By Anayo Korie / Ag Energy Editor
At 54 years of independence , Nigeria the largest oil producing nation in Sub-Saharan Africa is supposed to have met domestic demand for all brand of fuel while exporting surplus to the West African and global markets. This is to be expected because the derivatives of hydrocarbon such as Premium Motor Spirit (PMS) ,Automotive Gasoline (AGO), Dual Purpose Kerosene DPK) , Aviation Turbine Kerosene (ATK ), Low Pour Fuel Oil ( LPFO ), High Pour Fuel Oil( HPFO), condensate, asphalt etc should have added value to the stream of revenue already earned from Crude oil and gas exports to the global market.
Nigeria, the largest economy in Africa has the enormous potentials of diversifying her economy as regional hub for fuel exports but the nation has found herself a net importer of refined fuel from Latin American countries, United States, Asia, Europe where the same exported crude oil is refined and again imported by the Nigerian government and sold at high prices. Today, the pump price of PMS, otherwise known as petrol is sold at N97 per litre as Nigerians have long ago absorbed the shock when fuel price was hiked from N65 to N97 by Jonathan’s Administration in 2012 . There appears to be fuel everywhere because government is paying subsidy to oil marketers to flood the market with fuel imported from all parts of the world.
Fuel importation over the past two decades became a national festival in Nigeria with a population of over 167 million people, while the revenue that should have been invested to build on new refineries or develop other sectors of the economy is depleted at an average of N625 billion on annual basis to fund petrol subsidy. The reason behind both local and foreign investors shunning building new refineries is due to the partial deregulation of the downstream sector by the Government and the non -passage of petroleum industry bill (PIB) by the National Assembly which allows government rather than market forces. to determine the scope of businesses.
However, over N1.8 trillion was spent on subsidy in 2013 which was a subject of probe by the two chambers of the National Assembly. The inability of Nigerian government to invest in refineries had given rise to monumental corruption as some oil marketers who collected huge sums of money for fuel importation refused to fulfill the obligations they entered with government.
The building of refineries to eliminate the embarrassment of endless fuel importation was totally ignored by successive governments in the country .Nigeria’s blend of crude namely; Bonny light, Qua , EA, Forcados , Pennington, Brass, Escravos Yoho, Bonga,Erha, Agbami,Akpo, Amenam,Okwori,Okono, Antan,Abo, Usan, which are mainly light with less acid and sulphur, are refiners delight, but Nigerian Governments over the years, ignored and shunned any positive move of participation in refinery investment.
Nigerian Government between 2000 and 2007 awarded 22 Approvals in Principle licenses to both local and foreign investors for the building of new refineries to supplement fuel production coming from three refineries in the country with a combined capacity of 445,000 barrels . But these licenses were revoked by the Government due to the inability of their promoters to honour and meet the target for the projects.
But Nigeria is losing out by selling crude oil to the international market without adding value to the national purse.
The Amakpe Refineries, one of the projects Nigerians hope, as one of the independent refineries that should have added value to local refining was revoked by Akwa Ibom State government due to the breach of contract by its promoters resident in the United States.
However, Akwa Ibom State government asked the promoters to refund the money so far committed to the project. This negative development has dashed the hope of the refinery seeing the light of the day.
Nigerian Government’s decision of importing fuel from Niger Republic as from the end of this year is a testimony of failure on the part of Nigeria in building refineries to avert endless fuel importation. , The country’s leader, President Mahamadou Issoufou, who met with President Goodluck Jonathan at the State House, Abuja, recently explained that the planned export of products to Nigeria would be aimed at bringing succour to residents of Northern Nigeria, whom he said would be getting supplies of the products from Zinder Refinery in Niger Republic
Investigations revealed that the existing refineries in the country with a combined capacity of 445,000 barrels located at Kaduna, Port Harcourt, and Warri at full capacity utilization, cannot meet the need of domestic consumption of PMS, otherwise known as petrol which stands at over 34 million litres daily . Nigerian National Petroleum Corporation (NNPC), in order to avert scarcity of fuel and the disruption of economic activities in the country has embarked on the massive importation of fuel with support from few major and independent oil marketers to augment short fall .
The introduction and the full implementation of reforms by Obasanjo regime between 2003 to 2007 only ended up hiking the price of fuel in Nigeria . For instance, the prices of petrol, kerosene , and diesel jumped from N20, N18 and N18 respectively in 2000 to N65 ,N100 and N150 respectively at the end of 2007.The price of petrol, the fuel that powered over 80 percent of economic activities in the country was not reviewed downwards even when the price of crude oil crashed form a record high of over $147 a barrel to below $ 45 a barrel . Government still retained the price of petrol at N70 a litre.
