What was initially greeted with apathy by many concerned investors seems to have suddenly become hot cake. About 26 firms have now indicated interest in participating in the task to revamp Nigeria’s four refineries. According to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, this will require an investment of about $2billion (N720billion). This comes as the US Secretary of Energy, Rick Perry, has reiterated his country’s willingness to continue to encourage investment in Nigeria’s oil and gas sector.
The Nigerian National Petroleum Corporation (NNPC), has four refineries, two in Port Harcourt Refining Company Limited (PHRC 1&2), and one each in Kaduna Refining & Petrochemical Company (KRPC), and Warri Refining and Petrochemicals Company Limited (WRPC). The refineries have a combined installed capacity of 445,000 barrels per day (bpd). Despite the abundance of feedstock in the country, the refineries still produce less than their installed capacities, thereby subjecting Nigeria to decades of importation of petroleum products.
Chatting with reporters at the just-concluded Africa Oil Week in Cape Town, South Africa, Dr. Kachikwu declared that Nigeria was almost at the threshold of finalizing the process, assuring that the selection of the firms might be announced by January or February next year. It is part of the efforts by Africa’s biggest economy to reduce its reliance on imports. He also said Nigeria aimed to lift oil output in January to 1.8 million bpd from the current level of between 1.6 and 1.7 million bpd, but would not breach the ceiling agreed with the Organisation of the Petroleum Exporting Countries (OPEC). “If we get to 1.8 million bpd, then we need to stop there because we won’t break the rule.”
Dr. Kachikwu noted that oil prices were now encouraging, although OPEC had not ruled out further cuts to shore up the market. “The market is balancing fast. But do we need to see more cuts? We’ll see,” he said. Turning to self-sufficiency in crude oil refining, Dr. Kachikwu assured that Dangote’s 650,000 bpd refinery is due to come on stream by the end of 2019. According to him, “That should be enough to meet local needs.”
To boost local capacity, the Director, Institute of Petroleum Studies, University of Port Harcourt, Dr. Godwin Igwe, emphasized the need to install modular refineries at strategic locations in Bayelsa, Rivers, Akwa Ibom, Cross River, Edo, Delta, Ondo, and Lagos.
According to Dr. Igwe, modular refineries are flexible and cost- effective supply option for crude producers in remote regions. He said: “This is particularly true where there is a need to adapt rapidly to meet local demand. Relatively low capital cost, speed and ease of construction are key advantages of a modular mini-refinery. Location in close proximity and access to crude supply near to sizeable markets will provide logistic advantage. “To assist in developing the country, we should contribute through the vital role of technology in the systematic transformation of the production systems and capacities.”
Meanwhile, Mr. Perry, who commended Nigeria on the significant steps taken in the oil and gas industry, stated that the US government has a high level of respect for Nigerians. The landmark meeting is the first of its kind between the Ministers in charge of the energy sector in both countries since the inauguration of the Trump administration. This followed an earlier meeting that was hosted by the Office of the Secretary of Energy last May, at the US Departments of State and Energy at the sidelines of the Offshore Technology Conference (OTC), in Houston Texas.
Responding, Dr. Kachikwu said the government of Nigeria under the leadership of President Muhammadu Buhari has clearly set out the choices that the nation has to make over the next four years. It has also taken significant steps in achieving this through the continuous implementation of the 7BigWins – the Nigerian Petroleum roadmap, which focuses on stabilising the business environment, enshrining openness and transparency, and developing and entrenching new policies and regulations.
Dr. Kachikwu noted that the laudable achievements have contributed greatly in helping Nigeria pull back from recession. The minister restated the positive role the government has played through the Joint Venture cash-call payment agreement, ensuring adherence to due process in the sector, and promoting accountability. Others are encouraging sanctity of contracts, and reviewing the fiscal policy to provide incentives for investment in the sector, while optimizing revenues for the government. He also hinted that plans had been made to reduce government’s role in the sector in order to increase private sector participation.
