For a country rated second highest producer of crude oil in Africa, behind only Angola and ranked as one of the world’s top oil producers, it is baffling that the country still depends on importation to meet its needs.
With four refineries that barely work, Nigeria exports its crude and buys back the fuel it needs.
All that is set to change soon as Nigerian industrialist, Aliko Dangote, is constructing a refinery that has the capacity to turn 650,000 barrels of oil into petrol, diesel, kerosene and jet fuel — enough to potentially satisfy all the country’s daily needs.
That would be a welcome development for long-suffering Nigerians. The country’s four state-owned refineries are currently operating at just 5% capacity following decades of poor maintenance, mismanagement and corruption.
For the average citizens, the lack of domestic refining capacity has meant frequent power cuts and endless queues at filling stations.
The refinery, when completed, will put Nigeria in the league of countries with such facilities, thereby removing the shame and embarrassment the country and its people have suffered all these years as a result of recurrent fuel scarcity.
The gas pipeline runs from Bonny through Ogedegbe, Olokola down to Lekki and Escravos, Lagos pipeline and the West African Gas Pipeline. Unlike the existing pipelines that were laid on the surface, which expose them to vandalisation and attack, the subsea pipeline is inaccessible and not prone to vandalisation or sabotage by militants.
By embarking on the refinery project, Dangote has defied the lame argument that there is no profit in refinery business and that government cannot run a profitable refinery business. Sadly enough, successive administrations in the country bought into the falsehood and held down any move in that direction.
A major problem Dangote may face is oil supply. Pipelines are targets for oil thieves and, more recently, organized militants. Attacks by the Niger Delta Avengers have cut Nigeria’s oil production by as much as half. Refinery administrators have cited pipeline attacks as one reason they can’t produce enough petrol.
To curtail this, Dangote plans to build the pipeline supplying oil to the refinery underwater, in hopes that it will keep saboteurs away. He also plans to build two natural gas pipelines to feed power plants.
Similarly, plunging crude prices have pushed Africa’s largest economy to the brink of recession. Energy accounts for about 35% of Nigeria’s gross domestic product, 75% of government revenue and 90% of export earnings.
The government is now racing through its foreign currency reserves, and a shortfall of $11 billion in its 2016 budget has forced officials to discuss a potential cash infusion with the World Bank.
The $12 billion project which is expected to be completed in the first quarter of 2019 is also expected to fetch the Federal Government over N145 billion as income.
The project is also projected to create some 235,000 jobs both direct and indirect.
With all certainty, when completed, the Lekki refinery will have no rival in Africa. It will topple South Africa’s Sapref Refinery, which is the largest in Africa producing 180,000 barrels per day followed by Egypt’s Cairo Mostorod Refinery with a capacity of 142,000 barrels per day.
The largest refinery in the world is Jamnagar Refinery in Gujarat, India, which produces 1,240,000 barrels per day.
Before now, Nigeria had four refineries owned by the Nigerian National Petroleum Corporation (NNPC), located in Port Harcourt, Warri and Kaduna. The two refineries in Port Harcourt built in 1965 and 1989 were merged into one in 1993, with a total refining capacity of 10.500 million metric tonnes per year. The Warri refinery was built in 1978 with a refining capacity of 5.5 million mt/yr.
The Kaduna refinery was built in 1980 with a refining capacity of 5.5 million mt/yr. The three refineries have a combined refining capacity of 445,000 barrels per day, which amounts to 70.75 million litres of petrol. The Dangote refinery is bigger than all the refineries in Nigeria put together.
The daily demand of petrol in Nigeria is about 40.32 million litres, meaning we ought to have in excess 30.43 million litres. That means, if the three refineries in Nigeria were producing at full capacity, there would be more than enough petrol and an excess of 30.43 million litres that could be exported to earn foreign revenue.
Unfortunately, the refineries are producing far below their installed capacity such that they are not even meeting the meagre 40.32 million litres needed daily in Nigeria.
Following years of low performance and high Turnaround Maintenance cost (TAM), the Federal Government decided to hands off the building and running of refineries and to allow private investors take over.
