NNPC’s Insistence on Ending Fuel Importation in December

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Despite likelihoods of a slip, the Nigerian National Petroleum Corporation (NNPC) insists its goal of weaning Nigeria off imported petroleum products, especially premium motor spirit (PMS), otherwise called fuel, would be met. Chineme Okafor wonders if the self-imposed deadline is sacrosanct

The NNPC, in its September 2018 operations and financial report which THISDAY obtained shortly after it was released a couple of days back, had indicated it would stick to the plans it had made to ensure Nigeria stopped importing petrol by the end of 2019.

Though a tall order from experts’ assessments of the options available to the corporation to meet the year-end target, it however explained in the monthly report, which usually comes belated that since it was the intention of the federal government that Nigeria ends petrol importation, it would abide by the deadline provided.

Indicating the government-imposed deadline was perhaps sacrosanct, the corporation equally stated it was making progress on the plan which means that its refineries in Port Harcourt, Warri and Kaduna, would have to ramp up their production levels to produce most of the petrol consumed in the domestic economy.

“NNPC is intensifying efforts towards the rehabilitation of the refineries to meet the December, 2019 target of ending fuel importation,” the September report stated on the plan to meet the target.

What Brought the Deadline?

Based on an interview the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had in 2017 with the BBC, and in which he vowed to resign his cabinet position if Nigeria continued to import fuel by 2019, the deadline to end petrol importation, thus came about.

In the interview, which lasted for about 23 minutes, Kachikwu, made promises to have the refineries of the NNPC absolutely repaired and working at maximum capacities, and when he was specifically asked when Nigeria was going to be self-sufficient in petroleum products refining, he declared that 2019 had been set as the target.

“2019 is the target time… I target 2019. If I don’t achieve it, I will walk…I put the date and I will achieve it,” said Kachikwu, in the interview.

Going further, Kachikwu, maintained again earlier in 2018, that the 2019 target was still in place and that the country would in addition to revamping NNPC’s refineries, also expect the 650,000 barrel per day processing capacity Dangote refinery in Lagos, to come up and complement efforts at weaning itself from foreign-refined petrol.

He even explained that a steering committee he headed had been constituted to fine-tune the processes of getting this achieved.

Rationale

Based on THISDAY’s conversations with experts in the downstream petroleum sector, apart from Nigeria’s annual expenditure on petrol importation which has continued to grow, the country has also lost huge economic opportunities from its failure to locally refine the petrol it needs.

For instance, analysts in a November 2018 Financial Times report on the state of Nigeria’s oil sector, explained that Nigeria’s annual expenditure on subsidising imported petrol was about $7 billion, and that the expected emergence of Dangote’s refinery could change the country’s energy balance and effectively send NNPC’s three refineries to their natural deaths because there would not be any need for them on the back of the production capacity of Dangote’s.

Again, the Group Managing Director of NNPC, Dr. Maikanti Baru, recently disclosed that the total amount of under-recovery – a term now used by the corporation to describe the financial amount of subsidy the government absorbs for keeping the pump price of petrol at N145 per litre, was N25 per litre.

This figure when calculated against the three billion litres of petrol the corporation recently imported, suggested Nigeria may have recorded about N75 billion under-recovery in this regards.

Additionally, if calculated on the basis of 60 days, which the NNPC said the three billion litres it imported would last Nigeria, and which amounted to 50 million litres consumption per day, then the corporation may be recording an under-recovery of N1.250 billion daily to keep petrol pump price at government regulated price of N145 per litre, a decision experts view as wasteful and unproductive.

Thus, according to the market experts, to end importation of petrol means for Nigeria, to bring back jobs to her downstream oil sector and perhaps further enlarge its market clout across countries in the West African region where the NNPC claims most of the petrol it imports ends up through smuggling.

Moves Towards Target

Tracking how well the NNPC has followed the paths it has set to ending petrol importation, THISDAY at the 175th meeting of the OPEC in Vienna, Austria, asked Kachikwu, what had been done to meet the target, and he disclosed the board of the corporation was on December 15, going to hold more discussions with investors to decide whether to continue with the planned upgrade of the refineries in Warri, Port Harcourt and Kaduna, or not.

He acknowledged that negotiations with investors for the refineries’ upgrade had been slow, and rather not as fast as he would have expected, but stressed that, “the board of the NNPC has decided that by December 15, we should draw a ceiling whether we should be going forward or not with investors.”

“We think that we will be able to go forward with minor adjustments in terms of the terms and by first quarter of next year (2019), we begin to see some works begin at least with the initial ORBs,” added Kachikwu.

Also before the OPEC meeting, Kachikwu had earlier reportedly said at a Lagos meeting in November that it was no longer going to be possible to meet up with the plans to fix the moribund refineries and make them work in utmost capacity by 2019.

At the 18th edition of the International Biennial Health Safety and Environmental (HSE) Conference on the oil and gas industry in Nigeria organised by the Department of Petroleum Resources (DPR), Kachikwu, said “I am very excited about the development as they tend to create fuel sufficiency as well as employment opportunities.

We are also working hard to see the Nigerian National Petroleum Corporation (NNPC) four refineries coming up with 425,000bd in 2020.”

At the moment, all of NNPC’s refineries have a combined installed production capacity of 445,000 barrels per day, but the monthly report of the corporation showed they maintained an average of 11.66 per cent production levels in the last 13 months, that is, between September 2017 and September 2018.

Tough Deadline

Putting a perspective around the issue, one of the experts who agreed to speak with THISDAY, Mr. Dan Kunle, a global energy business advisor, who had worked with various energy agencies of the Nigerian government in the past, and understands the issues involved, explained it was a tough deadline.

Other experts THISDAY approached declined to comment on the basis that the issue had become mundane, and they were no longer interested in sharing their thoughts.

But Kunle stated that he was doubtful about the corporation meeting the target.

According to him, nothing the corporation has done so far with regards to the deadline looked concrete and convincing of it meeting the target. He clearly pointed out that the finances for the refineries upgrade would be a tough call to achieve, and even accused Kachikwu and officials of the NNPC of playing to the body-language of President Muhammadu Buhari, without concrete strategies to back their intentions.

“How can they work? Who will invest to fix the refineries? How many months do they think it would take to fix the refineries, considering that the parts and units of the refineries would have to be produced first?,” asked Kunle.

He further said: “What were even the terms and conditions for the refinery upgrade programme, which is the contract between them and the vendor to rehabilitate the refineries? We don’t have the terms or how it was tendered. How will the refineries work this year and at what capacity exactly would they operate? By the way, they are working at maybe 10 per cent now, but that is epileptic.

“We need to see the template and milestone of what they have done to make it work. The officials have played along with the body language of President Buhari, to say they will exit importation, but that is not the issue because we are still importing petrol and paying subsidy.”