Contrary to the Nigerian Government’s claim that the country will no longer import refined petroleum products from mid-2023, based on the expected completion of ongoing maintenance of the nation’s refineries and the almost completed Dangote and other modular refineries, petroleum industry experts have warned that importation of refined petroleum products will continue, until more refineries are set up in Nigeria.
The experts’ observation is coming against the backdrop of the recent figure released by the Nigerian National Petroleum Corporation Limited (NNPCL) that a total of 16.46 billion litres were imported to the country between January and August 2022, with a daily average of 68 million Premium Motor Spirit (PMS).
According to them, the possibility of meeting domestic sufficiency for petroleum products will be solely determined by the commitment of the Nigerian Government to effectively implement the Petroleum Industry Act(PIA) and other investment-driven policies that would encourage speedy completion of rehabilitation of the Warri and Kaduna refineries, as well as the ongoing construction of new private refineries by BUA and African Refinery in 2025.
EnergyDay’s analysis based on the data obtained from Energyeducation, showed that a barrel of crude oil(159 litres) produces 73 litres of (PMS)Petrol, 36 litres of (AGO) known as Diesel, 20 litres of (Jet A1) & heavy fuel oil, 6 litres of Propane and 34 litres of other products (Butane, Asphalt & Sulphur).
EnergyDay’s check revealed that the country’s Port-Harcourt, with a combined nameplate of 210,000 ongoing rehabilitation is expected to commence production by 2023, at 90 per cent capacity utilisation. This is therefore expected to produce an average of 15,330,000 litres of PMS per day.
Dangote Refinery is scheduled to begin production in July next year. Alh. Aliko Dangote, Chairman of Dangote Industries Ltd. in a recent statement said that the refinery will start by processing 540,000 barrels per day (BPD), before achieving its full capacity of 650,000 BPD months after take off.
The 540,000 barrels per day proposed by the Dangote refinery will translate to 39,420,000 litres of petrol per day.
The combined nameplate of four modular refineries supported by the Nigeria Content Development and Monitoring Board (NCDMB) is just 21,500 BPD.
They include Waltersmith (5,000bpd) modular refinery in Imo State, Duport (2,500bpd) Modular Refinery located in Edo State due for commissioning by the 3rd Quarter of 2022, both the Atlantic (2,000bpd) Refinery and Azikel (12,000bpd) Hydro-skimming Refinery both in Bayelsa.
The four modular refineries are expected to be doing 1,569,500 at their optimal capacity.
The Edo refinery, in Ikpoba, Edo State, Nigeria, is currently in the process of expanding its capacity to 36,000 b/d, according to a source close to the refinery. The 6,000 b/d modular refineries were launched in September 2021 and are running at full capacity, producing about 438,000 litres per day.
EnergyDay’s analysis showed that the total volume of PMS that Nigeria would be able to achieve in 2023 will be around 56,757,500 litres of PMS. This however fell short of the daily average of 68million litres quoted by NNPC Ltd.
Nigeria’s petroleum product local sufficiency is therefore based on the speedy take-off of more greenfield refineries under construction that are due to be completed in 2025.
Nigerian Government owned refineries Kaduna and Warri undergoing rehabilitation with a combined nameplate capacity utilisation of 240,000 are also expected to be completed in 2024 and 2025.
African Refineries Port Harcourt Limited (ARPHL), a greenfield Refinery, with the capacity to refine 100,000 barrels per day (BPD) is due to be operational in 2025. The BUA 200,000bpd Refinery in Akwa Ibom is also expected to be operational between 2024 and 2025.
While Nigeria is targeting to increase its domestic refining capacity by 1.421 million barrels per day within the next five years, with the rehabilitation of existing four national refineries, co-location of new refineries, construction of greenfield refineries and construction of modular refineries, experts have urged the Nigerian Government to be consistent with its policies.
In a conversation with Professor Wumi Iledare, Centre for Petroleum, Energy Economics and Law, believed that Nigerians always have ways by which major issues are figured out, even if it is suboptimal.
He noted that NNPC’s model has made it difficult for Nigerians to ascertain the actual volume of petroleum products consumed daily.
He said, “The challenge is knowing the projected consumption of petroleum products in Nigeria and it is unfortunate. Thus, predicting product demand is tough.
“However, if the structure of the economy follows the Sustainable Development Goal(SDG) for energy access for all, then the existing capacity may not be sufficient in a Pareto optimal,” Professor Iledare said.
Professor Adeola Adenikinju, Professor of Energy Economics and the Director of the Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, on his part, believed that the data released by the NNPC Ltd as the volume of PMS daily consumed by Nigerians is inflated.
According to him, with the implementation of the Petroleum Industry Act (PIA) and the liberalisation of the domestic petroleum product market, the number of refineries in the country will increase.
He noted that the local refineries would cater for all the ranges of petroleum products needed by Nigeria.
He said, “With the coming on stream of the Dangote refinery and the repairs of the domestic refineries, and the contributions of modular refineries, we will have sufficient supply to cover the legitimate local demand for petrol. We can also buy more products from Dangote than what our shares demand.
“Some of us are not convinced with the current figures for domestic consumption released by the NNPC Ltd. Those figures are inflated.
“With the implementation of the PIA and liberalisation of the domestic petrol market, I expect more refineries to spring up locally that will produce the full range of products and not just diesel.
He however noted that Nigeria will be in better shape with downstream megaprojects by 2024. This, according to him, would transform the country into a major refined crude exporter, while meeting domestic demand for gasoline, diesel, jet fuel and polypropylene.
Dr Abayomi Issac, lecturer at the Federal University of Technology, Akure, revealed that NNPC Ltd will continue to import PMS into the country beyond 2023, until when other refineries are completed in years to come.
He further noted that the volume of PMS projected to be daily consumed locally is not the current reality. According to him, Nigeria will continue to import PMS until when the NNPCL is ready to reveal the right volume of local consumption.
He said, “the NNPCL will still import millions of litres of PMS. Nigeria, therefore, needs to be realistic in terms of repositioning the petroleum industry by embarking on full deregulation of the downstream.
” Fuel importation will continue to be the only way out if certain issues are not addressed.
“The government needs to initiate investor-friendly policies and offer incentives that would pave the way for more investors to invest in the construction of our local refineries to save costs and add to what Dangote refinery is producing to cater for the domestic demand,“ added.
Obalola Martins, a lecturer at the Federal University of Technology, Akure, believed that the government needs to address the deficit in the industry, hastening its commitment to rehabilitate the old refineries and reviewing policy guidelines.
Martins noted the Federal Government needs to review policies and explore the state government’s potential to participate in the upstream and downstream sectors.
“I believe if each state is given control to monitor and account for their refineries which they own, importation of fuel will be reduced to a minimal rate. Also, without this in place, there is every possibility that fuel importation will continue despite the NNPCL assurance.” Martins noted.