NNPC
NNPC, supplies crude to local refineries. THE Dangote Petroleum Refinery’s admission that it missed its August target date to commence production because it could not get crude oil from the Nigerian National Petroleum Corporation Limited reflects how Nigeria’s oil industry is being grossly mismanaged. Devakumar Edwin, an Executive Director of the Dangote Group, explained to S&P Global Commodity Insights that the company was already importing crude and would begin refining between October and November. This is another national embarrassment. Beyond its lame excuses, the NNPC must ensure that local refineries receive adequate crude supplies.
It baffles Nigerians and the rest of the world how, despite being a significant producer and exporter of crude, successive administrations since 1999 have entrenched the country’s continuous reliance on imported refined petroleum products. Despite the disastrous impact on the country, the NNPC, which owns and has run four refineries aground, enjoys this iniquitous role.
All hopes of Nigeria ending decades of prohibitive fuel imports pinned on the 650,000 barrels-per-day Dangote refinery located in Lagos now appear misplaced. Edwin stated that the refinery will process petroleum from Angola! More worrisome, the company will reportedly initially concentrate on diesel, and lubricants, ignoring petrol, whose prices have spiked and created further hardship for Nigerians.
Nigeria is Africa’s largest crude producer at its height. According to Yahoo Finance, she is the world’s 15th biggest producer, and Angola is the 16th. Nigeria’s production currently ranges between 1.22 million to 1.5 million barrels per day. It has an OPEC quota of 1.78mbpd and the capacity to handle much more.
NNPC has no justification for failing to feed the Dangote Refinery, the existing and prospective modular refineries, and its own four comatose refineries in Port Harcourt (two), Warri, and Kaduna, which have a combined capacity of 445,000 bpd. The government and the NNPC undermine the country’s competitive advantage while causing suffering for Nigerians.
NNPC, which owns a 20% share in the Dangote Refinery, has announced that it will begin supplying the facility.
It should immediately start supplying the modular refineries too. The Crude Oil Refinery-owners Association of Nigeria says that its member-companies are barely surviving because NNPC does not supply them crude, leaving their refineries idle.
The NNPC’s inability to supply the domestic market is linked to the decades-old industrial scale oil theft undermining Nigeria’s production capacity. The National Security Adviser, Nuhu Ribadu, said recently that Nigeria is still losing 400,000bpd to oil thieves, representing about $4 million lost daily. That is enough to meet the needs of the four moribund public refineries. NEITI said Nigeria lost N1.96 trillion to oil theft, sabotage, and production adjustment in 2021.
President Bola Tinubu should clean up this mess. Realising self-sufficiency in refined products should be adopted as a national emergency. This should be private sector-led, with the government selling the four refineries immediately in transparent, corruption-free, and cronyism-free auctions to reputable investors to attract foreign investment and foster competition in the downstream oil sector. Tinubu should halt the continued waste of public funds on futile turnaround maintenance contracts.
Surprisingly, Tinubu, like his predecessors, appears comfortable with the current absurdities. The National Bureau of Statistics said Nigeria spent N16.9 trillion importing petrol between June 2015 and October 2022. The NNPC’s crude swap arrangements for refined products gulped N2.6 trillion in 2021, NEITI reported. Subsidy on imported products cost N4.39 trillion in 2022, and N3.36 trillion in the first half of 2023. The effects on the economy are shattering.
Other countries manage their resources and run their national oil companies more rationally. Saudi Aramco made a profit of $110 billion in 2021. Brazil’s Petrobras closed 2022 with a profit of $36 billion. Both are major crude producers as well as major refiners.
Tinubu should shrink NNPC into a holding company, and an investment subsidiary, while privatising all its midstream and downstream assets, and restrict the government to industry regulator.
Everything should be done to provide domestic refiners with crude; Tinubu should see to this.