PIPELINE TRANSPORTATION AND ITS SIGNIFICANCE TO THE MARKETING OF PETROLEUM PRODUCTS IN SOUTH EAST, NIGERIA

1 PIPELINE TRANSPORTATION AND ITS SIGNIFICANCE TO THE MARKETING OF PETROLEUM PRODUCTS IN SOUTH EAST, NIGERIA BY ANIKWE PASCAL CHIZOBA PG/MBA/11/ 60370 DEPARTMENT OF MARKETING FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPUS JUNE, 2012 TITLE PAGE PIPELINE TRANSPORTATION AND ITS SIGNIFICANCE TO THE MARKETING OF PETROLEUM PRODUCTS IN SOUTH EAST, NIGERIA BY ANIKWE PASCAL CHIZOBA PG/MBA/11/ 60370 BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF MARKETING, FACULTY OF BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA, ENUGU CAMPUS IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTERS OF BUSINESS ADMINISTRATION (MBA) DEGREE IN MARKETING SUPERVISOR: DR A.E EHIKWE JUNE, 2012 CERTIFICATION I, hereby certify that the project “Pipeline Transportation And Its Significance To The Marketing Of Petroleum Products In South East, Nigeria” is original and was carried out by me, Anikwe Pascal Chizoba, with Registration Number: PG/MBA/11/60370 for the award of Masters in Business Administration (MBA) degree in Marketing at the University of Nigeria, Enugu Campus and has not been presented to any other institution or any examination Anikwe Pascal Chizoba PG/MBA/11/60370 APPROVAL PAGE This project “Pipeline Transportation And Its Significance To The Marketing Of Petroleum Products In South East, Nigeria” written by Anikwe Pascal Chizoba with Registration Number: PG/MBA/11/60370 has been approved having met the standard required in partial fulfillment for the award of MBA in marketing of the University of Nigeria _ _ Dr A.E Ehikwe Date Project supervisor Dr S.C Moguluwa Date Head of Department DEDICATION I dedicate this research work to God Almighty ACKNOWLEDGMENT I express my profound gratitude to God Almighty for his guidance throughout this research work And also to my supervisor, Dr A.E Ehikwe for his patience in supervising and correcting all the necessary correction through the supervision of this work, may God reward him abundantly My gratitude goes to entire lecturers in Department of Marketing in University of Nigeria Enugu Campus for their encouragement and the kind of words they gave to me and my colleagues in the class Finally, to my dear Mother, Mrs Jinegwo Helen and my siblings, May God bless you all And to you all who in one way or the other contributed immensely to the success of this work, I thank you ABSTRACT This study was carried out on the significance of pipeline transportation mode on the marketing of petroleum products in Nigeria It was premised on the notion of the scarcity of refined petroleum products across the country in spite of the agitated advantages that pipeline transport mode is said to have over some other alternative transport modes considering the nature of product involved Other observed problems that prompted the carrying out of this study include: pipeline vandalization, aging pipelines and the ulterior motives of the management of pipeline and products marketing company (PPMC) regarding the volume of petroleum products moved to the various depots (regions) of the country A number of specific objectives sought to be achieved in the study included: (i) determine the effect of the use of pipeline transport mode on the availability of petroleum products in South East, Nigeria; (ii) identify the major challenges confronting pipeline transportation of petroleum products; (iii) determine the relative effect of pipeline vandalization; capacity underutilization; and PPMC management ulterior motive; on the scarcity of petroleum products in South-East Nigeria; and (iv) determine the strategies for effective management of petroleum products pipeline transportation operation in southeast Nigeria A cross sectional survey design method was adopted A random sample of 217 (106 from Enugu and 111 from Aba) staff of the Aba and Enugu NNPC Depots, determined by using Taro Yamane’s sample size determination formula, were covered in the research survey Hypotheses were tested by using: (i) Spearman’s Ranked Correlation (rho) and t-Test for the first hypothesis; (ii) Univariate Chi-square (X 2) for hypothesis two; (iii) Multiple Regression Analysis