By Anthony Uche
Nigerian refineries have always been impacted by operational problems, the inability of previous Turn Around Maintenance (TAM) operations over the years, have kept the four refineries in the country perennially operating below installed capacity.
Considering the high demand for petroleum products in the country, their availability is crucial. The estimated daily demand for petroleum products in Nigeria today is 30 million litres of petrol (PMS), 10 million litres of kerosene (DPK), 18 million litres of diesel (AGO), and 780 metric tons (1.4 million litres) of cooking gas (LPG), and the estimated amount of crude oil required daily for domestic refining, that would satisfy the demand for petroleum products in Nigeria adequately, should be about 530,000 barrels per day (bbl/d). This is some 85,000 bbl/d more than the combined refining capacities of all the state-owned refineries located in Warri, Port Harcourt, and Kaduna. The four refineries have combined installed capacity of 445,000 bpd and have never reached full production due to sabotage and operational failures.
In 2010, a meagre amount of 80,757 metric tones, MT, of petroleum products were refined by all the refineries. These included 53,223.4 MT of automotive gas oil, AGO, 7,567 MT of liquefied petroleum gas, LPG, and 19,967 MT of premium motor spirit, PMS. Amazingly, 8.1 million MT of petroleum products were imported into the country in the same year.
With crude oil exports currently above 2 million bpd, due to increased production, as a result of the relative peace being enjoyed in the Niger Delta region, the country ironically has to rely on imports of refined products for 85 percent of its fuel needs, mainly from European suppliers.
Nigeria, which is Africa’s largest crude oil exporter and also the 6th largest in the world, spent about N1.15 trillion to import an estimated 8.1 million metric tons (MT) of petroleum products in 2010 alone and will spend about N388.11bn to import petrol, in the first quarter of this year.
Ageing refining plants, dilapidated infrastructure, such as pipelines linking the plants and a lack of investment have held back the country’s refining industry for years, while militant attacks have worsened the situation.
In December 2010, a series of militant attacks to pipelines connected to the refineries forced the Nigerian National Petroleum Corporation, NNPC, to shut down all of them. Also in November, 2010, Kaduna refinery which runs on crude oil from Chevron’s Escravos oil terminal, and has capacity of 110,000 bpd, was shut down after the crude oil pipeline feeding the facility was damaged by militants operating from Delta state.
But the refineries are back on track, as information emanating from NNPC indicates, Group Managing Director, NNPC, Austen Oniwon, said in Abuja that that the NNPC was determined to make the refineries work at full capacity to reduce importation of petroleum products. The NNPC chief stated that the current stability in the supply of products could not be sustained in the long term, hence the need to rejuvenate local refineries. “The refineries must therefore work on a continuous basis, thus reducing imports significantly. In pursuance of this, the management is currently involved in discussions with the original EPC contractors with a view to carrying out rehabilitation works aimed at restoring the refineries to their original design capacities,” he said. Oniwon said that the initiative would lead to the desirable result of improving on the refineries’ contribution to meeting domestic demand.
Also, the Spokesman of NNPC, Levi Ajuonuma, noted that production currently fluctuates between 65-75 percent. He said the 125,000 bpd Warri refinery which was shut down temporarily is back on stream and has commenced the production of kerosene. “Warri is up to 75 percent and the rest are between 60 and 70 percent” Levi Ajuonuma noted. “In another couple of weeks we will be ramping up production. The key is pipeline security.” He added. When asked if security had been bolstered, Ajuonuma said “yes it has”. This is coming on the heels of the success of the Joint Task Force, JTF, operations in curtailing the activities of vandals in the region and also the ongoing amnesty programme.
Plans are on the way for additional 750,000 bpd to be added to the existing refining capacity of 445,000 bpd. China State Construction Engineering Corporation Ltd intends to build three new refineries in Kogi, Bayelsa, and Lagos state. Already, the Memorandum of Understanding, MoU, has been signed and the Chinese have inspected the proposed sites, as a sign of their commitment to the project. The deal is said to be worth $23 billion. One just hopes the projects materialize, considering the fact that the last refinery, the Port Harcourt refinery, was built by the Babangida administration over twenty years ago.
Nigeria’s state-owned refineries all have very poor maintenance histories, are technically inefficient, and are unreliable for uninterrupted domestic production of petroleum products, even at the very best of times. Liberalization and total deregulation of the downstream will create the necessary environment for attracting investors into the refining sector. With her huge hydrocarbon resources, there is no reason Nigeria should not be able to refine petroleum to meet local demand and for export to the regional and international markets.