A Review of the Nigerian Energy Industry

Bringing the refineries back to life

23 June 2015, Lagos – The news that Nigeria’s four refineries will resume production in July, no doubt has elicited excitement and hope among Nigerians. The enthusiasm of seeing the refineries back to production may not have come at a better time, given the harrowing experiences Nigerians have been faced with in the last four months due to fuel scarcity.

Section of the Port Harcourt Refinery.
Section of the Port Harcourt Refinery.

According to the Group General Manager, Public Affairs of the Nigerian National Petroleum Company, NNPC, Mr. Ohi Alegbe, the ongoing phased maintenance of the refineries is nearing completion and the facilities would soon commence production.

“I think by July, the four refineries should begin to work,” he said, adding that the two refineries in Port Harcourt are scheduled to begin to receive crude next week while those in Warri and Port Harcourt would follow shortly after.

He also said the turnaround maintenance, TAM of the refineries, which he said began in November 2014, was being undertaken by NNPC’s in-house engineers. “We had to resort to in-house engineers after the original builders of the refineries, who were called in to do the job, kept coming up with outrageous bills,” he said.

Power challenges

The NNPC spokesperson also said that part of the problems with the Port Harcourt refineries had to do with lack of electricity to power the facility. Alegbe said: “We have now installed a mini power plant to solve that problem,” said. The return of the refineries will however not put an end to fuel importation in the country.

Even when the four refineries operate at full capacity, they would only be able to cumulatively refine 19 million litres of petrol per day. Nigeria, consumes 40 million litres of petrol per day. “As you can see, that leaves us with a balance of 21 million litres per day, and we will still have to rely on importation to make up for that deficit.”

Refineries downturn

Nigeria has for years depend on importation for its entire energy needs. But it must be pointed out that the comatose state of the refineries precedes the government of the immediate past President Goodluck Jonathan. Right from the administration of late General Sani Abacha, no meaningful turn around maintenance had been carried out in any of the refineries.

Also, the Nigerians had been abandoned to the whims and caprices of marketers, most of whom have been cronies and friends of government officials. According to the World Oil and Gas Review 2014, despite its status as Africa’s top crude oil producer and exporter, Nigeria continues to trail other African countries such as Algeria, Egypt, Libya and South Africa in terms of refining capacity.

In the survey, which covered refining output for last year, Egypt has the highest primary refining capacity in 2013 among the five countries, followed by Algeria and South Africa. Primary capacity in Egypt was put at 840,000 barrels per day, in Algeria, 607,000 bpd, South Africa, 520,000 bpd, while Libya was at 380,000 bpd. In Nigeria, primary capacity was said to be 342,000 bpd last year, as against 345,000 in 2005, the report said.

“We need a paradigm shift in the oil and gas industry. As United States stops buying our crude oil and set to become an exporter of crude oil, I think it is a call to action. We need to start to look at value addition in terms of refining, petrochemicals and others,” said Dr. Imo Itsueli, Chief Executive Officer of Dubril Oil.

According to him, “Singapore has no crude oil, but they have refineries. Why can’t we be a refining hub for the rest of Africa? Why can’t we export petroleum products to Europe instead of crude oil? We are talking about crude oil, not value addition out of crude oil. That is our challenge.”

Also, speaking, the Secretary General of the Nigeria Labour Congress, NLC, Dr. Peter Ozo-Eson, said that incentives need to be put in place to attract new refineries.

“Our domestic refineries must be made to work. Appropriate incentives need to be worked out to attract new investment in refining. While domestic refining by itself is not sufficient to guarantee product price stability, there are clear gains to be derived from domestic refining as opposed to imports,” he said

According to KPMG, a global network of professional firms providing audit, advisory and tax services, in its 2014 Africa Oil and Gas Report, “Subsidies have also contributed to low capacity utilisation at refineries. In Nigeria, for example, current subsidy schemes lead producers to sell crude overseas rather than to local refineries and therefore add to increasing volumes of refined product imports, which present a large cost to the economy.”

– Sebastine Obasi, Vanguard

In this article

Join the Conversation