Emerging roadmap for Nigeria’s refineries?

It is increasingly becoming crystal clear that the Buhari administration will rather encourage establishment of private refineries rather that sell the existing state-owned ones which are running at a fraction of their capacity because of poor maintenance and aging equipment.

Vice-President Yemi Osinbajo has said the government is working on a medium-term reduction of the pump price of petroleum products by collaborating with private refineries and reducing importation.

“We think that in the medium term, we would be able to get cheaper pump price, pump price of fuel would be cheaper because we would be importing far less refined petroleum. A lot of that will be produced locally”, said Osinbajo.

More than 30 licenses for refineries have been granted and private refineries will be allowed to build near the state-run units so they can “benefit from the available infrastructure,” he said.

Many of them, their major concern is feed stock, are we going to be guaranteed feed stock? We are working on that. Once we are able to deal with that, we feel we would substantially be able to reduce pump price and get the whole business of importation of refined petroleum and the NNPC just getting directly involved in business; we are going to reduce that. The objective is to make the NNPC play more regulatory function”, said Osinbajo.

Kachikwu’s refinery rehab plans

Ibe Kachikwu, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), while being screened by the senate unveiled what looked like the roadmap for the Nigeria’s refineries.

He gave assurances that all the local refineries would start working by the end of the year to displace massive fuel imports, cut huge import bills, reduce pressure on the nation’s lean foreign exchange revenue and create multiplier effects in the domestic economy.

He reiterated his confidence and trust in the technical workforce of the refinery, saying that over 80 per cent of the nation’s technical skills pool for operations of the NNPC were competent and pointed at the achievements of the Port Harcourt Refining Company (PHRC) at rehabilitating its plants as part of the potentials available in the industry.

Kachikwu said that the new business model which he had activated would dismantle all administrative and funding constraints at all the corporation’s business units, especially the refineries, and leverage internal energies and competencies in optimising uptime at the plants.

Refineries operated at 10 per capacity

Nigeria’s three refineries in Port Harcourt, Warri and Kaduna recorded average capacity utilisation of 10.04 per cent, according to the monthly financial and operations report of the Nigerian National Petroleum Corporation (NNPC) for January to August 2015.

The NNPC report indicates that during the eight-month period under review, the three refineries operated at a total loss of N31.682 billion, with Kaduna refinery accounting for the highest loss of N26.183 billion, while Warri and Port Harcourt refineries made losses of N8.496 billion and N8.057 billion respectively.

While Kaduna refinery recorded losses throughout the eight-month period, Warri and Port Harcourt refineries recorded profits in some months within the period under review. The Kaduna refinery operated at a loss of N5.111 billion in January; N2.673 billion in February; N2.260 billion in March; N3.045 billion in April; N2.595 billion in May; N2.662 billion in June; N3.847 billion in July and N3.990 billion in August.

The Warri refinery recorded profits of N4.668 billion and N79 million in the months of January and July, respectively, but recorded losses in February (N1.390 billion), March (N1.338 billion), April (N1.753 billion), May (N1.288 billion), June (N1.532 billion) and August (N1.195 billion).

Port Harcourt refinery also recorded profits of N705 million in March, N557 million in July and N5.045 billion in August. The refinery, however, operated at a loss of N1.497 billion in January, N1.705 billion in February, N1.437 billion in April, N1.713 billion in May and N1.705 billion in June.

Nigeria subsidizes fuel and relies on imports for more than 70 percent of its supply. Nigeria also depends on crude exports for about two-thirds of state revenue and more than 90 percent of export earnings. A drop in crude prices in the past year has put pressure on public finances, while the naira has declined 7.4 percent against the dollar this year.

FRANK UZUEGBUNAM