 175,000 barrels per day were involve. This off shore refining arrangement continued until two new refineries were commissioned in warn in 1978 and Kaduna in 1980 the two refineries have a combined processing capacity of 20,000 barrels per day. Recent forecast, however, indicate further increase in the domestic demand of petroleum product and the fourth National Development plan provides for the building of two more refineries. Petroleum product pricing was not informed through the country. The pump price depended on point of sales and this affected distribution and even development of the country. The oil marketing companies naturally concentrated their activities in area where cost of distribution was lowest and profit was high. Lagos and Port-Harcourt area were serves which the hinterland was not product adequately supplied encourage even distributed of product to all parts of the country.

Government introduced the uniform pricing system in October, 1943 for all grade of product and to differentials in the cost of product the decree 9 was promulgated, setting up the petroleum equalization find management board with the following function.

i.      To retraining surplus revenue recorded from oil marketing companies.

ii.     To reimburse companies for losses offered as a result of sales of product at uniform prices all over the country.

iii.    To recover the differences between the landed costs imported product and the open market price in the country.

1.2Statement of Problem

It is on record that petroleum resources contribute about 70 percent of Nigeria across National product and about 80 percent of her export earning. Also petroleum resources have a lot it impact on national productivity. As a result, the distribution of the essential aspect of productive. Resources need to be efficient in not only in personal but also in terms of another aspect of logistics. 

To this end, the study attempt to provide answers to the following question what is responsible for the scarcity of petroleum product at different time in the country that are the types of markets and distribution channels involved in the marketing the activities of channels members.

What are the motivating factors and to what extent can the factors be addressed in order to ensure staff to duty and higher productivity?

1.3Research Questions

The following research questions will be useful to understand the topic under study.

i.            Is the volume of petroleum products at Benin depot always adequate for even distribution of sales outlets?

ii.          Is the distribution of petroleum adequately controlled by NNPC?

iii.        Are favouritism and corruption significant contributions to inefficient petroleum products distribution?  

1.4Objective of the Study

The objectives of this study are;

i.      To examine if the products in Benin depot are adequate to distribute to sales outlets.

ii.     To examine if the distribution of petroleum products is adequately controlled by NNPC.

iii.    To ascertain if favouritism and corruption contribute significantly to inadequate distribution of petroleum products.  

1.5Research Hypotheses

Hypothesis I

HO:   The volume of petroleum product at Benin depot is always inadequate for even distribution to sales outlets.

HI.:   The volume of petroleum product at Benin depot is always adequate for even distribution to sales outlets.

Hypothesis II

HO:   The distribution of petroleum is inadequately controlled by NNPC.

HI:    The distribution of petroleum product is adequately controlled by NNPC.  

Hypothesis III

HO:   Toomuch favouritism and corruption are not significant contributors to inefficient distribution of products.

HI:    Too much favouritism and corruption are significant contributors to ineffective distribution of products.  

1.6   Significance of the Study

The study will serve as guide to Edo people in obtaining utility from the purchase of petroleum product and ensuring availability of the product at all time. It will also stimulate other record with the attempt in finding out more specialized work n the area of distribution pattern and management especially in the marketing aspect of the organization. These are yet to receive of this study while contribute significantly to the development of corporation and better owing the society.

1.7   Scope of the Study

This research work titled marketing of petroleum product in Edo state is being undertaken in view of problems that have been faced by members of Nigerian public especially people in Edo state in recent times.

The production and utilization of petroleum product involves a number of activities among which is marketing effort would be made through this study to examine the most critical aspect of the marketing activities in the pipeline and product marketing company (P.P.M.C). The problems being faced or being experienced by people of Edo state as regard the consumption of petroleum product is a repletion of the market situation in all the company sale like time and financial constraints. It is only wise that a representative sample of the consumer population is studies. What ever are the findings could at best be generalized for the total population. Since as the same goes, Edo state is like mini Nigeria.

The research study could be designed to survey opinions of the middle men as well as member of management of the subsidiary.

The study would cover a period would have being 
inadequate. The time limit is in compliance with the directive of the Federal Polytechnic Auchi. Other necessary information would be obtained form secondary data, within and outside the Polytechnics library and also in the P.P.M.C.

1.8   Limitations of the Study

Several factors combined to limit the extent and scope of this research project some of those factors include.

Time: Apart from the time needed for this research work, the researcher had his lectures and other academic.

Exercises to contend with funds: Funds was also limiting factor and as such the research could not travel extensively to collect all relevant data. Another factor worthy of mention is the uncooperative attitude of activities and in responding to the research questionnaire.

However, time and funds involved in traveling posed the major problem, because of the above constraints (time and resources) involved in actually exhausting everything concerned about this topic; the researcher had a limit the scope of coverage of this study to the marketing and distribution of petroleum 
product. A case study of Benin Depot, Edo State.

1.9   Operational Definition of Terms

For the proper understanding of this research work certain technical term applicable specifically to petroleum’s operations or marketing are explained briefly below:

Allocation: This is a programme of shorting crude oil or petroleum products of short supply on a contractual or historic basis.

Crude Oil: Is any oil (other than oil extracted by destructive destinations from coal bituminous shell or other stratified deposits) won n Nigeria either in natural state or after the extraction of water, and or foreign matter or substance there from.

Depot: NNPC storage terminal located nation wide from where marketers can buy petroleum product for further distribution.

Distribution: This is a process by which agencies or other facilities are used to accomplish the movement of product from the production place to the industry or final consumption point.

Discovery: Covers an exploratory (Wild cat) well through which a new deposit of oil is found, it is also referred to as upstream.

Automotive: Gas Oil (AGO) otherwise known as diesel.

Filling station: These are station with dispensing pumps and sales room built to specification for dispensing white products to consumers and also rendering related service.

Independent Marketers: Enterprising Nigeria encouraged to participate in petroleum product distribution example include general gas, phoremix, niddoge gas e.t.c.

Marketers: They are individuals of organization who buy the petroleum product from the NNPC depot and supply to their filling station or directly to their customers.

Marketing: Is the performance of business activities that direct the flow of goods and service from producer to consumer or user. 

Major Marketers: These are marketers with large financial capability and they completed control the marketers are total, national, Texaco, chevron, Agip African petroleum (AP) Mobil.

Petroleum: This is a part of hydrocarbon that occur naturally in a crude oil other wards, it is a mineral oil (Rock oil) normally a liquid mixture consisting essentially of many different hydrocarbons, occurring naturally and haling a wide range of colours yellow to black with characteristic odours.

Pipeline: Is the system of transporting crude oil. Trunk line collect an oil producing refineries.

Tank farm: This is an enclosed premise in which huge storage tanks fabricated will steel are built for storing petroleum product which are to be the markets.

Trunks: These are tanker vehicles retailers used in transporting petroleum product byroad from the deposit to filling station and direct to the final consumers.

White Products: These are the petroleum product under review this research work. They include P.M and A.G.O and D.P.K.

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