If the new refinery to be built by Africa’s richest man, Aliko Dangote, the six refineries the Federal Government last year promised to build and others come on stream as planned, as well as the revamping of the nation’s current refineries, Nigeria’s oil refining woes may well be on course to become a thing of the past as capacity could reach over 800,000 barrels of oil per day (bpd) by 2017.
Dangote plans to invest up to $8 billion to build a Nigerian oil refinery with a capacity of around 400,000 barrels a day by late 2016, the tycoon told Reuters on Tuesday, almost doubling Nigeria’s refining capacity.
Nigeria is Africa’s largest oil producer and the continent’s second-biggest economy, but still relies heavily on imported refined petroleum products for the servicing of the economy, creating a lucrative market for European refiners and oil traders at the expense of the Nigerian masses.
The country has four refineries, Port Harcourt Refining Company I and II, Warri Refining and Petrochemical Company Limited, and Kaduna Refining and Petrochemical Company, with a combined capacity of around 445,000 bpd or 70.75 million litres per day, but because they are running below capacity, the country imports much of its refined fuel demand at world prices, which is then sold to the domestic market at a discount.
In 2009 and part of 2010 particularly, low refinery runs forced the country to import about 85 percent of its fuel needs. In 2011, the operational capacity at refineries averaged 24 percent, slightly higher than the 22 percent in the previous year, according to U.S. Energy Information Administration. try’s refineries to reach full production capacity has been linked to poor maintenance, sabotage on crude pipelines feeding refineries, oil theft, and corruption.
For several years, the government has promised the construction of new refineries, but it has yet to be seen to be making good its promises.
Between 2002 and 2004, the Federal Government through the Department of Petroleum Resources (DPR) issued nine licences to private investors with total refining capacity of 464,000 bpd, but the refineries have yet to come on stream as the enabling environment was said to be lacking.
In 2010, the Nigerian National Petroleum Corporation (NNPC) announced government’s intention to build three refineries to be sited in Kogi, Lagos and Bayelsa states. This much was reiterated by President Goodluck Jonathan in the wake of the January 2012 anti-subsidy protests, but the projects are yet to take off.
Olusegun Aganga, minister of trade and investment, on July 3, 2012 signed, on behalf of the Federal Government, a Memorandum of Understanding (MoU) with United States (U.S)-based Vulcan Petroleum Resources and local firm Petroleum Refining and Strategic Reserve for a $4.5 billion investment to construct six refineries in collaboration with NNPC.
Each refinery will have a capacity of up to 30,000 barrels of crude oil per day and produce gasoline, diesel, kerosene, and low pour fuel oil.
According to a recent Business Monitor International (BMI) report, the construction of two of the proposed six new refineries this year could help decrease the country’s imports of refined products and ease the country’s hefty fuel subsidy bill, but regulatory environment and security risks could, however, delay efforts to build the two facilities this year.
FEMI ASU
