Market crisis: Players call for pan-industry collaboration on local refining
Sopuruchi Onwuka
Players in the Nigerian petroleum industry have restated the need for stakeholders’ collaboration as private investors reinvent the country’s petroleum refining industry after over 40 years of deleterious importation boom that depleted the nation’s foreign exchange reserves, worsened balance of payment and rendered thousands of workers redundant at moribund government’s refineries.
At the inaugural summit organized by the Crude Oil Refiner-Owners Association of Nigeria (CORAN), over 28 speakers from public and private sectors agreed that good understanding and cooperation has become crucial as Nigeria transitions from net crude oil exporter to net exporter of refined products.
The Oracle Today reports that the summit followed extensive consultations launched by CORAN members to build a strong national stakeholder base with participants from all streams of the petroleum industry, regulatory agencies and government’s policy makers.
The moves come after a protracted spat between the refiners and crude oil producers over operating and commercial issues in repositioning the domestic fuel market after decades of public sector monopoly in refining and product supplies. And key issues revolved around crude oil feedstock supplies to local refineries, currency of transaction and internal pricing regulations.
Anchored on the theme of “Making Nigeria a Net Exporter of Petroleum Products,” the summit focused on how to create seamless flow of feedstock and payment systems that would guarantee optimal plant capacity utilization, sufficient domestic fuel supplies and logistics facilities that guarantee internal energy security while replacing crude oil as main foreign exchange earner for the country.
Chairman of CORAN, Mr Momoh Jimah Oyarekhua, stated in his opening address at the event that transiting Nigeria to a net exporter of refined products would boost the country’s economic independence, create jobs, diversify revenue and improve trade balance.
Chairman of CORAN, Mr Momoh Jimah Oyarekhua.
He pointed at the urgent need for the country to boost internal refining, drive investments, improve infrastructure, groom new set of workforce, sector-wide collaboration and enhance global competitiveness through regulatory reforms.
The Oracle Today reports that Mr Oyarekhua is the Chairman of OPAC Refineries which struggles with feedstock challenges to operate a 10,000 barrel per day refinery in the country.
He declared that Nigeria currently holds 1.137 million barrels per day (mbd) of refining capacity, noting that the available refineries could displace current 750, 000 barrels per day of fuel imports if all the available refining capacity is optimized with feedstock supply.
He listed the available local refiners to include the Nigerian National Petroleum Company (NNPC) Limited with 445,000 barrels per day (kbd), Duport Refinery with 5000 barrels per day (b/d), Dangote Refinery with 650 kbd, WalterSmith’s Ibigwe Refinery with 25 kbd, Aradel Refinery with 11 kbd, and Edo Refinery with 1 kbd.
The existing refineries, he said, can satisfy domestic demand and still supply regional markets with refined products.
President of the Dangote Industries Group, Alhaji Aliko Dangote, declared in a presentation delivered on his behalf at the event that Nigeria is now poised to transition to a net exporter of refined petroleum products, and firmly establish itself as an emerging global player in downstream trade flows.
President of the Dangote Industries Group, Alhaji Aliko Dangote
The Oracle Today reports that the Dangote group operates Africa’s largest crude oil processing complex at its Free Trade Zone which hosts the new 650 kbd refinery. Alhaji Dangote and his refinery have been very audacious with demanding and securing official directives on the industry to guarantee feedstock requirements for the local refineries.
He stated that Nigeria could take advantage of disruption in historical trade flows for refined petroleum products in Africa global developments in the petroleum sector particularly in Europe and be a formidable player in the global oil industry.
“As a vibrant exporter of refined products, Nigeria will witness an improvement in its balance of trade and generate much needed foreign currency,” he told delegates.
In thanking President Bola Tinubu for his support for the private refiners, Alhaji Dangote noted that Nigeria in competition with other regions of the world in a prevailing capacity development race that holds potential for 1.8 million barrels of refining stream day. He pointed at Dos Bocas Refinery in Mexico, Duqm Refinery in Kuwait, Yulong Refinery in China, and Sitra Refinery in Bahrain as global competitors to Nigerian refinery developments.
He pointed out that whereas aging population, evolution of electric vehicles and climate action by developed countries, make some regions uncongenial for new refinery investments; rising population in Asia and Africa flaunts strong incentives for new refinery development although in markets ruled by low margins.
He pointed at a $17 billion worth imports flowing from Europe, Russia, and other parts of the world as legitimate targets for Nigeria refineries as “both the crude oil and the petroleum products will travel shorter distances. The logistics costs of a floating storage will be eliminated, and countries can purchase their petroleum product requirements just-in[1]time.”
