Nigeria may be on the path to becoming self-sufficient in the production of petroleum products. The federal government expects to increase the country’s refining capacity from 445,000 barrels per day to 2.62 million barrels per day. According to reports, the Department of Petroleum Resources (DPR) has already granted licenses to 22 private firms to establish refineries. They are expected to produce 1.97 million barrels per day in the short, medium and long period.

If these refineries come on stream, Nigeria is expected to save over $15 billion yearly from the importation of petroleum products, create jobs and meet the needs of industrial firms, which depend on by-products from refineries. Meanwhile, nine companies have submitted bids for co-location of new refineries within the complexes of Nigeria’s three existing refineries in Kaduna, Warri and Port Harcourt, which are expected to increase the nation’s refining capacity from 445,000 barrels per day (bpd) to 650,000bpd.

In its yearly report on the oil and gas sector, DPR stated that the federal government hoped to achieve 50 per cent domestic refining capacity by 2020, through a combined policy of deregulation and rehabilitation of aging plants. The agency stated: “The modular refinery model is now emerging as a credible solution to the dismal share of domestic refineries. The model is gaining credence due to its comparatively lower establishment and running costs”.

Compared to bigger refinery projects, the modular solution appeals more to the marginal upstream producers desiring maximization of assets value through local refining of produced oil. So far, DPR has issued 22 LTE (License to Establish) and three ATC (Approval to Construct), respectively for modular Refineries projects. The projects have cumulative potentials to boost the domestic refinery capacity by more than 671,000BPSD on completion.

On his path, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf urged the federal government to liberalize the downstream petroleum sector for unfettered private sector participation and investment, while ensuring that the refineries are operated as commercial business entities. He said the approach should be subjected to appropriate regulatory framework that defines the role of NNPC, while a model that would allow for a level playing field for all operators including the NNPC should be adopted.

His words: “We have concerns over lack of clarity on the deregulation and liberalization of the sector. This policy lacuna has put many investments in the sector at risk; while many other investment decisions have been put on hold”. Still in another development, the importation of Premium Motor Spirit (PMS) into Nigeria is to gulp extra cost of over N2.369 billion per day from federal government and marketers. This is because the landing cost for fuel has soared to N212.7 per litre.

Folashade Olubayo
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