for hypothesis three; and (iv) Kolmogorov Z-Test for the fourth hypothesis The findings of the study revealed that: Pipeline transportation mode has significant (t cal = 29.04, tcal = 28.33 > ttab = 1.984) suitable effect on the availability of petroleum products in southeast Nigeria; (ii) Small pipeline diameter and pipeline vandalisation are the significant (X = 68.105, X2 = 11.488, p < 0.05) major challenge confronting petroleum products transportation; (iii) Pipeline vandalization, capacity underutilisation and PPMC management ulterior motive have significant (F(3, 205) = 323.004, p < 0.05) relative effect on the scarcity of petroleum products; and finally; (iv) Replacing the petroleum product pipelines with the ones with wider diameter and controlling the transportation operations remotely are effective strategies (Z = 4.028, p < 0.05) for aiding management of petroleum products pipeline transportation in southeast Nigeria Based on the findings and the set main objective of the study, it was concluded that pipeline transport mode remains the most suitable means of transporting petroleum products not only because it is fast but because it can deliver much barrels of petroleum products than trucks/tankers can and also, it is safer It was however recommended that, petroleum pipeline transportation operations should be remotely controlled from the pump stations so that if there is any disruption in the operation, it would be identified on time before it causes any fire outbreak; also, security guards should be deployed to areas particularly the networks through which the pipelines are laid so that any attempt of vandalisation would be combated out; pipelines should be replaced with wider diameter ones so that they can transport more barrels and quicker than before; the needs of Nigerian petroleum product consumers should be made preclude the oil industry’s operation particularly in the production and volume of barrels supplied just as it is in developed countries Finally therefore, it was recommended that the monopoly of PPMC should be diffused with many private pipeline operators so that their ulterior motive will no longer have effect on the supply of petroleum products TABLE OF CONTENTS Title page - - - - - i Certification - - - - - ii Approval page - - - - - iii Dedication - - - - - iv Acknowledgement - - - - - v Abstract - - - - - vi Table of Contents - - - - - vii List of Tables - - - - - x CHAPTER ONE INTRODUCTION 1.1 Background of the Study - - - - - 1.2 Statement of the Problem - - - - - 1.3 Objective of the Study - - - - - 1.4 Research Questions - - - - - 1.5 Research Hypotheses - - - - - 1.6 Significances of the Study - - - - - 10 1.7 Scope of the Study - - - - - 11 1.8 Limitations of the Study - - - - - 11 References CHAPTER TWO LITERATURE REVIEW 2.1 Historical Development of Petroleum Pipeline Transportation - - - - - 13 2.2 Overview of Petroleum Marketing Industry in Nigeria - 16 2.3 Domestic Refineries and Disparities Product Supply - 28 2.4 Petroleum Pipeline Transportation in Nigeria- 32 2.5 Pipeline Transportation and the Marketing of Petroleum Products in Nigeria 2.6 - - - - 34 Impediments to Petroleum Pipeline Transportation in Nigeria 36 2.7 Petroleum Products Supply and Distribution Problems - 39 2.8 Prospects of Pipeline Transportation in Nigeria - 42 2.9 Problems of Pipeline Vandalization/ Damage in Nigeria - 44 - 2.10 Remodeling the Management of Nigeria Oil Pipelines - 46 2.11 Summary of the Related Reviewed Literature - - 51 CHAPTER THREE RESEARCH METHODOLOGY 3.0 Introduction - - - - - 57 3.1 Research Design - - - - - 57 3.2 Area of the Study - - - - - 57 3.3 Source and Type of Data - - - - - 58 3.4 Population of the Study - - - - - 58 10 3.5 Sample Size Determination - - - - - 59 3.6 Data Collection Instrument - - - - - 60 3.7 Validity and Reliability of the Data Collection Instrument60 3.8 Method of Data Analysis - - - - - 64 CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND INTERPRETATION 4.1.1 Analysis of Administered and Returned Questionnaire Copies 4.2 Analysis of Respondents’ Demographic Data 4.3 67 68 Analysis of Respondents’ Responses to the Questionnaire Items Significance of Pipeline Mode of Transportation For Petroleum Products - - 70 - - 81 CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary of Findings 5.2 Conclusions 5.3 Recommendations Bibliography Appendix I Questionnaire - 92 93 93 4.4 Test of Hyotheses - 100 Scarcity This can be further explained by the model fit indicated by (RSquare 825) which is also confirmed by the Normal P-P Plot of the Regression Standardised Residual presented below, also a result of the regression analysis On the graph, both the expected and observed cumulative probabilities that the independent variables: pipeline vandalisation, capacity underutilisation and PPMC management ulterior motive would have significant collective effect on the dependent variable: scarcity, cluster around the line of best Normal P-P Plot of Regression Standardized Residual Expected Cum Prob Dependent Variable: Scarcity 1.0 0.8 0.6 0.4 0.2 0.0 0.0 0.2 0.4 0.6 0.8 1.0 Observed Cum Prob In addition, each of the predictors shows significant effect on the dependent variable at the following levels: Pipeline vandalisation (b = 0.530, p < 0.05) Capacity underutilisation (b = 0.571, p < 0.05) PPMC management ulterior motive (b= 0.589, p < 0.05) 101 Where the y-intercept value ‘a’ is 0.839; the regression model is therefore Since (F(3, 205) = 323.004, p < 0.05), thus H0 was rejected and the alternate hypothesis (H4) that states “Pipeline vandalization, capacity underutilisation and PPMC management ulterior motive have significant relative effect on the scarcity of petroleum products” was accepted 4.4.4 Test of Hypothesis Four H0: Replacing the petroleum products pipelines with the ones with wider diameter and controlling the transportation operations remotely are not effective strategies for aiding management of petroleum products pipeline transportation in southeast Nigeria H4: Replacing the petroleum products pipelines with the ones with wider diameter and controlling the transportation operations remotely are effective strategies for aiding management of petroleum products pipeline transportation in southeast Nigeria To test this hypothesis, the data collected on tables 4.15 and 4.16 were used respectively Test Method Used Kolmogorov Z-Test was used Testing the normality of the distribution of the respondents’ responses regarding the strategies for effectively managing pipeline transportation 102 operations was the justification for choosing the kolmogorov z-test In this test, the object was to know whether the responses given by the respondents are normally distributed or not Decision Rule: Reject H0 if |p < 0.05| Otherwise, accept it Table 4.22: Kolmogorov Z-Test Result for Hypothesis Four N Normal Parameters(a,b) Most Extreme Differences Mean Std Deviation Absolute Positive Negative Kolmogorov-Smirnov Z Asymp Sig (2-tailed) a Test distribution is Normal, b Calculated from data VAR00005 209 9.1818 1.01216 279 209 -.279 4.028 000 103 On table 4.22 above, the distribution of the respondents’ responses regarding the strategies for effectively managing pipeline transportation operations is normal (Z = 4.028, p = 0.000) Hence, p < 0.05, the null hypothesis was rejected while the alternate hypothesis which states “Replacing the petroleum products pipelines with the ones with wider diameter and controlling the transportation operations remotely are effective strategies for aiding management of petroleum products pipeline transportation in southeast Nigeria” was accepted CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 5.1 SUMMARY OF FINDINGS This study, themed ‘Pipeline Transportation and its significance to the Marketing of Petroleum Products in Nigeria’ was premised on the need to determine the veritability and/or suitability of pipeline transportation mode for moving petroleum products, challenges confronting the use of 104 pipelines for transporting petroleum products, relative effect of pipeline vandalisation, capacity underutilisation and PPMC management ulterior motive on the scarcity of petroleum products, and the determination of strategies for effective management of pipeline transportation operations in southeast Nigeria Findings of the study show that; a Pipeline transportation mode has significant (tcal = 29.04, tcal = 28.33 > ttab = 1.984), suitable effect on the availability