According to him, Africa imports about 3.0 million barrels a day of petroleum products, and about half of the volume is imported by countries along the coast from Senegal to South Africa which ironically produce over 3.4 million barrels per day of crude oil.
“As a result of these factors, margins are down and refiners are getting squeezed. Only the most efficient refineries will be well placed to weather these head winds,” he declared.
In referencing sentiments in the continent about energy security, Alhaji Dangote stated that “Nigeria and Africa can become completely self-sufficient and we can keep all the value on our shores. We have done it in Cement, and we can certainly do it for petroleum products.
“It is worth noting that the Dangote Refinery already produces sufficient diesel and jet fuel to meet Nigeria’s demand. We recently started the production of PMS and will soon ramp-up to meet Nigeria demand. Our refined products have been exported to diverse markets, including Europe, Brazil, UK, USA, Singapore, and South Korea, among others.”
To achieve the vision of turning Nigeria into a refining hub, Alhaji Dangote called on government to provide investors with fiscal incentives to develop new 1.5m barrels per day of refining capacity and enable the country to expand its market share.
“Nigeria’s potential as a refining hub is clearly not in doubt, let’s work together to make it happen,” he urged the stakeholders.
In his own remarks, the Governor of Lagos State, Mr Babjide Sanwo-Olu, expressed confidence that the discussions would inspire new ideas, foster stronger partnerships, and set a course toward making Nigeria a true net exporter of petroleum products.
Governor of Lagos State, Mr Babjide Sanwo-Olu
In recommending Lagos State for destination of more refinery investments, Governor Sanwo-Olu said the state has consistently “demonstrated its capacity for innovation and leadership in creating an environment where businesses can thrive, and where strategic partnerships, like the one between government and key industry stakeholders, can flourish.”
The governor cited the Dangote Refinery as a shining example of the possibilities that lie ahead when vision meets the right conditions for success. “The refinery’s impact on Nigeria’s energy landscape is proof of what can be achieved with determination, investment, and collaboration.”
The Authority Chief Executive (ACE) at the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Engr. Farouk A. Ahmed, told the delegates that the agency would continue to assist with effective regulation of the refining space through licensing, monitoring and standardization.
ACE, NMDPRA, Engr. Farouk A. Ahmed
He said all regulatory tools have been sharpened for ease of operation by the industry.
Executive Secretary of the African Refiners and Distributors Association (ARDA), Mr Anibor Kragha, stated that oil products would continue to play key roles in meeting Nigeria’s rising energy demand. He made it clear that Nigeria’s expanding refining options and diversity of waterborne supply delivery points provide near-term advantage.
Executive Secretary, ARDA, Mr Anibor Kragha
Chairman of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LACCI), Mr Osagie Okumbor, declared that the upstream producers are not opposed to domestic refining, noting that internal fuel production is good for supply security and positioning Nigeria as a net exporter of products.
Chairman of OPTS, LACCI, Mr Osagie Okumbor
He stated that the members of the OPTS form part of the collaboration in growing the local economy, adding that the industry was in dire need of new investments in developing and producing greater crude oil volumes in the face of rising local demand.
New incentives for new field development projects, he stated, have become urgent as domestic refining capacity threatens to outstrip crude oil production. He added that the OPTS was working regulators to make the operating environment more congenial.
In providing hope for the industry, the Minister of State for Petroleum Resources, Mr Heineken Lokpobiri, stated that his office was working with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to facilitate reentry into abandoned assets for reactivation.
Minister of State for Petroleum Resources, Mr Heineken Lokpobiri
He added that some seven deepwater offshore assets have been approved for development by next year as the government targets to grow production to 3.0 mbd. He stated that government was already working out arrangements with operators that are willing to go to site.
He however clarified that whereas arrangements were currently in top gear to boost production, it would take years of project stages for the results to hit the surface.
The Commission Chief Executive (CCE) of the NUPRC, Engr Gbenga Komolafe, buttressed that there was existing arrangement for every local refinery to get crude oil from an active proximate oilfield, in line with the requirements of the Petroleum Industry Act (PIA) as advised by the NMDPRA.
CCE of NUPRC, Engr Gbenga Komolafe
He also pointed at cargo programming window evolved by the agency as part of the outcomes of a scheduled monthly review of compliance to crude oil supply obligation by operating companies.
On the whole, the players and stakeholders who delivered presentations and spoke at panel sessions agreed on the need to forge stronger pan-industry collaboration in which every segment of the chain must deliver on obligations in transiting Nigeria from the current quagmire of acute feedstock shortages to a robust refining hub where full plant capacity is optimized.
