Domestic oil supply disequilibrium and Niger’s offer

Port Harcourt refinery

By Paul Arhewe

How did our blessed Nigeria, with her abundance of crude oil deposit and a leading global exporter of crude could get reduced to the lowly status of relying on external supply for her domestic oil consumption? The lowest point of the national embarrassment is the gesture from Niger Republic. Our neighbor up North on the fringe of Sahara Desert has expressed her willingness to come to our rescue with her residual 13, 000 barrels (2.06 million litres) of premium motor spirit (PMS) of her daily refined oil output of 20, 000 barrels. This gesture was made by Nigerien minister of petroleum, Foumakoye Gado, last week during a visit to Nigeria.

I personally feel affronted by the gesture for the simple fact that it underlines our planlessness and the visionlessness of our leaders. Niger is a fringe player in the global oil business. Yet she was perceptive enough to realize that her best option is to refine more petroleum products than she needed. This influenced the production policy of 20, 000 barrels per day while domestic demand currently stands at 7, 000 barrels. It is this leftover she is pleading to off load to her neighbour, our dear Nigeria, the leading crude oil producer in Africa. We have sunk to this lowly status because NNPC has still not found pragmatic solutions for full capacity utilization of the installed capacities of our four refineries nor have we made any sense of the private refinery policy.

However, I still find the gesture from Niger Republic laudable and instructive. The authorities should see this gesture not as succor, but as a wakeup call to come up with down-to-earth solution in routing out those sabotaging the optimal functioning of existing refineries in the country and the obstacles on the way to the implementation of the private refinery policy. One is left in quandary that Nigeria with the huge yearly receipts from crude oil sales cannot efficiently develop and run refining system that could place her in good stead to rescue her less privileged African countries.

That is only a wish. How would Nigeria now or in the nearest future operate functional refineries when revelations from the ongoing House of Representatives’ probe on oil subsidy has exposed a monumental corruption in the extant supply equation in the nation’s oil supply and demand mix?

Presently, the country has four refineries - two in Port Harcourt, one in Kaduna and one in Warri. Their combined installed capacity is 445,000 barrels per day. Presently, the four refineries are working at less than 30 percent of their installed capacities according to official figures, contrary to the well flaunted figure of between 60-75 percent capacity utilization by the NNPC.
Past and present governments have pumped in billions of our hard earned foreign exchange in turn around maintenance to put the refineries at optimal capacities, but the activities of faceless economic saboteurs appropriately tagged ‘oil cabal’, have ensured that the gestures of the governments never yielded the targeted objectives. The raking in of billions of naira of abnormal or unmerited profits is the attraction for these acts of economic sabotage.
How does anyone expect our refineries to work and be cleansed of sabotage when report has it that our daily consumption of fuel is 35 million litres yet importers were being paid for 59 million litres a day? Such loopholes utilised by this faceless cabal for sapping the country’s dry won’t allow any meaningful progress in the refineries’ TAM or the establishment of private oil refineries.
Even as government currently plan to achieve a 90 percentage production capacity by next December, where it is expected that production of PMS will rise to 20.3 million litres, 9.2 million litres of kerosene and 15.3 litres of diesel, this would still be less than the daily national consumption which currently stands at 35 million litres for PMS, 10 million litres for kerosene and 12 million litres for diesel. Assuming the oil cabal allows this new plan to come to fruition, I think the country still needs more refineries. This would not only stop the fraud associated with subsidy, but would lead to flow of billions naira into government’s coffer from the sale of by-products from crude oil during refining.
It is time government acted sincerely, as not doing so will be a disservice to Nigerians and a shame to the nation.