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Stakeholders Advocate Optimal Performance Of Refineries

Posted: Jun 9, 2015 at 1:52 am   /   by   /   comments (0)

By Phillip Oladunjoye – Lagos


Stakeholders in the oil and gas industry have said that the existing refineries in the country must be made to work optimally before the country can phase out incessant fuel scarcity.

They lamented that the four refineries – the two Port Harcourt Refining Company, Warri Refining and Petrochemical Company and the Kaduna Refining and Petrochemical Company, with a combined capacity to refine 445, 000 barrels per day were not functioning at optimal capacity.

For instance, a Petroleum Economist and President, Commonwealth Youth Council, Ahmed Adamu, said all refineries must start to operate at least above 70% operating capacities (currently operating at 16%), new ones must be built, subsidy must be totally removed, industrial sector must be bailed out, and economy diversified.

“Nigerians must be ready to adapt to some difficult times for a while, and wait to benefit from the resulting effects of these difficult decisions,” he said.

He noted that as at 2014, Nigeria imported 886 million barrels of petroleum products, making it the 13th largest petroleum importer in the world. For each barrel of petrol imported, Nigeria government paid at least $8 per barrel, which tallied the total fuel subsidy payment to about $7 billion in 2014.

Chief executive officer of Dubril Oil, Imo Itsueli, said Nigeria needs a paradigm shift in the oil and gas industry, saying that efforts should be made to add value to the country’s refining capacity.  “We need a paradigm shift in the oil and gas industry. As the United States stops buying our crude oil and set to become an exporter of crude oil, I think it is a call to action. We need to start to look at value addition in terms of refining, petrochemicals and others.

“Singapore has no crude oil, but they have many refineries. Why can’t we be a refining hub for the rest of Africa? Why can’t we export petroleum products to Europe instead of crude oil. We are still talking about crude oil, not value addition out of crude oil, that is our challenge,” he said.

General Secretary of the Nigeria Labour Congress, Dr. Peter Ozo-Eson, had in a report titled ‘Pricing of Petroleum Products in Nigeria,’ said, “Our domestic refineries must be made to work. Appropriate incentives need to be worked out to attract new investment in refining. While domestic refining by itself is not sufficient to guarantee product price stability, there are clear gains to be derived from domestic refining as opposed to imports.”

Also, According to KPMG in its 2014 Africa Oil and Gas Report, “Subsidies have also contributed to low capacity utilisation at refineries. In Nigeria, for example, current subsidy schemes lead producers to sell crude overseas rather than to local refineries and therefore add to increasing volumes of refined product imports, which present a large cost to the economy.”

The report noted that problems in the refining industry on the continent include corruption, poor maintenance, theft, and operational problems.

Meanwhile, experts believe that the Port Harcourt Refining Company (PHRC) Limited was fundamental to increasing and improving local refining capacity in the country.

They argued that if working at near optimal capacity, it would assist in reducing the importation of refined petroleum products, as well as help in conserving foreign reserves.

Chairman of in-house branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Fidelis Ighodaye, noted that the PHRC produces varieties of products, including Liquefied Petroleum Gas (LPG), Premium Motor Spirit (PMS – petrol), Kerosene, Automotive Gas Oil (AGO – diesel), Low Pour Fuel Oil (LPFO) and High Pour Fuel Oil (HPFO), saying that the unleaded gasoline produced by PHRC was of international standard.

He said the two refineries in Port Harcourt have not been functioning at optimal capacity due to some challenges, including the refusal by the government to carry out the Turn Around Maintenance (TAM) as at when due.

PENGASSAN National Public Relations Officer, Emmanuel Ojugbana, said that Nigeria’s quest to turn the tide of import-driven petroleum products and achieve self-sufficiency in local refining of petroleum products will be a wasted effort if the refineries are in moribund state.

“The refineries have severally suffered from irregular turn around maintenance.  While TAM is required once in every 18 months, the refineries have been without TAM for almost two decades and this has caused serious problem for their operations.”

Also the President of National Union of Petroleum and Natural Gas workers (NUPENG), Achese Igwe, said unless the federal government evolves efforts to refine petroleum products and put the nation’s refineries in good shape, scarcity of fuel would persist in the country.

Igwe advocated the need to remove fuel subsidy and deregulate the downstream sector, saying that it was a shame that Nigeria continually import petroleum products despite its large hydrocarbon deposit, blaming the past and present leaders for the endemic corruption in the downstream nation’s sector.

He said: “Today, NNPC is the highest importer of refined petroleum products in Nigeria. The same NNPC is responsible for optimal functioning of the four refineries. NNPC also championed the N3/litre payment to depot owners for storage (Thru’put arrangement) and will direct marketers to depots where they will load fuel.

“What happened to NNPC depots across the country? Nigerians should look beyond N200billion subsidy which included debt, accrued interest and foreign exchange differentials. Scarcity will continue until we begin to refine domestically and shun importation of products,” he said.

“We support the liberalization of the downstream oil sector to break NNPC monopoly. The eighteen (18) prospective applicants that were licensed in 2002 to establish refineries are demanding for enabling laws, basic infrastructure and incentives,” he said.

Industry observers believe that the federal government should do everything within its power to ensure that the refineries are working while more investors are encouraged to build more refineries in the country.