By Richard Odusanya
Building and operating domestic refineries in Nigeria is, arguably and intuitively, significantly more beneficial than importing ~cheaper, refined petroleum products.
It is posited here that establishing domestic refineries would lead to substantial economic advantages like job creation, foreign exchange savings, improved product quality control, energy security, and a more robust domestic economy, even if initial costs might seem higher due to upfront investment in infrastructure development.
In a nutshell, a refinery is a huge investment, especially for a country like Nigeria. (Globally, there is a surplus of refineries, and if you look closely, whether building a new one is a good option or not) Many of the refineries are running at low volume as there is surplus refining capacity, which means that you can get the refined product back while paying very little to the refiners, so why invest so much in the older ones?
Ironically, our beloved country, Nigeria, has a problem: It is one of the world’s top oil producers, but it doesn’t have sufficient gasoline (petroI) to fuel its struggling economy. The country’s four state-owned refineries are currently operating at less than 15% capacity according the statistics from Bureau of Public Enterprises (BPE), following decades of neglect, poor maintenance, mismanagement, and corruption in the industry. Thankfully, the organised private sector is fully ready to rescue our oil and gas sector in a similar manner to what it happened in the telecom sector a couple of decades ago.
Similarly, statistics from the Bureau of Public Enterprises (BPE) clearly suggest that, there are almost no public enterprises in Nigeria today that function optimally. While they were created to lessen the shortcomings of the private sector and spearhead the development of Nigeria, many of them have smothered entrepreneurial development and fostered economic stagnation. NITEL, NEPA and the Nigerian National Petroleum Corporation (NNPC), ELECTRICITY DISTRIBUTION COMPANIES? are the best examples of these. Public enterprises have served as platforms for patronage and the promotion of political objectives, and consequently suffer from operational interference by civil servants and political appointees.
Furthermore, as of 2018, Nigeria spent $9.95 billion importing refined petroleum. 74% of imports were from the Netherlands, Belgium, Luxembourg, and the United Kingdom; countries that are much richer than Nigeria. All of them rely on private sector operations for refined petroleum products, not the government. However, refineries are different all over the world because they have to not only process the raw crude oil but also make products in quantities that match ~the~ market demand.
Essentially, not all crude oil is the same. Russian Urals grade crude, being of medium density and molecular weight and high sulphur, is very different from the lower density, lower molecular weight, low sulphur US West Texas Intermediate. Yet all of these inputs must be able to create a standardised set of outputs, like gasoline (petrol?), heating oil, bunker fuel for ships, LPG for cooking and heating, and rigorously purified chemical feedstock for the creation of products such as polymers, herbicides, detergents, permanent markers, and a lot more. All of these products must perform the same way every single time.
In conclusion, Nigeria produces only high-value, low-sulphur-content, light crude oils—Antan Blend, Bonny Light, Bonny Medium, Brass Blend, and Escravos Light. Hence, the need to support the building and takeoff of our own refineries in Nigeria rather than importing cheaper, low-quality refined petroleum products.
Finally, the HARBINGER of HOPE is the coming on stream of the private refineries that have the capacity to change the status quo Namely: Dangote Petroleum Refinery and Petrochemicals, Lekki Free Trade Zone, Ibeju Lekki, Lagos, Nigeria.
2• The BUA Refinery in Akwa Ibom State, Nigeria, a significant petrochemical project with a capacity of 200,000 barrels per day.
3 • Gasoline Associates International is one of the private companies licensed by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), formerly, DPR. To establish private petroleum refineries in Nigeria, situated in Ipokia, Ogun State, it is the only petroleum refinery in Nigeria that offers 100% vertically integrated technology covering all aspects of refining, petrochemicals and gas. In joint partnership with FL Engineering Consortium, it has established a 100,000bpd Petroleum Refinery & Petrochemical Plant that is expandable to a 450,000 BPSD capacity However, for strategic reason, it may maintain the 100,000bpd.
The above initiatives will significantly contribute in no small measure to both micro- and macro-economics of Nigeria when fully established and operational.
Richard Odusanya, [email protected]
