32 Tank Farms, Depot Owners Face Bankruptcy

Thirty-two out of 44 tank farms and petroleum products private depot owners are contending with bankruptcy, as most of the 22 licensed commercial banks exposed to the downstream sector through large syndicated loans, have tagged them as insolvent business entities.

The lenders, which had earlier issued caveat on lending for all the 44 tank farms, New Telegraph exclusively gathered at the weekend, are now battling to recoup their loans.

Head, oil and gas unit of a first generation bank told this newspaper that lenders have written to the 32 tank farms owners on moves to clamp down on them over bad loans, some of which were poorly collateralised.

The source said that the overexposure of banks’ finance to the tank farms is already causing liquidity issues in the sector. He said: “Five banks, namely FirstBank, Nigeria’s largest bank by assets; Diamond; First City Monument Bank (FCMB); Ecobank Nigeria Plc.; and Skye Bank Plc., have issued profit warnings in the past months.”

The source added that banks are now in serious battle to recoup their finances from the private tank farms and depot subsector, which is now considered insolvent by the financial institutions.

“You have witnessed what transpired between Obat Oil and Skye Bank at the weekend,” he declared, maintaining that the battle between the banks and the remaining 32 tank farm owners considered insolvent will soon blow into the open, because some of them are also in court.

He declined to mention names of the depots due to the court cases, but stated, “all of them are already idle in Apapa.” The major slide in fuel importation, storage and consumption, checks by this newspaper showed, had turned business bearish for tank farms, subjecting many of them to idleness.

The Nigerian National Petroleum Corporation (NNPC), which is the sole importer of petroleum product, only patronise a few of them for third party storage known as “Thru put” contract.

The corporation has also begun moves that would worsen recession for the depot owners with the fixing of Atlas Cove Jetty and Mosimi depots. Group Managing Director of NNPC, Dr. Maikanti Baru, who said this at a recent re-commissioning of 87.70 million litres Mosimi depot, maintained that the corporation would soon fully fall back to its depots across the country for products’ storage.

Works, he said, are ongoing on System 2B pipeline, which would be used to transport the product from Atlas Cove to depots in Mosimi, Ogun State; Ejigbo, Lagos State; Ibadan, Oyo State; Ore, Ondo State and Ilorin in Kwara State.

Expressing pessimism that the depots considered insolvent would be able to service their debts to banks, former chief executive officer of Petroleum Products Pricing Regulatory Agency (PPPRA), Mr. Reginald Stanley, said that “most of those tank farms would be broken down and sold out because the capacity to engage what we have today is too large for the market.”

He noted that there are many opportunities for investors “when you go down the retail part.” About 80 per cent of petroleum tank farms across the country are currently lying idle, Stanley said, blaming this partly on massive divestment by oil marketers into the retail arm of the business. He spoke during the inauguration of Emadeb Energy Services Limited retail outlet in Abuja.

Stanley said: “Today, the capacity utilisation of tank farms in the country is about 20 per cent. That means 80 per cent of tank farms in the country are lying idle.

“And I dare say that some of those tank farms will be broken down and sold out because the capacity to engage what we have today is too large for the market.

However, when you go down the retail part, there are many opportunities.” It would be recalled that a High Court sitting in Lagos last weekend ordered Skye Bank Plc. to take over Obat Oil and Petroleum Limited’s depot over an alleged N2.1 billion debt.

Justice Jude Dagat made an order directing the Inspector-General of Police, the Assistant Inspector- General of Police, the Lagos Commissioner of Police as well as the court’s Deputy Sheriff to assist in the enforcement of the order.

Obat Oil and Petroleum’s depot at H.I.M. Oba (Dr.) F.E.O. Akinruntan Close, Beachland Estate, Apapa, Lagos, was sealed up last weekend pending liquidation of the debt.

The order was sequel to an Originating Motion by Skye Bank seeking the enforcement of an arbitral award dated August 7, 2015. Skye Bank had sought to recover a loan debt of the sum of N2,142,462, 572.26 owed it by Obat Oil and Petroleum.

The loan was guaranteed by His Imperial Majesty, Oba (Dr.) Frederick Eniti Akinruntan.