Nigeria may
be on the path to becoming self-sufficient in the production of petroleum
products, as the Federal Government expects to increase the country’s refining
capacity from 445,000 barrels per day
to 2.62 million barrels per day.
To achieve
this, the Department of Petroleum
Resources (DPR), has granted licences to 22 private firms to establish
refineries, which are expected to produce 1.97 million barrels per day in the
short, medium and long period. If these refineries come on stream, the country
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.
Already, 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.
DPR, in its
yearly report on the oil and gas sector 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. According
to the agency, in line with this aspiration, DPR has already granted 25
Licenses to Establish (LTE) and five Approvals to Construct (ATC) refineries in
Nigeria to qualified companies.
It stated
that one of the 25 LTE holders, Dangote
Oil Refinery Company (DORC) has progressed the refinery development project
to the equipment fabrication stage. DPR said that the DORC project is due to be
commissioned in 2018 and would add 500,000 BPSD to the domestic refining
capacity.
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 maximisation of assets value
through local refining of produced oil. So far, DPR has issued 22 LTE and three
ATC, respectively for modular Refineries projects. The projects have cumulative
potentials to boost the domestic refinery capacity by more than 671,000BPSD on
completion.”
The DPR
noted that Nigerian refineries are plagued with peculiar domestic challenges
and are not able to produce at sub-optimal levels partly due to the
increasingly aging plants.
It added
that incessant disruption of crude oil and product pipelines have posed further
challenges to operations. DPR said that there is a yawning gap between domestic
demand and output from the domestic refineries, clearly underscores the need
for proactive policies to bridge the gaps.
The agency
noted that the continued low domestic refining capacity especially poses a
peculiar policy challenge, in view of expanding local market for petroleum
products. According to the DPR, growing the domestic refining capacity would reduce
the dependence on foreign products, boost local content, generate new jobs and
develop requisite competencies in the ancillary sectors. “It would also free the foreign exchange market from undue
demand pressures of petroleum products imports,” it added.
The agency
said the future of the domestic refinery sector would be greatly improved
through policy consistency, secured crude oil supplies and improved
infrastructure. “Government is committed to tackling
all the associated challenges facing the effective development of the domestic
refinery sub-sector by promoting the business-friendly environment that is
capable of driving the growth that will ensure the emergence of Nigeria as a
refining hub in Africa,” it added.
The Director-General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf urged the Federal Government to liberalise the downstream petroleum sector for unfettered private sector participation and investment, while ensuring that the refineries are operated as commercial business entities.
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