22 September 2011, Sweetcrude, Accra- Multinational oil company Royal Dutch Shell has dropped its initial plan to invest in oil refining in Nigeria.
The company’s decision, announced in Accra, Ghana, yesterday, is contrary to Nigerian government’s directive that crude oil producers in the country should refine 50 per cent of their output locally.
Shell, in explaining its decision, said its portfolio in the country’s downstream was already saturated, but government regulation of oil prices could be one of its reasons for the plan reversal.
The company’s Global Leader, Crude Trading, Mike Mullier, who delivered the firm’s presentation at the ongoing Africa Energy Week in Accra, Ghana, said Shell no longer considered downstream crude processing a growth area, adding that the company had already overshot its portfolio.
He decried low returns on downstream investments and government regulation of prices of petroleum products in some African countries.
Some of the fears, he said, had made Shell shut down its downstream operations, adding that the company has no intention to expand its downstream portfolio in Africa, although it would continue to retain some refining businesses in few countries in the continent.
According to him, the company’s investment direction is currently focused on high profit areas that offer growth opportunities to guarantee adequate returns on investors’ funds.
The statement by Mullier may have sealed off hopes of visible private investment in domestic refining, given that Shell is Nigeria’s biggest petroleum industry operator and produces nearly half of the country’s 2.5 million barrels per day.
Shell also operates Nigeria’s biggest petroleum assets under joint venture and production sharing agreements with the Nigerian National Petroleum Corporation (NNPC).
The company is always seen as the strategic factor in the realisation of government’s objectives and its performance spell either failure or success of official policy programmes in the industry given the size and spread of its operations.
The statement also came a week after Akwa Ibom State government declared that it was withdrawing from the highly advertised Amakpe Refinery, sited in the state.
The proposed refinery was rated ahead of over 18 refinery licences, granted few years ago by Federal Government.
The chain of investment failures and apathy to downstream petroleum industry are occurring amidst a presidential directive on producers in the country to refine 50 per cent of their output in-country.