Minister of Petroleum Resources, Diezani Alison-Madueke
Chika Amanze-Nwachuku writes on the feasibility or otherwise of federal government’s plan to end importation of refined petroleum products in 24 months
Nigeria is Africa’s biggest oil producer and fifth supplier to the United States. Despite her being rated among 12 biggest oil producers in the world, the country still depends on fuel importation to meet local demand for refined petroleum products.
Currently, country is believed to be importing more than 85 per cent of her refined products because of low refining capacity. The Federal Government had since the past seven year, struggled to fix the country’s traditional four refineries to scale down the rate of products importation and reduce expenditure on subsidy, which claimed about N1.7 trillion in 2011 fiscal year alone.
But in what appears a cheering news last week, Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed in far away Vienna, Austria that the era of fuel importation would end soon, specifically in 24 months.
Alison-Madueke gave the indication on Wednesday, while speaking to journalists on the sidelines of the just-concluded 5th Organisation of Petroleum Exporting Countries (OPEC) International Seminar.
The minister, who was responding to observations by panelists at the conference that high oil prices affect economies of developing nations more than the others, said ending refining petroleum products importation would reduce the impact of oil volatility on the Nigerian economy.
She expressed optimism that the government would stop refined petroleum products importation within the next two years, after it was done with the turnaround maintenance, (TAM) of the existing refineries, which first phase, she said had commenced with the Port Harcourt Refinery.
According to the minister, “First, as you are aware at this point in time, we are trying to ensure that our refined petroleum products that are imported are produced in country within the next 24months or so. To do that we need to do the TAM of the refineries that we already have on ground. We have already moved into the first phase of the TAM of PH, using the original people that built them, so at the end of this year, PH should be up to 90 per cent capacity and by the end of 2013, Kaduna, and then Warri will follow suit.”
Stakeholders views on Routine TAM
Reactions have continued to trail the last week pronouncement by the minister, with many questioning the rationale for continuing TAM of refineries, when it has not yielded any fruitful result.
An industry expert opined that the idea pumping billions of naira year in year out on refineries in the name of TAM was no longer acceptable, as nothing meaningful has come out of the TAMs. Another source at the petroleum minister who spoke off the record noted that the only way to stop massive fuel importation was to return the refineries to full capacity and build new ones. The source however argued that only the private sector can make this happen.
Former Minister of Petroleum Resources, Mr. Rilwan Lukman, had at an oil and gas conference in 2008, declared that government was no longer prepared to spend any more on rehabilitation of the refineries. He pointed out that so much money had been spent in the past, which he alleged was mismanaged by those entrusted with responsibilities of managing the refineries.
“We are not ready to put any money into the refineries again. No more. Our refineries have not been well run in the past. They have been mismanaged and the problem was compounded by the regulatory agencies and that is why we want to address the issue. If we have the correct ambience, people will come to build new refineries,” Lukman had said.
Following the botched sale in 2007, the Nigerian National Petroleum Corporation (NNPC), under the then GMD, Abubarkar Yar-Adua awarded the contract for the repair of the refineries to a Warri-based firm at a cost of about $57 million.
The refineries remained in dilapidated state despite the repair, which the NNPC confirmed was perfect job.
Also in 2009, the corporation carried out a TAM on the Kaduna Refinery, which cost the Federal Government another $20 million. Alhaji Sanusi Barkindo, who was the GMD then confirmed the amount and stated that the need to revamp the plant became necessary because it was the only one that serves the nineteen states of the North.
"The Kaduna refinery is a very strategic one. It is the only refinery serving the 19 states of the North, otherwise we will continue to track imported products and attendant risk to the environment and of course, the cost of its TAM was $20million," he said.
This again yielded no result. Despite the yearly TAM, the four refineries, with capacity to refine 445,000 barrels of crude per day (bpd) have remained in comatose states despite huge sums of money, which successive administrations claimed was expended on the TAM.
In February this year, Alison-Madueke inaugurated a National Refineries Special Task Force. At the ceremony, which held in Abuja, the minister explained that the setting up of the task force was in line with government’s determination to revamp the existing refineries for maximum output towards meeting local demand for petroleum products.
The team led by a renowned economist and former Finance Minister, Dr. Kalu Idika Kalu, was given 60 working days to revive the four refineries located in Warri, Kaduna and Port Harcourt.
Alison-Madueke even gave the assurance that the proposed three Greenfield Refineries in Lagos, Kogi and Bayelsa would come on stream by the 2017, to boost the nation’s refining capacity.
She said: “The state of the nation’s refineries, the shortfall in local production and the gradual increase in importation of petroleum products over the years has been well publicised. Even if the importation of petroleum products appears to be a solution to cover the gap between local production and consumption, it should be a temporary one.
The minister added: “The best solution for the long term is to attain adequate local refining capacity to fully meet the requirements of domestic consumption. The present administration is determined to reverse the continued negative trend in the refineries’ performance. It is for this reason that we are reaching out to patriotic Nigerians with undisputed credibility from inside as well as outside the industry to brainstorm on and seek holistic solutions to re-align our refineries to global standards.”
An end in sight?
Given that past TAM of refineries have not produced any meaningful result, as the refineries are still in sorry states, industry experts say reliance on TAM to boost refining capacity would not be the best option, because it is bound to be a failure.
Edo State Governor, Comrade Adams Oshiomhole, once told THISDAY that the only way to make the refineries functional was for the Federal Government to allow private entities to own and manage them. This, he said, would save the billions of naira spent on importation of petroleum products and payment of demurrage on landed vessels carrying imported products.
He pointed out that the huge amounts expended on importation could be used for other developmental projects, if petroleum products are refined in the country. This, he added, was aside fromjobs that would be created and adequate products, if private persons run the refineries.
Some stakeholders spoken to at the weekend doubted the possibility of Nigeria stopping fuel importation, when the country has no functional refinery at the moment.
Pointing out that the planned building of three Greenfield Refineries in Lagos, Kogi and Bayelsa has continued to suffer setbacks; these experts believe that the surest way to make the refineries function properly would be for the government to hands off the business.
In the alternative, they suggest that the current NNPC ownership stake in the refineries be reduced to a minority level, as according to them, this will make refineries more competitive and productive. For them and most Nigerians, continuing pumping of money on TAM is fraudulent and will not do the economy of Nigeria any good.