of petroleum products in southeast Nigeria b Small pipeline diameter and pipeline vandalisation are the significant (X2 = 68.105, X2 = 11.488, p < 0.05) major challenge confronting petroleum products transportation c Pipeline vandalization, capacity underutilisation and PPMC management ulterior motive have significant (F(3, 205) = 323.004, p < 0.05) relative effect on the scarcity of petroleum products d Replacing the petroleum product pipelines with the ones with wider diameter and controlling the transportation operations remotely are effective strategies (Z = 4.028, p < 0.05) for aiding management of petroleum products pipeline transportation in southeast Nigeria 5.2 CONCLUSIONS Based on the findings of this study, it can be concluded upon that pipeline transport mode is the most suitable means of transporting petroleum products It is not only because it is fast but because it can deliver much 105 barrels than trucks could and also, it is safer The petroleum products are inflammable, particularly the petrol motor spirit (PMS) 5.3 RECOMMENDATIONS The following recommendations have been put together for use by users of research reports particularly research and government agencies as well as policy makers (i) The petroleum pipeline transportation operations should be remotely controlled from the pump stations so that if there is any disruption in the operation, it would be identified on time before (ii) it causes any fire outbreak In addition to the above recommendation, security guards should be deployed to those areas, particularly the networks through which the pipelines followed Any attempt of vandalisation (iii) would be combated out The pipelines should be replaced with wider diameter ones so (iv) that they can transport more barrels and quicker than before Nigerian consumers’ needs should preclude the oil industry’s operation particularly the production and barrels supplied just as (v) it is in developed countries The monopoly of PPMC should be diffused with many private pipeline operators so that their ulterior motive will no longer have effect on the supply of petroleum products 106 BIBLIOGRAPHY Adeyinka H (2000), Introduction to Commerce Ibadan: sport light books Adeyinka, H (2000), Introduction to Commerce, Ibadan: Spotlight Books Ajayi (1998) “The Nigerian oil Industry: Onitsha, Joance Educational Publishers ltd Aluko S A and Ijere M.O (1995) “Petroleum and the Nigeria Economy” Awka: Africana publishing co Amodu (2000), The challenges of Pipeline Transportation, Unpublished project report, University of Benin Amodu, (2001) “Transportation Arrangement for Petroleum Products” Business Times Mon, Aug 12 p.19 Augaigbo J.O (1998) The Structure of the Nigeria Economy, Edo James publishers B (1998) “Niger Delta Environmental Survey Final A Functional Ebo C.K (2008) Research Methodology, Ebonite publishers Onitsha, Nigeria Edoreh A (1997) Future of Nigeria Petroleum Industry, Lagos Academy Press Emedosibe N (2009) Marketers make 106% profit per litres in Petroleum 107 Eromosele V (1997) Nigeria Petroleum Resources hand book Lagos Academy press Essien, D (2003) “Losing The Grip on The Petroleum Sector” Newswatch Mon sept.10 p.4 Henry A.K and Miller S L (1997), Transportation and Traffic Management, New York: Alexander Hamilton institute Ibeqbu., L “facts of Transportation Management, Lagos: Hallmark publishers Ike, S E (2009), Pipeline of Transportation Management for Nigeria Schools, Lagos: Empire Publication ltd Kotler P., & Amstrong, G (2000), Principles of Marketing New Jersey Prentice Hall Inc Kupoloyl A.O (2000) Proposal for Effective Marketing of Petroleum Products in Nigeria, Unpublished project report,_university of Jos Kupuloyi A (2000), Proposals for effective marketing of Petroleum Product in Nigeria, Unpublished project report, University of Jos Ndu K (1998) A Concise History of the Nigeria Oil Lndust, Ibada R D company ‘ltd Ndukwe B (2000), Distribution Arrangement for Petroleum Products in Nigeria, Lagos: Chuks Publishers 108 Ndukwe B (2000) Distribution Arrangement for Petroleum products in Nigeria, Lagos Chuks Publishers Nottingham R (2004) Energy Market Strategic Practice New York Isherwood Products Inc Odoh K.E (1998) Impediments to effective transport