By Dr. Akintola Omigbodun

The previous week we mentioned that since Nigeria obtained an International Monetary Fund loan in 1986 with the accompanying structural adjustment programme for the economy, our earnings from crude oil sales and non-oil exports have not been adequate to meet our foreign currency requirements. We asked what we could do to remedy the situation.

We continue to import refined petroleum products with subsidy payments to the importers. The Nigerian National Petroleum Corporation, NNPC, owns refineries in Port Harcourt, Warri and Kaduna and in recent times, we have not had a decent output relative to the design capacities of these refineries although the Federal Government, FGN, obtained a comprehensive report on available options from a National Refineries Task Force in 2012. There is a private refinery currently under construction in the Lagos area and in addition to this, the FGN should enter into partnership with the major oil multinationals for the purpose of building a new refinery.

We have the example of the Nigerian Liquefied Natural Gas Company which has operated successfully for several years as a partnership between the FGN and the major oil multinationals. I would suggest that this refinery be located in the Port Harcourt/Bonny axis given the infrastructure available in this area.

The petroleum products importation plus subsidies and the indifferent performance of the NNPC refineries constitute a huge drain on our foreign currency earnings. The report of the National Refineries Task Force indicated that refineries in South Africa and Egypt had outputs of more than 80% of their design capacities.

What the report did not mention is that when a refinery was built in Alexandra, Egypt in the late 1900s, an operations and maintenance contract covering the first period of five years was given to an international company, Foster Wheeler. It is apparent that the NNPC refineries have not been put on a sustainable operational mode from the start and so we should simply allow them to limp along until the new refinery is completed. I believe we would be able to come up with petroleum products prices that meet all competing socio-economic factors when we have the new refinery in operation.

Pipelines vandalisation

Petroleum products distribution and pipelines remain a problem given the vandalisation of the pipelines and the theft of products from the pipelines. The products pipelines from the Lagos Ports area through Arepo, Ogun State to the Mosimi NNPC depot have brought death and destruction through the activities of pipeline vandals.

Recent reports indicate that pipeline vandals have attacked and killed two sets of security operatives, first a number of policemen and more recently Department of State Security officials. This column has advocated on 27 March 2013 and 27 May 2015 that the Ogun State Government, OGSG, should acquire the uninhabited area, which is more than 2 square km, adjacent to the products pipelines east of Arepo and the river Owuru. The FGN should consider placing a modular refinery in the acquired area such that crude oil would be fed from the Lagos Ports area to the modular refinery while refined petroleum products would go from the refinery to the Mosimi NNPC depot.

We should not allow the current conflicts east of River Owuru to develop into an intractable problem. The areas strategic to the resolution of the problem lie in both Ogun State and Lagos State. The OGSG and the Lagos State Government, LASG, should acquire uninhabited land along the east bank of the River Owuru from about 2km north of Arepo to the Majidun creeks and the Lagos lagoon.