Dangote, PH refineries won’t end Nigeria’s petrol importation

By EMEKA EJERE

Nigeria will still depend on importation to bridge her premium motor spirit (PMS) supply shortfall, even after the Dangote Refinery and the four state-own refineries become fully operational, analysis of industry developments have revealed.

This is raising credibility questions on the recent assurance by the Group Chief Executive Officer (GCEO), of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, that Nigeria would stop consuming imported petrol by the end of this year.

Kyari, who relied on his earlier disclosure Thursday, March 13, at an interactive session with the Senate that the Port Harcourt Refinery would become operational in two weeks time, also assured Nigerians that the delivery date of the refinery and other refineries remained sacrosanct.

The NNPCL Boss told the Senate ad-hoc committee investigating the various Turn Around Maintenance (TAM) Projects of the Nigerian Refineries that over 450,000 barrels of crude oil had already been stocked into the Port Harcourt Refinery.

According to the NNPCL spokesperson, Olufemi Soneye, in a statement, Kyari said: “We will make sure that promises that we made about the rehabilitation of these refineries are kept. We completed the mechanical completion of PHRC in December.

“Now, we have crude oil already stocked in it. It is currently undergoing regulatory compliance tests before we re-stream it. I assure you that this refinery will start in next two weeks.

“For the Warri Refinery, we have also done mechanical work on it. It is undergoing regulatory compliance processes that we are doing with our regulators. Kaduna will be ready by December this year, but we have not reached that stage. We believe that it will also be ready on schedule.”

At a book launch in Abuja last week, Kyari stated that Nigeria would stop consuming imported petrol by the end of this year. Represented by the NNPCL Chief Financial Officer, Umar Isa Ajiya, the NNPCL helmsman said: “We have moved from a loss marking corporation within six months of taking over and we have declared profit. We have moved the company that is focused on upstream development to refinery and downstream marketing.

“The culture of selling crude outside and Importing refined products will stop this year. Nigerians will not be buying petroleum product refined abroad but product refined locally.

Greeted by doubts

However, not many were excited, as most people expressed scepticism, considering the past unfulfilled promises. Since 2015, when the ruling All Progressives Congress (APC) took over power, there have been promises of turnaround maintenance of the Port Harcourt Refinery and others and their eventual operation, with none ever coming to fruition.

Recalls that in 2022, Kyari, during a media briefing at the State House, Abuja, said the country would end importation of petroleum products by June 2023.

He also said the Lagos-based 650,000 barrels per day Dangote Refinery then under construction would start producing petrol by the middle of 2023, with a capacity of 50 million litres daily.

“Even if all our four refineries in three locations are operating at 90 per cent of installed capacity, they will only be able to raise 18 million litres of petrol (per day)”, Kyari had also said.

According to him, the combination of outputs from the Dangote Refinery and the national oil company’s four refineries would “eliminate any importation of petroleum products into this country. You would not see any importation into this country next year.

“This is very practical. As a matter of fact, when we are done with our own refineries and the Dangote Refinery, there remain other small initiatives that we are doing, small modular condensate refineries that we are building. If that happens, and we are very optimistic it will happen, you would see that this country will now be a net exporter.

He reaffirmed that NNPC owns 20 per cent of the Dangote Refinery and has first right of refusal to supply crude oil to the plant.

Different realities

Relying on multiple sources, this newspaper last week reported that a serious struggle among international oil traders and the Federal Government for supply of Dangote Refinery’s finished products is delaying the release of the over two billion litres of petroleum products already produced by the 650,000 barrels per day plant, since it started production on January 12, 2024.

The situation is said to be compounded by several factors, especially the inability of the refinery to meet the stiff regulatory requirements by the regulatory agencies, as well as the disagreement between the Federal Government and the refinery’s management on the appropriate pricing of the products in the country.

Our report quoted sources at both Dangote Group and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the regulator of Nigeria’s midstream and downstream oil sector, as blaming the delay in the release of refined products into the market on failure to get the much needed pass mark from NMDPRA.

One of the reliable sources had said: “All other grey areas have been sorted out. The only knotty issue, as far as I know, is that of pricing. That is the amount Dangote will sell his products locally.

“International oil traders are offering Dangote more than what the nation (government) is offering him for his products.

“While BP, Trafigura, Vitol and other big oil traders are ready to buy at a premium, even offering to pay upfront for future fuel cargoes and making available huge loans to Dangote for it to purchase feedstocks, local authorities want Dangote to sell at a discount.

“I think the prolonged approval process is meant to arm twist Dangote to sell his fuel at a controlled rate. If not that there is something to it, how long does it take to complete a normal regulatory process?

“I can assure you that if the disagreement on pricing is sorted out today, Dangote’s fuel will enter the market today”

Between premium and discount

With the pendulum of cost-benefit analysis more likely to swing in favour of foreign oil traders, analysts do not see Dangote Refinery supplying to the local market a quantity of products that will guarantee self-sufficiency when added to the outputs of the state-own facilities.

“Dangote is a businessman; he will surely go for an offer that will give him good margin’’, Joe Ofili, an energy expert told our correspondent.

‘’So what it means is that, even with all the four government refineries fully operational”, there’ll still be supply shortfall that only importation can assuage, at least for now.’’

According to data from NMDPRA, prior to the removal of subsidy, which saw a drop in fuel consumption in Nigeria to 46.38 million litres per day in July 2023, the country’s consumption level was at 65 million litres per day.

“The current daily consumption has drastically reduced as against 65 million litres, which had been the daily consumption before subsidy removal’, Ahmed Farouk, Chief Executive, NMDPRA, had noted during a stakeholder meeting with oil and gas downstream operators in Lagos.

“In January, it was 62 million litres per day; February, 62 million litres per day; March, 71.4 million litress per day; April, 67.7 million litres per day; May 66.6 million litres per day; June, 49. 5 million litres per day and July, 46.3 million litres per day,”.

In 2019, a former Group Managing Director (GMD) of the then Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, revealed that Nigeria needed to grow local refining capacity to 1.52million barrels per stream daily (BPSD) to meet the need of PMS.

Baru said: “Nigeria needs a refining capacity of 1.52million Barrel Per Stream Day (BPSD) of crude oil in order to meet its PMS requirement by 2025.

“This capacity requirement includes Dangote’s 650,000 BPSD Refinery and NNPC’s current nameplate capacity of 445,000 BPSD (WRPC, KRPC and PHRC). This leaves a shortfall of 20million litres which is equivalent to 427,000BPSD.”

In a presentation titled: The roadmap for energy sustainability in Nigeria at the Society of Petroleum Engineers (SPE) Oloibiri Lecture Series and Energy Forum 2019 in Abuja, Baru, however, explained that in order to address this shortfall in PMS demand, NNPC is adding 215,000 BPSD of refining capacity through private sector driven co-location of existing facilities in Port Harcourt Refinery Company (PHRC-100,000 (BSPD) and Warri Refining and Petrochemicals Company (WRPC-115,000 BPSD).