Duncan Clarke, the Managing Director of Global Pacific Capetown of South Africa, who spoke in Lagos recently said Nigerian refineries have operated at under capacity utilization , adding that a lot of illegal bunkering or illegal fuel sale thrives on daily basis which depletes expected stream of revenue to the national purse.
He observed the existence of trans-border shipping of products as well as method of governance that must change for Nigeria to move forward . He street the need to build new green field refineries in Nigeria due to its size and market.
Noting that the Nigerian economy is growing at 7 percent of Gross Domestic Product, he said:
“ It does not make sense for Nigeria to export its crude to the international market while having little or nothing for its domestic refineries. There is urgent need for Nigeria to invest in refinery projects either in its own or in partnership with stakeholders operating in this country.’’
Major oil marketers namely Mobil, Total, Oando TexacoConoil, Forte oil Plc . Zenon, Beco, Acorn , Honey well, Energy Obat, SPG etc benefited from the deregulation of the downstream sector of the oil and gas sector but failed to invest some of their profits in the building of new refinery projects , The oil marketers smile to banks on daily basis, declares jumbo profits annually which runs into several billions of naira , while Nigerians are subjected to the whims and caprices of forces of demand and supply at the international market.
The Federal Government in the past 11 years paid lip services to the idea of building new refineries , while the idea of fuel importation was embraced by the Government of the day to the detriment of the people . The cold feet so far developed towards the building of new refineries was based on the premises that Government all over the world is a bad manager of business enterprises. Nigerian Leaders who were apostles of the World Bank and International Monetary Fund (IMF) bought the idea without giving it a second thought.
The Nigerian National Petroleum Corporation (NNPC) have indicated interest in the building of three new green refineries with a total capacity of 1million barrels in three states of the federation, but this plan is still in the pipeline . Meanwhile, all the multinational oil firms including Shell Nigeria, ExxonMobil, Total Agip, have all shunned investment in refinery projects in the country.
However, investigation revealed that government’s ownership and running of business have worked well in many oil producing countries, especially the cartel of Organization of Petroleum Exporting Countries (OPEC) where Nigeria is an influential member
While Nigerian Government played to the gallery, swallowing World Bank doses which have impoverished the developing nations, other OPEC member states namely; Saudi- Arabia, Libya, Iran . Kuwait, United Arab Emirate(UAE ) ,Algeria, Qatar, Venezuela etc are busy, fast expanding their refineries both at home and abroad. Kuwait and Libya for instance, have offshore refineries in Europe where crude oil is shipped, refined and sold to consumers from their fuel stations in Europe. Venezuela, another important member in South America owns over 22 refineries , eight of which are located in the United States alone..
OPEC member nations have invested over $50 billion for refineries projects . Mr Abdalla El Badri, the Secretary General of OPEC who confirmed the matter recently in Austria said, the investment would balance the practice where by emphasis was shifted to the developing countries based on the rejection of building new refineries in Europe and America due to environmental concern.
However, the paradigm shift where public and private partnership has been advocated for as solution to national challenge is working in the area of building new refineries. In this regard, Dangote group of companies leading the private sector has sealed deals with investors to build big refinery at the cost of $9billion .The President of the group AlikoDangote contributed $3.5billion and the investors pledged to provide the remaining equity, while the Federal Government also sealed deal worth $4.5 billion for the construction of 6 modular refineries .The Minister of Petroleum, Mrs Diezani Allison -Madueke who confirmed the investment said the refineries would be built in collaboration with NNPC .Each modular refinery, when completed, will refine up to 30, 000 barrels of crude oil per day and produce up to five million litres of petrol, diesel kerosene and LPFO.
The Minister of Trade and Investment, Mr Olusegu Aganga signed on behalf of the Federal Government, while Jim Mansfield, Vice-President/Director, Vulcan Petroleum Resources limited, and Edozie Njoku, Chairman, Petroleum Refining and Strategic Reserve Limited, signed on behalf of their companies respectively.
Jim Mansfield of Vulcan Petroleum Resources Limited, at the ceremony described the investment as testimony of Nigeria being a good place to do business
If Nigerians cannot manage these refineries when completed . the nation should adopt Nigerian Liquefied Natural Gas limited (NLNG) model that worked out in the monetization of natural gas in the country.
Nigerians workers, if encouraged with conducive working environment are capable of running these refineries to the benefit of all the stakeholders.
Source : Independent