management in Nigeria, Unpublished research paper; 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A historical perspective” Business week feb.28 p Ukiwe M (1986) Transportation Management- Approach Ibadan: Macmillan 110 APPENDIX I Department of Marketing, Faculty of Business Administration, University of Nigeria, Enugu Campus, Enugu State Dear Respondent, I am a postgraduate student of the University of Nigeria, Enugu Campus I am currently carrying out a study on “pipeline transportation and its significance to the marketing of petroleum products in southeast, Nigeria” in partial fulfillment of the requirements for the award of Masters of Business Administration (MBA) in marketing I hereby plead for your kind attention to complete the questionnaire attached with this letter Please, so as objectively as you can All information you supply shall be treated with all confidentiality Yours faithfully Anikwe Pascal Chizoba PG/MBA/11/60370 111 QUESTIONNAIRE COMPLETED BY THE STAFF OF NNPC, ABA AND ENUGU DEPOTS SECTION A: Respondents’ Demographic Data Gender: Male Female Age: 20-29yrs 30-39yrs 40-49yrs 50-59yrs Marital Status: Single Married Education: Masters B.Sc/HND OND/NCE SSCE/GCE SECTION B: SIGNIFICANCE OF PIPELINE MODE OF TRANSPORTATION FOR PETROLEUM PRODUCTS How would you describe the suitability of pipeline mode of transportation for petroleum products? Very Good Good Bad Very Bad Undecided In view of your opinion in above, would you agree that pipeline transport mode can supply petroleum products adequately more than trucks or any other modes Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided 112 How adequate have petroleum products been made available for masses consumption here in southeast Very adequate Adequate Inadequate Very inadequate SECTION C: Undecided CHALLENGES CONFRONTING PETROLEUM PRODUCTS PIPELINE TRANSPORTATION IN SOUTHEAST, NIGERIA The diameter of the pipelines is not wide enough hence it limits the volume of petroleum products transported Strongly Agreed Agreed Undecided Disagreed Strongly Disagreed Vandalization of petroleum products pipelines is a challenging force to petroleum product transportation to Aba and Enugu Depot Strongly Agreed Agreed Disagreed Strongly Disagreed SECTION D: PIPELINE UNDERUTILIZATION ULTERIOR VANDALIZATION, AND MOTIVE: Undecided PPMC EFFECTS ON CAPACITY MANAGEMENT PETROLEUM PRODUCTS SCARCITY How often are petroleum products experience scarce or inadequate for masses’ consumption here in southeast Very often Often Seldom Very Seldom Undecided How would you react to pipelines vandalization as being responsible to scarcity of petroleum products 113 Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided How would you react to NNPC and PPMC’s production capacity underutilization factor as being responsible for scarcity of petroleum products Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided How would you react to the ulterior motive of the management of PPMC as a factor being responsible for the scarcity of petroleum products in southeast Nigeria Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided SECTION E: STRATEGIES FOR EFFECTIVE MANAGEMENT OF PIPELINE TRANSPORTATION OPERATIONS What would you feel to the replacement or repairing of all pipelines as a strategy for aiding effective management of pipeline transportation of petroleum products Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided How would you react to remotely control of pipeline petroleum products transportation with computer as an aid to effectively manage operations Strongly Agreed Agreed Disagreed Strongly Disagreed Undecided ... significance of pipeline transportation mode in the marketing of petroleum products in Southeast, Nigeria while the specific objectives however are: To determine the effect of the use of pipeline transport... vandalization, aging pipelines and many others loom the country’s oil industry Of what significance then is the pipeline transportation mode to the marketing or distribution of petroleum products in the country... prompted the carrying out of this study include: pipeline vandalization, aging pipelines and the ulterior motives of the management of pipeline and products marketing company (PPMC) regarding the