Why Nigeria will continue to import petrol — Investigation
Despite efforts to expand domestic capacity, there were indications, yesterday, that Nigeria would continue to import Premium Motor Spirit, PMS, also known as petrol, in the short and medium term because of the government deregulation policy, the inability of modular refineries to refine petrol, lack of funds and foreign exchange issues, and the long period of time needed to construct new refineries.
Before now, there were expectations that the completion of many refineries, including more than 20 modular plants and an improved economy would enable Nigeria to meet domestic demand, estimated at 50 million litres per day.
In different interviews with Vanguard, experts said the importation of petrol would be mostly driven by deregulation, a government policy, which enables operators to source their product from domestic and international markets.
Matrix Energy, A.A Ranno, NIPCo, AY Shafa, Petrocam import petrol
Meanwhile, it was gathered that many companies, including Matrix Energy, A. A Ranno, NIPCo, AY Shafa, Petrocam and major oil marketers have imported the product under the current deregulation regime.
The transactional analysis indicated that the landing cost of petrol rose by 4 per cent to N956.13 per litre in October 2024, from N919.55 in September 2024, due to the differential in the value of the Naira to the United States dollar, which was N1, 625/$ but is currently exchanging at N1, 645/$ in the official market.
The analysis also put the total direct cost, including product cost N887.45, Freight (Lome-Lagos) N10.37, port charges N7.37, Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA Levy N4.47, storage cost N2.58 and others at N913.12 per litre, thus resulting the pump price hitting more than N1,000 per litre in the domestic market.
We look forward to importing product — PETROAN, IPMAN
In an interview with Vanguard, yesterday, the Chairman of the Lagos State chapter of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Mr. Joseph Ehimen, said: “Deregulation encourages competition that opens up the market, allowing investors to source the product from the local or international market. We are currently looking at the Dangote refinery for supplies but are open to exploiting any business opportunities, whether local or foreign.
“Generally, the business environment is tough. From below 18 per cent, the interest rate has risen to 40 per cent. So, we will continue to look at the options. Our members will get the license to import if importation appears better.”
On his part, the National Public Relations Officer of PETROAN, Dr. Joseph Obele, who appealed to the federal government for an N100 billion bailout, said: “Before the removal of fuel subsidy, it costs petroleum products retail outlets owners about N7million to buy a truck of PMS with a capacity of 45,000 litres. As of today, the same truck is selling for N47million. The sudden upward review of 500% has rendered about 10,000 retail outlet owners financially handicapped and incapacitated.
“The inconsistency, instability and financial turbulence of the sector have compounded the challenges, thus making it difficult for petroleum products retail outlet owners to secure funds from financial institutions.”
Also, the Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, IPMAN, Chief Chinedu Ukadike, said deregulation would enable its members to buy petrol from both domestic and international markets.
Modular refineries don’t refine petrol — Analyst
A Port Harcourt-based energy analyst, Dr. Bala Zakka, said although former President Muhammadu Buhari’s administration granted licenses to more than 20 promoters to construct modular refineries, they were not configured to refine petrol but diesel, kerosene and other products
These include the Edo Refinery and Petrochemical Company with the capacity to refine 12,000 bpd, Duport Midstream in Edo state with a capacity to 2,500 bpd and Walter Smith refinery, Imo state with the capacity to refine 5,000 bpd.
Others include the OPAC refinery in Delta state with 10,000 bpd capacity and the Niger Delta Petroleum Refinery (Aradel0 with 11,000 bpd capacity.
Lack of funds, forex issues hinder new investment — Banker
However, an investment banker, who pleaded to be anonymous, said: “With the much-politicised energy transition, it has become difficult for African nations, including Nigeria to attract funds for execution of fossil fuel projects. The situation is also worsened by the difficulty associated with foreign exchange in the nation. All the same, investors and potential investors should not be discouraged.”
Nigeria records consistent rise in demand — Report
According to a Ministry of Petroleum Resources report, Nigeria started thinking about building refineries in the 1950’s after the commercial oil find of 1956 and by 1959, a survey for the construction of a refinery was carried while construction of the first refinery started in 1963, with the old Port Harcourt plant, which had initial capacity to process 35,000 bpd.
The report has it that the refinery inaugurated in 1965, produced fuel oil, gas oil and petrol and dual purpose kerosene, both for local consumption and for export.
But rising demand, especially between 1967 and 1970, encouraged the government to increase in installed capacity of the refinery to 60,000 bpd in order to meet demand.
However, the demand was not met, a development that prompted the government to set up the Oputa Commission of Inquiry to proffer solutions to the problem.
It maintained that it was the Commission’s recommendation that called for the construction of Kaduna and Warri with initial installed capacity of 35,000 bpd each, which were later raised to 110,000 bpd for Kaduna and 125,000 bpd for Warri.
It was gathered that the government resorted to offshore refining of its crude oil before building the fourth nation’s refinery in Port Harcourt by a consortium of three companies – HGC Corporation and Marubeni Corporation, both of Japan and Spie Batignolles of France – in 1984 in order meet domestic demand.
The new refinery, which has 150,000 bpd installed capacity increased the capacity of Nigeria’s four refineries to 445,000 bpd and enabled the nation to meet its demand for a while, adding that past administrations also considered leasing the refineries out to private operators and having them run under contract agreement.
The report noted that the government granted licenses to investors to construct petroleum refineries, including Brass Refineries Limited and Qua Petroleum Refining Limited as well as more than 20 modular refineries without much impact on domestic supply.
Also, the National President, Oil and Gas Services Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “As a leading producing nation, Nigeria should deploy more quantity of crude to increase domestic refining while meeting local demand.”
Nigerians should consider CNG, others — 11Plc
However, the Managing Director of 11Plc, Adetunji Oyebanji, said motorists, households and other consumers should consider alternatives, including Compressed Natural Gas, CNG.
He said: “Customers will make informed choices about where to buy from. Operators will need to improve on safety, customer service, and accurate measurement to retain customers.
“This is also the time for consumers to consider alternative sources of powering their vehicles like compressed Natural Gas, CNG. The era of full competition has come to Nigeria. With time, things will stabilise, and people will make informed choices.”
(Vanguard News)
