It would appear the prospects of the nation’s four refineries being rehabilitated to bridge the country’s virtual whole dependence on the import of refined petroleum products has run into a hitch, if not a ditch. Since the era of former President Olusegun Obasanjo, the out-dated refineries, which performed far below their installed capacities, and couldn’t be turned around to public advantage, faced the threat of being sold to private investors. Indeed, the former president sold two of the refineries for $750 million. But his successor, the late President Umaru Musa Yar’Adua, eventually reversed the deal. The licences the Obasanjo government availed 18 investors interested in refining in 2002 did not help matters, too.
The country’s immediate past leader, Dr. Goodluck Jonathan government continued on that road, promising in one breath to build new refineries or turnaround the old ones since 2012, and in another, canvassing the non-viability of government running refineries, or private refiners’ reluctance to invest in building refineries under a regime of fuel subsidy. In order words, the government mouthed the deregulation of the downstream oil sector, on the one hand, but on the other, held tight to choking regulation of the pump prices of petroleum products through a thoroughly corrupted subsidy policy.
We have said before that had the refineries been working optimally; and additional ones built to support them, public or private, local refining capacity would have climbed, and subsidy reduced. The chief culprit of unmitigated petroleum products importation in the land has been the corrupt proceeds of subsidy which official operators of the Nigerian downstream oil sector and their private sector collaborators gleefully enjoy, even when none of the subsidised products get to the final consumer at affordable prices.
It was, therefore, a piece of cheering news when the Nigerian National Petroleum Corporation (NNPC) said most recently that the Port Harcourt and Warri refineries had commenced preliminary production. According to the NNPC, the decision to revive the refineries was taken in 2011, while test-production in the Port Harcourt and Warri facilities commenced after nine months of phased in-house rehabilitation exercise by NNPC engineers and technicians, assisted by Original Equipment Manufacturer (OEM) representatives who handled major equipment overhaul and rehabilitation. The exercise reportedly begun in October 2014 scaled down costs by 70 percent.
The refinery in Port Harcourt was expected to be operating at 60 percent of its 210, 000 barrels per day installed capacity and yielding five million litres of petrol daily; while the one in Warri would do 80 percent of its installed 125, 000 bpd capacity and contributing 3.5 million litres of petrol to local refining capacity per day. The NNPC said it had shifted its attention to the Kaduna Refining and Petrochemicals Company, which has an installed capacity of 110, 000 barrels per day.
The nation’s four refineries (two in Port Harcourt, one in Warri and the other in Kaduna), most of which were built in 1979; were to feed 18.2 million litres of fuel into the system had they been producing at installed capacity. Nigeria’s average daily consumption of Premium Motor Spirit (PMS or petrol) is 40 million litres; Automotive Gas Oil (AGO or diesel) 12 million litres; Dual Purpose Kerosene (DPK) 11 million litres; and Liquefied Petroleum Gas (LPG) 1.2 million litres, official figures say. But the country refines only 5.10 million litres of PMS; three million litres of AGO; 2.10 million litres of DPK; and 0.34 million litres of LPG daily and imports the difference of 34.90 million litres of PMS; nine million litres of AGO; 8.90 million litres of DPK; and 0.86 million litres of LPG per day; about 90 percent of Nigeria’s daily petroleum products’ need on a rough average; and NNPC superintends the huge import and the inherent colossal subsidy paid in the process.
As has always been the experience in recent years, the hope of reviving the refineries seems lost, with the recent remark credited to the Group Managing Director of NNPC, Dr. Ibe Kachikwu, some days ago, that the country was losing N40 billion per annum due to the poor performance of the four refineries. This means they are still unviable. It is most likely, therefore, that the so-called gains recorded by reviving the facilities were cosmetic; therefore, looking at other alternatives may be the next step. But whichever option the FG decides to settle for, what the nation’s down-stream oil sector yearns for now is honest deregulation to allow competitors engage in refining to boost supply and force down pump head prices in the long run, even if the FG wishes to sell off the four old refineries.
