The report of the Idika Kalu National Refineries Special Task Force, painted a very sorry state of the downstream sector of Nigeria’s oil industry, placing the country at the bottom spectrum in Africa, and raised the spectre of the nation’s fuel import bill rising to a mind boggling $18 billion (N2.8 trillion) annually by 2030.
The document said although Nigeria has the third largest refining capacity in the continent (445,000bd), it however came in at 18% by way of capacity utilisation and efficiency, compared to South Africa with a capacity of 540,000bd and a rating of 85% and Egypt with 774,900bd and a rating of 81%.
Of the 42 oil refineries operating in Africa, the three in Nigeria recorded the worst performance in terms of efficiency and capacity utilisation, the committee found.
The 69-page report, a copy of which has been seen by BusinessDay, opens with a seven-point executive summary, in which the authors comprehensively catalogued the woes of the nation’s refineries and the products storage and distribution assets, describing as a total failure, the current model whereby the refineries are owned and managed by government.
The committee report said while Nigeria can potentially meet her petroleum products needs and even satisfy requirements of the West African sub-region, the nation’s three refineries have been beleaguered by poor governance in a non-commercial operating structure that is unsustainable.
The report, which was apparently completed on August 1, 2012 but was not received by the president until November 2, also cautioned against the move to spend a staggering $1.6billion on a turn around maintenance (TAM) of the refineries, saying investment in any TAM by government, “should therefore be limited to the minimum required to make the refineries work in a safe and reliable manner.”
Pointing the way forward, the committee asked the government to sell the refineries within 18 months, while also recommending the full deregulation of petroleum products pricing within the same period, but subject to adequate palliatives.
Committee members blamed the regime of regulated and uniform pricing as having contributed immensely to the failure of the sector, and especially the failure to attract private investment into the downstream sector.
The report also highlighted the dilapidated state of Nigeria’s supply and distribution assets, leading to very disturbing capacity and material losses over the years, and suggested the concession of the depots and pipeline network currently being managed by the Petroleum Products Marketing Company (PPMC).
The report examined the viability of the proposed greenfield refineries in different parts of the country, saying of the three proposed, economics strongly favour the 350,000 barrels a day proposed plant in Lagos, but government was told take a minority stake in the plant and that 80 per cent of its funding should come from debt.
The committee also threw light on the rather opaque status of the management of the 445,000 barrels of crude handed to NNPC daily to refine, saying the corporation was in fact never able to refine more than 20 per cent of the total.
The government was told that NNPC should not be given more than it can refine locally and that the balance should be refined abroad, under an independent and transparent offshore arrangement, to meet national demand.
Because of the dramatic rise in Nigeria’s demand for gasoline, the committee said should government fail to take the right steps, the nation may face a supply deficit of about 34.8 million litres of PMS daily from 2030.
According to the report, “it is instructive to note that if there is no decisive intervention from current trends, products import bill for bridging supply gap will rise steadily from $9.6bn in 2012 to $18.1bn in 2030 and self sufficiency will decline from 21% to less than 13% over the same period.”