•Private concerns, rather than the Federal Government, seem to take the initiative on refineries
Will we soon be seeing a ray of light and hope at the end of the dark tunnel of Nigeria’s grossly inefficient oil and gas sector characterised by import dependency and massive corruption? If the proposed plan by the Independent Petroleum Marketers Association of Nigeria (IPMAN) to build two ultra-modern refineries in Bayelsa and Kogi states comes to fruition, this may well be so and there is the strong possibility of our getting out of the woods in this beleaguered sector that has become a burden on the economy.
According to Elder Chinedu Okoronkwo, IPMAN’s National President, the proposed project is a venture with foreign investors who will inject $3 billion into the economy to achieve the objective. Of course, the benefits of increased domestic refining capacity through functional local refineries are obvious. These include availability of petroleum products to IPMAN members, reduced scarcity of petroleum products, enhanced job creation, reduction in capital flight and the attendant growth in the country’s Gross Domestic Product (GDP).
This is graphically portrayed by Elder Okoronkwo when he said that “Where Nigerians are spending $60 million in exporting crude oil and bringing in refined products, the proposed refinery will reduce the cost and stress of exporting crude to bring in the refined products”.
It is regrettable that despite the billions of Naira spent on the Turn Around Maintenance (TAM) of the country’s three existing refineries, they continue to operate abysmally below installed capacity. The consequence is that the Nigerian National Petroleum Corporation (NNPC) receives 445,000 barrels of crude oil per day but refines only a fraction locally. Thus, the NNPC engages in a swap deal which involves its selling unrefined crude and importing refined petroleum products. This has provided an avenue for massive corruption to the detriment of the economy through the purported fuel subsidy attendant on importation of petroleum products.
A probe by the House of Representatives into purported fuel subsidy payments between 2010 and 2012 revealed that the country had been defrauded to the tune of $6 billion. Fifteen fuel importers were discovered to have collected more than $300 million within the period without importing any fuel. Others dubiously collected double payments on several occasions. Similarly, about N700 million is allegedly being spent daily on illegal kerosene subsidies while kerosene is generally sold at N150 per litre across the country.
Regrettably, the government has made no move to either issue a white paper on or implement the recommendations of the Dr Kalu Idika Kalu National Refineries Special Task Force Committee, which was set up following the 2012 fuel subsidy removal crisis. The committee had proposed an offshore refining scheme as an interim measure to bridge the gap between the current production level of NNPC and the balance refined abroad. It also recommended changes in the current ownership structure and business model of the existing refineries in order to turn them around, with the aim of privatising them within 18 months and ultimately achieving full deregulation of the oil and gas sector after necessary palliatives had been put in place.
For some inexplicable reason, the three Green field refineries planned by the NNPC Greenfield Projects Division Group since 2005 remain unrealised while no progress has been made as regards the 18 licences issued by government for private refineries since 2002. That is why it is in the national interest that the initiatives by IPMAN and the $9 billion refinery and petrochemical complex being planned by the Dangote Group should be given every encouragement to succeed. It is also of utmost importance that the long and unjustifiably delayed Petroleum Industry Bill (PIB) be urgently passed into law to sanitise the oil and gas sector and encourage the much needed private investment to maximise its potentials.
