Of the 42 existing refineries in Africa, Nigeria’s four refineries have been pointed out as the most inefficient, according to a report by the National Refineries Special Task Force (NRSTF), which was established by the oil-rich country’s government to assess the operation of its four underperforming oil refineries and deduce sustainable measures to significantly improve performance following years of fuel importation and subsidy burdens to meet growing energy demands.
According to ThisDay, the NRSTF report which was recently submitted to the Nigerian government reads: “There are 42 refineries in Africa. Nigeria has four and the third largest combined capacity of 445,000 bpd. The countries with higher number and capacity are South Africa and Egypt, with two refineries each, and corresponding capacities of 545,000bpd and 774,900bpd respectively.
Nigerian refineries have the worst performance record among the 42 refineries, with an average capacity utilization of only 18 percent compared to 81 percent and 85 percent respectively for Egypt and South Africa in 2006-2009.”
Imported Fuel and Oil Subsidy Scam
Despite being the world’s sixth largest oil producer, and Africa’s largest, Nigeria has struggled to refine its crude following the deterioration of its four refineries, thereby relying primarily on imported fuel to supply its local market. Lack of political will and self interest have been cited as the cause of the prolonged condition of the refineries with oil marketers said to be profiting hugely from the imported fuel.
Pressured by heavy fiscal burden, President Goodluck Jonathan in January announced (in what led to a nationwide strike) that his government was removing subsidy, leading to a doubling in fuel prices. Overnight, petrol price in Lagos, Nigeria’s commercial hub, escalated from 67 naira per litre to 150 naira (less than $1).
The government, however, conceded its stand after a week long strike, and launched a probe into the oil marketers, after considering the outrageous expense acquired from the subsidy bill. The probe revealed a multi-billion naira scam. So far, some arrests have been made.
The former Minister of Finance, Dr. Kalu Idika Kalu-led committee, recommended that an experienced and strongly capitalized, privately managed refinery system with minimal government intervention will suffice in reviving the country’s refining industry.
According to the report, “The NRSTF is of the opinion that only drastic and far-reaching measures will successfully turn around the refineries. To this end, it recommends that majority shareholding, a minimum of 51 percent in the three NNPC refineries should be divested to the private sector, in accordance with subsisting legislation, as in the Public (Privatisation and Commercialisation) Enterprises Act 1999.”
Nigeria’s four refineries are managed by state-owned corporation NNPC. Two of the refineries are located in Port Harcourt (PHRC), and one each in Kaduna (KRPC) and Warri (WRPC). A comprehensive network of pipelines and depots strategically located throughout Nigeria links these refineries.