11 August 2015, Abuja – Despite claims that Nigeria’s refineries are now operational, the country will have to depend largely on imported petrol in the third quarter of 2015.
Our correspondent gathered that no refinery had been able to produce petrol in commercial quantity in the past weeks, despite claims by the operators of the facilities that they had started refining crude oil to produce petroleum products.
In fact, senior officials of the Federal Ministry of Petroleum Resources and the Petroleum Products Pricing Regulatory Agency told our correspondent in Abuja on Monday that tankers still headed for Lagos to load products.
The Nigerian National Petroleum Corporation last month announced that the Port Harcourt Refining Company was ramping up capacity to about 60 per cent of the 210,000 barrels per day of crude capacity, while production from the Warri Refining and Petrochemical Company had been projected to hit 80 per cent of its installed 125,000 bpd capacity.
The Manager in charge of the Production Programming and Quality Control, Kaduna Refining and Petrochemicals Company, Shehu Malami, had reportedly said that the refinery would save about $5.33m daily for the country when it hits 90 per cent production capacity in the first quarter of 2016.
But officials at the petroleum ministry and the PPPRA wondered why the refineries had yet to churn out products, particularly petrol, if actually they were operational as claimed.
An official at the ministry, who spoke to our correspondent in confidence, said, “Has any of the refineries stated the quantity of products that they are actually churning out? It is already known that Nigeria consumes an average of 40 million litres per day; so, if the refineries are working, then you can now say maybe they are producing about 20 million litres per day and you can now subtract that from the imports.
“We need to verify if indeed they have started churning out products, not just on paper. Just two weeks ago, they gave letters of allocation to importers to bring in products to meet the third quarter consumption demand.”
In his reaction, the National President, Independent Petroleum Marketers Association of Nigeria, Mr. Chinedu Okoronkwo, said the refineries were working but they had constraints in terms of supplying products to marketers.
He said, “For now, marketers go to where they think they can get the products easily without problems. The refineries are working, no doubt, but we know that the pipelines are not functioning properly because of vandalism. We are working with the Federal Government to see how we can connect, especially Aba and Enugu up to Makurdi.
“Soon, a lot of things will fall in place. Considering what they are producing now, if the pipelines are not in order, then they will not be able to get products across. However, I’m sure that the new government, being a government of change, is working on this issue.”
Meanwhile, the daily subsidy on a litre of petrol has dropped to N33.86 from a high of N51.61 on June 11, 2015, pricing template by the PPPRA showed on Monday.
The PPPRA put the landing cost of the product at N105.37 per litre as of August 7, down from N123.12 per litre on June 11, while the Expected Open Market Price was N120.86 per litre, compared to N138.61 on June 11.
Subsidy refers to the money paid, usually by the government, to keep prices below what they will otherwise be in a free market system.
There have been calls in some quarters urging the Muhammadu Buhari-led government to remove fuel subsidy, which has been described as wasteful and prone to corruption.
Nigeria, Africa’s top oil producer, relies on importation for most of its fuel needs as the country’s refineries operate below installed capacity. The sustained fall in global oil prices has triggered the decline in the landing cost of petrol as crude oil constitutes a major component in the pricing template.
Last week, the global benchmark Brent crude plunged below the $50 per barrel mark, for the first time in six months.
Brent, against which Nigeria’s oil is priced, was trading at $49.86 per barrel on Monday.
Analysts at Ecobank Capital including the Head of Energy Research, Mr. Dolapo Oni, noted that the Federal Government had decided to retain its fuel subsidies at least for another quarter as the PPPRA had recently selected 29 petroleum marketers to import 1.6 million tonnes of petrol, approximately 2.1 billion litres, for the third quarter of the year.
They said, “The decision to retain the fuel subsidies is particularly surprising given the government’s fiscal position is significantly constrained by the drop in oil prices and difficulties in selling its crude.”
They said, going forward, the government’s revenue and ability to sustain the fuel subsidies could be significantly challenged by trends in the global oil market.