Page 4 - DMEA Week 26 2022

DMEA COMMENTARY DMEA

The curious case of Nigerian

refining: waiting for Dangote

Refineries are taking the blame for Nigerian fuel shortages and high prices but acquiring
a 20% stake in the new Dangote facility means NNPC may soon breathe a sigh of relief.

MIDDLE EAST THE managing director of the Nigerian National communities in the Petroleum Industry Act so
Petroleum Corp. (NNPC) Ltd, Mele Kyari, told that they become part and parcel of the system,”
the country’s House of Representatives (HoR) he said.
WHAT: this week that issues with fuel prices and availa- “Many of [the refiners] are completely armed
NNPC’s managing bility should be blamed on state refineries being and the community members cannot even
director has said the out of operation. report them. They are helpless, because if they
country’s out-of-service In doing so, the official effectively levelled report them, they will come after them,” he
refineries are to blame the blame at his own company, which failed to added.
for the current situation, carry out turnaround maintenance (TAM) on Meanwhile, he suggested that more oil
rather than theft, though the plants for several decades, leading them to should be produced and made available while
he also blamed illegal require major overhaul work. also allowing oil marketers to import prod-
refining. Kyari noted that more than 200 illegal refin- ucts. “There’s need to engage the [Central Bank
eries across the country had exacerbated the of Nigeria] to create more dollars. Once we do
WHY: situation. this, dollars will be allocated for the import of
Nigeria has long battled NNPC operates three refining facilities on automotive gas oil [AGO or diesel]. This will also
with subsidies and is behalf of the state, with a combined capacity of dampen the effects of going to buy dollar in the
now dealing with supply 445,000 barrels per day (bpd), all of which have open market. So, you can have cheaper dollar
challenges that maintain been out of commission since 2019, leaving and definitely it will affect the price.”
the burden on state 100% of Nigeria’s active capacity in the hands These comments jar with reports in May
coffers. of independent companies that operate small, that quoted modular refiners as saying that they
modular facilities that currently have a name- were unable to operate properly owing to issues
WHAT NEXT: plate capacity of 16,000 bpd. acquiring sufficient crude supplies from NNPC
NNPC has paid the first Work has been signed off to rehabilitate the while the company continued to sell its crude on
instalment of a deal to two refineries that make up the 210,000 bpd Port international markets.
acquire a stake in a new Harcourt Refining Complex, with the 125,000 Appearing during the same gathering was
650,000 bpd refinery, bpd Warri Refining and Petrochemical Co. Farouk Ahmed, CEO of the Nigerian Mid-
which is seen as the and 110,000 bpd Kaduna Refining and Petro- stream and Downstream Petroleum Regulatory
saviour of Nigerian oil chemical Co. also to undergo major repair work Authority (NMDPRA), who also advocated for
and product markets. thereafter. the resurrection of Nigeria’s refining capabilities.
The billion-dollar projects have come under While he noted that Nigeria, like other coun-
intense scrutiny, with politicians casting asper- tries, was at the mercy of global fuel and product
sions about the Port Harcourt tender process as markets for pricing, he suggested that greater
well as questioning investment in rehabilitating foreign exchange be made available to “genuine
facilities that have a history of poor performance. importers at CBN’s official rate”, the government
Against this backdrop, NNPC has hedged its work to encourage the establishment of more
bets, making the first instalment of a $2.76bn local refineries and LPG processing facilities to
deal to acquire a 20% stake in what will be the meet domestic demands and raise LPG supplies
country’s largest refinery. from local producers.

Blame game Dangote payment
In fairness to Kyari, his comments came in CBN, NNPC and just about every other Nigerian
defence of local communities, blamed for either stakeholder are pinning their hopes and invest-
siding with groups that have engaged with illegal ments on the 650,000 bpd Dangote Oil Refinery,
refiners or not reporting such activity. which is seen reaching full capacity in 2023.
“Community members are not the thieves. Construction work at the refinery is complete
Absolutely not. Everything we are doing is to and testing is ongoing ahead of the commence-
incorporate the communities into the process of ment of refining operations, which the company
protecting these assets. The National Assembly has said should begin by the end of this year at
in its wisdom also included [a] trust fund for the 540,000 bpd.

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