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Boosting Nigeria’s oil refining capacity

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Boosting Nigeria’s oil refining capacity

The recent initiative by the Federal Government to enhance crude oil refining capacity has raised the prospect of Nigeria becoming self-sufficient in refined petroleum products and gradually ending years of unprofitable swaps.

 

Since it has become almost impossible to overhaul the existing refineries with several failed turn around maintenance (TAM) programmes or build a new one from the scratch, the recent decision by the Federal Government through the Nigerian National Petroleum Corporation (NNPC) to establish two new brownfield refineries in Port Harcourt and Warri comes as a ray of hope for the country’s effort to minimise wastes.

 

It is no longer news that Nigeria’s four existing refineries have suffered from lack of proper maintenance for over a decade, thereby resulting in gross underperformance.

It is on record that in time past, the Federal Government had mindlessly spent trillions of naira, enough to build new refineries from the scratch, in an attempt to refurbish the existing ones, without commensurate result.

Only in February, the House of Representatives ordered NNPC to stay action on the plan to expend another $1.8 billion on the apparently unending TAM.

 

The House was particularly miffed that Nigerians were being subjected to suffer harrowing difficulties associated with fuel scarcity despite the huge monies expended on TAM of the nation’s refineries over the years.

 

Appalling as the situation is, despite all the monies spent so far, none of the four refineries worked up to 50 per cent of their capacity at any time in 2017, according to figures from NNPC.

 

Today, the near carcass of two refineries in Port Harcourt, Rivers State, are with a combined installed capacity of 210,000 barrels per stream day (bpsd); the Kaduna Refining and Petrochemical Company Limited (KRPC) with an installed capacity of 110,000 bpsd and the Warri Refining and Petrochemical Company Limited (WRPC) with an installed capacity of 125,000 bpsd, making a combined installed capacity of 445,000 barrels per day.

 

For 2017, Warri refinery functioned highest in January, utilising 42.6 per cent of its capacity. The Port Harcourt refinery, for the year, functioned at its peak in December, reaching 41.7 per cent.

Kaduna refinery had the worst performance in terms of capacity utilisation in 2017. It functioned most in February, utilising just 34.4 per cent of its installed capacity.

 

The inability of the country to refine its crude has provided several loopholes for corrupt elements to wreck the economy through series of manipulations bordering on crude expors/swaps as well as refined petroleum product import.

Although the Federal Government has continued to play politics with the actual amount being spent to subsidise importation of refined petroleum products, the fact, however, is that Nigeria remains the loser in all of the arrangement.

Even with its claim that it had exited the era of subsidy payment on imported PMS, recent data from NNPC showed an under-recovery of N190.314 billion between January 2017 and January 2018.

The current move for massive refining capacity is part of the Federal Government’s initiative designed to boost local refining capacity to end all of these.

The initiative also reaffirms the current administration’s plans to ensure a complete turnaround in the whole process by the end of 2019. It is for the same reason the Federal Government’s step to establish modular refineries in the Niger Delta, where most of Nigeria’s crude is located, remains commendable.

Although, private investors like Alhaji Aliko Dangote are aggressively coming into the picture, it is still very expedient for the Federal Government to remain a major player so as not to leave the market for capitalists, who are sure to play on the side of profit than public interest.

Government hopes to use the modular refineries, for instance, to stop illegal refining of crude and also create employment and wealth among residents of the Niger Delta.

Without necessarily making it a mere pronouncement, the Group Managing Director of NNPC, Maikanti Baru, has gone a step further to announce the award of licences to 13 companies that applied.

Apart from encouraging job creation, the process will also transform Nigeria from a net exporter of crude oil to a net exporter of petroleum products, just as the 2019 target has often been targeted as a permanent date to resolve the perennial fuel crisis.

 

However, the new agenda being put in place to make things work, it is also in the interest of the country not to give up completely in trying to refurbish the existing refineries. Although, previous attempts had been marred by wastages and elements of corruption, the current arrangement to get the original builders of the refineries to return them to at least 90 per cent capacity utilisation remains a well thought out plan.

With the cards already on the table and arrangement concluded, we advise the Federal Government not to allow the process end up as another white elephant project.

The Federal Government should also speed up the passage of the Petroleum Industry Governance Bill (PIGB), whose provisions are fully in place to take care of shortcomings in the oil and gas sector.

By way of ensuring competition and petroleum product availability, we also believe that more investors be given licences to set up more of such.

Why we commend the Federal Government for the modular refinery initiative, we also advise that priority should be given to host communities in the area of employment and whatever they are qualified for.

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