Nigerian refineries are not ready to produce PMS due to subsidy – Dr. Fatona, NDEP Plc
None of the existing private refineries in Nigeria can produce and survive profitability under a Premium Motor Spirit (petrol) subsidy regime and over-regulated downstream sub-sector.
Dr. Layi Fatona, Executive Vice Chairman, Niger Delta Exploration & Production Plc made this known in a conversation at the PricewaterhouseCoopers (PwC) Nigeria’s oil and gas stakeholders forum with the theme: ‘Marginal Oilfield Licence: After Winning, What Next?’According to him, if the subsidy on petrol is removed today, investors will massively invest in the domestic production of PMS and other petroleum products. He also said that existing modular refineries produced quality diesel and aviation fuel used locally, but can’t produce petrol because of subsidy.
He noted that the deregulation of the downstream sector is critical to positioning Nigeria on the path of growth and sustainable development, especially in the refining of petroleum products
The NDEP Vice Chairman added that the removal of subsidy will promote free market competition and encourage more investment in the refining of petroleum products and further boost the commercial viability of products.
Fatona further revealed that it is not profitable and sustainable to compete with government-subsidized imported petroleum products, after refining the product at a high cost.
He said, “Refining activities in Nigeria are not attractive to investors, while those who already have facilities in Nigeria are struggling with business expansion due to the nature of the market.
“There is no subsidy on Diesel, LNG, and Kerosene, which is why some refineries in Nigeria are producing these products at commercial quantities, but have refused to produce petrol because it does not make good economic sense
“If Government decides to remove the petrol subsidy today, refineries would produce and sell at a profit, while new refineries will spring up across Nigeria.
“There are many investors that would gladly get their act together, towards the production of PMS in Nigeria when the subsidy is finally removed.
The NDEP Plc boss however added that a deregulated downstream petroleum sub-sector will guarantee local availability of the petroleum products charged at competitive prices.
Fatona confirmed that his company’s Ogbele Refinery which has been upgraded from 1,000 barrels per day to 11,000bpd produce millions of litres of diesel every month, a part of which is used to power its facility, while others are sold to the market.
He confirmed that if the subsidy on petrol is removed today, the NDEP’s modular refinery would be modelled to produce PMS at a reasonable cost and sell to the Nigerian market.