By Obah Sylva, Weekend Editor, Abuja.
The periodical non availability of fuel also known as Premium Motor Spirit (PMS), has been one of Nigerian greatest nightmares for decades. Despite the fact that Nigeria is one of the world’s greatest producers of Crude Oil, the country has constantly battled with its ability to make available PMS which is one of the derivatives of the Black Gold.
Faced with moribund and inefficient government owned refineries, in Port Harcourt, Warri and Kaduna, Nigeria is left with no option but to import fuel to serve over 200 million of its population. The government through the Nigerian National Petroleum Company (NNPC) Limited, which is saddled with the responsibility of providing PMS, had for decades issued licenses to importers of fossil fuel.
It is a known secret that most importers of petroleum products have taken full advantage of the subsidy regime and the corruption in the system to make billions from the Nigeria government. Most times importers deliberately create artificial scarcity as a means to force the government to do their bidding.
For about 2 weeks now, Nigeria is again faced with the issue of fuel scarcity. This time, it is alleged that importation of bad fuel is the cause of the scarcity. Many citizens believe that artificial fuel scarcity in Nigeria would continue as long as no one gets punished for it. This remains the dominant downstream problem because top hierarchies are gaining from the dysfunctionality that leaves the lives of Nigerians miserable, but for how long?
It is disheartening that fellow Nigerians with licenses to import fuel, will deliberately import bad fuel just to compound the miserable life conditions in the country and probably to increase profit margins. It is even more disappointing that the government lacks the political will to prosecute those involved in this evil act.
Last week the NNPC named four companies responsible for importing bad petrol which has led to an acute shortage of the product across the country.
The companies, the importing vessels and the product origin were listed as: MRS (MT Bow Pioneer LITASCO Terminal, Antwerp-Belgium); Emadeb/Hyde/AY Maikifi/Brittania-U Consortium (MT Tom Hilde – LITASCO Terminal, Antwerp-Belgium); Oando (MT Elka Apollon -LITASCO Terminal, Antwerp-Belgium); and Duke Oil (MT Nord Gainer-LITASCO Terminal, Antwerp-Belgium).
Four of the oil companies accused by the Group Managing Director of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari, of importing substandard petrol have all in writing denied the allegation. The management of NNPC has since been silent on the issue.
Though Mr. Kyari had apologized to Nigeria and promised that measures have been put in place to salvage the situation in a few days, Nigerians seem to be more interested in a permanent solution to the issues of fuel scarcity.
… All Eyes on Dangote Refinery.
The 650,000 liter per day Dangote Refinery successfully installed the largest single crude distillation column where different products boil off (from the crude mixture) and are recovered at different temperatures in December 2021. It prides itself as the largest single-train refinery in the world.
Dangote Oil Refinery, a company owned by the Nigeria-based Dangote Group, is developing the project with an estimated investment of $19bn. Nigeria’s Federal Executive Council (FEC) approved the acquisition of a 20% minority stake in the project by state-owned Nigerian National Petroleum Company (NNPC) for $2.76bn in August 2021.
The integrated refinery and petrochemical project is expected to generate more than 9,500 direct and 25,000 indirect jobs.
Earlier this year the contractors handling the project completed the testing of lighting at the Mild Hydrocracking unit of the Dangote Refinery, as the project enters the stage of wiring and debugging. Just 10% of work is left for a Nigerian company to produce 65 million litres of fuel daily, beginning from September 2022.
According to NNPC Nigeria daily fuel consumption is 55 million liters per day. This implies that the Dangote refinery with 65 millions liters per day, will conveniently satisfy Nigeria’s consumption capacity and generate foreign exchange through exports. Therefore many look to the future with a glimpse of hope despite the current dark tunnel of hopelessness. Clearly, the Dangote Refinery will greatly improve the supply chain of petroleum products, but will it make the prices of fuel cheaper?
Some economists have debunked claims that the Refinery will guarantee cheaper fuel, however, they agree that it will improve the supply chain.
The Chief Executive Officer of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, recently advised Nigerians not to entertain the illusion that the Dangote Refinery would guarantee them cheaper supply of refined petroleum products. He agreed that the Refinery will improve fuel availability and supply chain.
Rewane said: “Nobody should expect that the Dangote Refinery is going to make petrol cheaper (in Nigeria). It is going to make it more available at any point in time. I doubt it whether he is going to collect his money in Naira because Dangote has costs.
“Dangote Refinery technically and theoretically is outside Nigeria as it is situated at the export processing zone. We have a deep sea ports where the ships will take the refined products. But rather than buying from Amsterdam we will buy from Dangote and ship to Atlas Cove, Bonny and Port Harcourt.
“The saving (to Nigeria economy) is that rather than shipping a tanker from Amsterdam to Nigeria, we will be shipping it from Lekki. Another savings is because Dangote refinery is 45 percent more efficient than other refineries because of its cutting edge technology. This will further reduce the cost.”
The African Petroleum Producers Organisation (APPO) believe that the Dangote Refinery would reduce importation of petroleum products production into the continent by as much as 36 per cent.
The Secretary-general of APPO, Dr. Omar Farouk IBRAHIM, had expressed confidence that the success of the project could incentivise the rise of similar projects across Africa despite the current focus on energy transition.
Ibrahim stated, “To appreciate the impact that the Dangote refinery is going to have on African economies and especially on the supply of petroleum products, and to some extent the conservation of scarce foreign exchange, a look at some statistics on the continent’s petroleum products demand and supply is in order.
“Currently, Africa’s daily petroleum demand is 4.3 million barrels per day (mbd). Of this volume, 57 percent is produced locally (on the continent) while 43 per cent is imported. When Dangote is fully operational, the percentage of Africa’s products imported shall drop to 36 per cent. This is even as the total volume of products demand rises to 5.4 mbd.
“You can therefore see the huge impact that Dangote refinery shall have on the overall products supply in Africa. Dangote shall be supplying over 12 percent of Africa’s products demand.
“That is huge savings for a continent that has scarce foreign exchange and little to export. We shall save from buying abroad and from shipping and insurance costs. Furthermore, the success of Dangote could incentivise the rise of similar projects, the noise about energy transition notwithstanding,”
As rightly stated by Ibrahim, the birth of Dangote Refinery has motivated other Nigerian business men to dive into the lucrative oil refining sector. Topping the list is the Chairman of BUA Group, Abdul Samad Rabiu, who is investing billions of dollars on the BUA 200,000bpd refinery billed to be completed before 2025 in Akwa Ibom state.
Others are; Waltersmith Refining & Petrochemical Company Limited In Ibigwe Imo State, OPAC Refineries in Umuseti, Kwale, Delta, and Niger Delta Petroleum Resources (Train 3) in Ogbele Rivers.
Facts from experts in the oil Refining sector are pointing in the same direction. Firstly, there will be a reduction in shipping cost considering the distance of travel. Secondly, the cost of shipping crude oil to western countries for refining. This usually takes months in the sea with huge cost implications.
With these two shipping costs there may be some marginal reduction in the landing cost of PSM once the refinery begins operation. No matter how small the landing cost reduction will be, Nigerians eagerly await the completion of the Dangote Refinery with hopes to solve consistent non availability of fuel.
