CHIJIOKE NWAOZUZU

Nigeria has been particularly dependent upon imports for light products (petrol, diesel and dual- purpose kerosene/aviation kerosene), and long on dark products (fuel oils, etc) for nearly two decades. An estimated $12-15 billion per annum is expended on importing light petroleum products at present.

A refinery
A refinery

Meanwhile, it would cost about $2.5 billion to construct 100,000 barrels per day (b/d) refinery plant. It is also estimated that there is a 650,000 b/d refining gap over the next ten years. The current name-plate capacity of national refineries is 445,000 b/d, but capacity utilisation is usually below 30% and should increase marginally with the recent turn-around maintenance.

Nigeria requires at least a million b/d refining capacity to meet current and projected petroleum products demand. Increasing existing refinery utilisation to even 100% would not meet this demand. For a country with a population of nearly 170 million people, this situation is quite dire.

How do you drive industrialisation, provide a boost to economic development, and create jobs when funds that should be channeled towards developing infrastructure for crude oil refining, production of petrochemicals, power generation &transmission, transport systems, agriculture, etc are instead diverted to importation of refined petroleum products? In some countries, this could have led to huge social unrest or even a revolution! This is reckless!

In most oil producing countries, governments enter into partnerships with the oil majors or large independent oil companies to construct large-scale refineries. In the case of Nigeria, we chose to go it alone (i.e. NNPC monopoly of refineries) and have made a huge mess of it.

But, it is not too late to make amends. We can privatise existing refineries in such a way that one of the oil majors would be the ‘Operator’, and with significant shareholding. We can also encourage a joint venture between the government and one or some of the oil majors in constructing new mega-refineries and petrochemical complexes. There is also a role for small-scale private refiners, because it is a recurring Nigerian Government policy to encourage indigenous participation in all aspects of the oil and gas value chain.

Monopolistic operations

Going into the refining business as a National Monopoly without partnering with the International Oil Companies (IOCs) has cost this country greatly. Another ‘royal fuck-up’ would be to allow private individuals (domestic or foreign) to construct mega-refineries. We can ill-afford private individuals threatening our national security by deliberately reducing the supply of petroleum products or determining political outcomes to the latest generations with the colossal cash flows that attends such business.

The present circle of petrol importers can even now hold up economic activities in this country, let alone when you allow some of them to own 200,000 – 400,000 b/d private refining capacity (i.e. a mega-refinery). There are anti-trust issues to be weighed and considered here. The American Government was not stupid when it broke up the Rockefeller and Bill Gates monopoly, and yet America is the world’s most advanced free market economy.

There is no OPEC member state that has adopted these models (i.e. going into refining without partnerships with the IOC’s or allowing individuals to construct mega-refineries). Not even the ‘all- mighty’ Gaddafi of Libya owned a private mega- refinery in Libya, Saddam Hussein did not own a mega-refinery in Iraq, nor were the Arab oil Sheiks allowed to own private mega-refineries in Iran, Saudi Arabia, Egypt, United Arab Emirates, etc. In all these countries, the model adopted were a partnership between the government and one or some of the IOCs with the latter being the ‘Operator’. Let’s keep it that way! But then, how do we encourage the IOCs to make the ‘leap of faith’.

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