With cost of imported refined petroleum products increasingly unbearable – thanks to the steady recovery in global crude oil prices – and with no end in sight to the current regime of importation that continues to sap the nation’s vital juices, it seems for the Nigerian National Petroleum Corporation (NNPC) both the time to lament and to trade in hope.
In lamentation –the corporation, in a statement titled: Green Field Refinery Initiative, claims to spend between $12 – $15billion annually in direct costs on the annual fuel import bazaar by OPECs sixth leading oil producer. Excluded obviously would be the opportunity costs foregone in the countless potential jobs, the unrealised spin-offs in raw materials and other crude oil derivatives, the perennial cycle of fuel shortages and the spasm generated on the economy, etc. To these could be added the associated superficial, rentier economy known to be the most opaque, if not the most corrupt, in the world.
As if trading afresh in hope, the corporation would claim to be revving up plans to establish three refineries under its so-called Greenfield Refinery Initiative in Lagos (200,000 barrels per day), Bayelsa (100,000) and Kogi (100,000). This time, it says it does not intend to build on a sole risk basis but rather in partnership with other prospective local and foreign investors, while holding reasonable but minority interests.
The refineries, it says, “will be ring-fenced refineries to be operated strictly on a commercial basis; completely market-oriented and profit motivated and as such issues of location, configuration and shareholding structure will be determined not solely by NNPC but by the consortia collectively”.
The refineries combined, projects an output of approximately 28 million litres of petrol, 7.5 million litres of kerosene, 25 million litres of diesel, and one million litres of Light Sulphur Fuel Oil (LSFO). With that, the corporation hopes to break the fuel importation jinx.
We welcome the initiative as indeed similar initiatives designed to boost the nation’s refining capacity. For an initiative that started way back in 2005, we cannot wait to see it happen. At the risk of sounding like a broken record, the scandal isn’t just that Nigeria’s four refineries with combined crude processing capacity of 425,000 bpd are effectively out of action, the endless Turn Around Maintenance (TAMs) to keep them running has become a byword for corruption and profligacy, just as the scandalous regime under which the country exports crude to finance its local requirements for white products has become a global reference on how an oil-producing country should not do business.
As it is, only the NNPC and the Federal Government feign ignorance of what Nigerians’ expectations are. The call has always been an end to the unbridled regime of fuel importation. Liberalisation of the sector is of course the way to go. However, it is increasingly obvious that this will not happen overnight; and certainly not without support and some form of partnership by the Federal Government.
The good news of course is that the business is do-able. The coming of Dangote Refineries and Petrochemical Complex has shown that the business, sometimes presented by government as something of rocket science, is actually viable. Moreover, that new investors are currently coming on board with modular refineries would seem to attest to the endless possibilities in the sector, provided that the government is willing to provide the needed leadership. And if we may refer specifically to the Greenfield refineries, their commercial viability has long been affirmed by Messrs. Wood Mackenzie Energy Consulting Limited and Messrs. Foster Wheeler Energy Limited in their feasibility studies on the Greenfield refineries conducted in 2011. Why the corporation has not moved swiftly to get investors with requisite technology and know-how remains a wonder that only the corporation and its principal, the Federal Government can explain.
We can only hope that things will be different this time.
