NNPC and new refineries: Another drain pipe?

Whatever the good intentions of the ministry of petroleum resources and the Nigerian National Petroleum Corporation (NNPC), news that it plans to build two new refineries are sly. It flies in the face of reality. According to NNPC, the new refineries will increase local refining capacity to 850,000 barrels per day in 2020.

We doubt this plan by NNPC because existing refineries are in such a poor state despite past assurances they would be rehabilitated. The country’s refineries, with a combined capacity of around 445,000 barrels per day or 70.75 million litres per day have been operating well below full capacity owing to decades of mismanagement and corruption.

Last year, we questioned the rationale of spending $1.6 billion on the turnaround maintenance (TAM) of the existing refineries. We argued that it would not mitigate the “pains and sufferings” of Nigerians. Before now, whopping sums of public money have been reportedly spent on TAM, but have failed to expand domestic refining capacity.

At the moment, the misery index of Nigerians, due to lack of petrol, has been multiplied. We are spending time either in traffic or queuing for petrol. Transport fares have risen. What has become of the $1.6bn? Why are we still importing petroleum products in large volumes?

As Nigerians discovered last year, the fuel subsidy scam is a haven for cronies and hell for the poor; kerosene is allegedly ‘subsided’ at N50 per litre but Nigerians pay between N140 to N150 per litre. Since 2010, $8.5bn has been spent on kerosene subsidies, half a million dollars less than what Dangote Industries Limited will spend on a refining, petrochemical and fertiliser complex.

Over the years, the production capacity of the nation’s refineries has been huddled by graft and mismanagement in the vast, opaque and unaccountable NNPC. In 2011, the committee on fuel subsidy discovered that the nation imported 59m litres but consumed 35m litres. Of the N2.6 trillion spent on fuel subsidy in 2011, N382bn was fraudulently obtained.

Nigeria’s four refineries hardly refine a fraction of their 445,000 barrels per day capacity. The 400,000 barrels of crude oil NNPC is allocated daily, ordinarily meant for domestic refining, is swapped for refined products imported by Taleveras, Sahara Oil, Aiteo and Ontario Oil and Gas, local trading companies.

It is ludicrous that Nigeria, Africa’s largest oil producer and the continent’s second-biggest economy, still relies heavily on imported refined petroleum products for the servicing of its economy, creating a lucrative market for European refiners and oil traders at the expense of Nigerians.

We need state that the path of efficiency, trust and service is in the direction of transferring the ownership and management of the refineries from government to capable private hands. The long delayed Petroleum Industry Bill (PIB) should be tidied up and passed into Law. This will create a transparent and re-assuring road map for investment in the petroleum industry in general, and the refinery business in particular. This is a matter of utmost urgency.

It is glaring that NNPC or government has proven that it cannot be trusted with the business of refining our crude oil.