• Friday, May 24, 2024
businessday logo

BusinessDay

Petrol from NNPC’s revamped refinery to go off-spec in 2 years

It is official: Petrol price deregulation is over, at least for now.

Nigeria’s state oil company is spending nearly three billion dollars to rehabilitate the country’s three petroleum refineries, but the petrol they will produce will fall short of the prescribed standard in Africa by 2025 due to high sulphur content.

This could pose a threat to the health of Nigerians and their vehicle engines, as all over the world there is a shift to fuels with lower sulphur content. But the NNPCL appears to be digging in by splashing billions of dollars on obsolete refineries as pressure from labour leaders trumps other concerns.

The generally acceptable quality of refined petrol has improved over the years from 300 parts per million (ppm) of sulphur to 150 ppm which is the standard according to rules drafted by the Standard Organisation of Nigeria (SON) in July 2017.

But the NNPC refineries could not meet this standard. “As at 2019, refineries were producing PMS with sulphur content ranging from 100 ppm to 300 ppm and AGO (diesel) with sulphur content ranging from 800 ppm to 1500 ppm” said Anibo Kragha, former NNPC COO, Refining and Petrochemicals but is now the executive secretary of the African Refining and Distribution Association (ARDA).

Bogged down by huge petrol subsidies, some analysts say cash-strapped NNPC was swapping Nigerian crude for cheaper fuel grades with more sulphur even after the July 2017 deadline as it had taken 1,000 ppm as a baseline, meaning it paid an extra $1.50-$2 a tonne for 500 ppm and up to $25 a tonne more for 150 ppm.

In recent times, however, petrol with 50 ppm sulphur content has been largely imported into Nigeria, including from oil marketers. Currently, the best global standard in use is petrol with only 10 ppm which is also the specification used by the Dangote Refinery due to ramp up production next year.

The 10 ppm grade is also known as Euro 5 in Europe or Afri 6 in Africa. It is set to become the fuel standard on the continent by 2025.

Sources with knowledge of the NNPC refinery rehabilitation plans, tell BusinessDay that the government-owned refineries now being rehabilitated will be producing petrol with sulphur content of 300 ppm after the Turn Around Maintenance (TAM). Industry experts say the Kaduna Refinery, which was designed to run on heavier crude grades unlike Nigeria’s lower sulphur crude, will produce the dirtiest fuel.

This amounts to a troubled future for Nigeria’s refineries as authorities in West Africa, under the auspices of the African Refining and Distribution Association (ARDA), of which Nigeria is a member, have set a 2025 deadline for the importation or distribution of any grade of petrol higher than 50 ppm.

“In line with the ECOWAS directive for production of AFRI-5 (50 ppm sulphur fuels) by 2025, I understand that NNPC Limited is committed to upgrading the NNPC refineries to produce cleaner, lower sulphur content fuels as part of the ongoing rehabilitation process,” said Kragha.

It is unclear how much commitment there is from the NNPC. According to one senior government official, “There was a conversation around this dilemma last year when the matter of the turn-around maintenance, TAM became a big issue and it was the reason why some were opposed to the TAM.”

However, Kragha said….It is important to note that the fuel specifications circa 2019 were in line with Nigerian fuel standards at the time although I understand that these standards are being updated in line with the ECOWAS AFRI-5 (50 ppm) directive.

ECOWAS has directed refineries to procedure AFRI-5 (50 ppm sulphur fuels) by 2025, ARDA has been working with the African Union Commission on the adoption of AFRI-6 (10 ppm sulphur) fuels by 2030 given the attendant incremental health and socioeconomic benefits, said Kragha.

Petrol with high sulphur content poses a danger to the health of Nigerians and their vehicle engines.

“It will not only negate and reverse any commitments or advancements Nigeria has made towards reducing emissions, but it will also exacerbate the already poor air quality in urban areas,” says Amara Nwankpa, director of public policy initiatives at the Shehu Musa Yar’Adua Foundation, an environmental non-profit.

Leslie Adogame, executive director of Sustainable Research and Action for Environmental Development (SRADev Nigeria), an environmental advocacy group, said: “Petroleum fuels that have high sulphur levels directly generate high emission levels in automotive engines. Inadvertently, resulting vehicular emissions will contain high levels of toxic pollutants such as benzene and particulates that have negative impacts on human health and the environment.”

BusinessDay has reached out to the NNPCL for comment but has yet to receive a response as of the time of publication.

Over the years, major refineries across the world now compete on who produces the cleanest fuels, with 10 ppm as the standard for petrol. Countries in Europe including the large refiners like Belgium and the Netherlands, now have laws banning the sale of any grade of PMS below 10 ppm.

A petroleum engineer who spoke to BusinessDay said workers’ unions pushing for local rehabilitation of the refineries may not be asking all the questions about the value the country will get from these refineries.

“The three refineries being rehabilitated will have perhaps the highest refining cost if and when they come back to life, and no one should expect any savings as a result.

“For a refinery operation to begin to make sense, the plant has to be running at nearly 90 percent of capacity. Don’t expect any of these three refineries to attain that level of efficiency assuming we are willing to accommodate this dangerously high level of sulphur in the petrol to come out of the plants,” he said.

Government data suggest that the contract for the turn-around maintenance of the 210,000 capacity Port Harcourt awarded to Maire Technimont SpA will cost $1.5bn while the Kaduna refinery contract will cost $741 million and the Warri refinery contract was given at a cost of $492 million to Daewoo Engineering and Construction Company.