Nigeria’s refining capacity increases by 29%

…as NNPC cuts losses by 16.19%

The Nigerian National Petroleum Corporation (NNPC) has said that its refining capacity has increased by 29 percent.

In the Corporation’s latest Monthly Financial and Operations Report for January released in Abuja on Tuesday, combined installed capacity utilisation of the Corporation’s refineries located in Port Harcourt, Warri and Kaduna increased by about 29 percentage points in January 2017 compared with their performance in December 2016.

NNPC said the capacity utilisation of the refineries rose to 36.73 percent in January, 2017, as against 7.55 percent in the previous month of December, 2016.

The report attributed the improvement to the implementation of the 12 Business Focus Areas (BUFAS) strategy introduced by the Group Managing Director, Dr. Maikanti Baru.

According to the report, the refineries benefitted from the introduction of a new Refineries Business Model under the 12 BUFAS strategy which has transformed them from “tolling plants to merchant plants” thereby placing them on the path of profitability.

The Port Harcourt Refining Company (PHRC ) and Warri Refining and Petrochemical Company (WRPC) also posted surpluses of Five Billion, One Hundred and Fifteen Million Naira (N5,115,000,000) and Four Hundred and Four Million Naira (N404,000,000) respectively.

Under the new refinery model, each refinery purchases crude oil at export parity price, processes and sells the corresponding products on its own account.

“This is different from the previous Tolling Plant model where the refinery does not take title to the crude, but rather charges a tolling/processing fee to the owner of the crude which was PPMC on behalf of the Corporation”, the report stated.

Apart from PHRC and WRPC, five other subsidiaries of the Corporation also posted surpluses. These include the Nigerian Petroleum Development Company (NPDC), the Nigerian Gas Pipelines and Transport Company (NGPTC), NNPC Retail, the National Engineering and Technical Company (NETCO), and the Integrated Data Services Ltd (IDSL).

According to the document which is the 18th in the series of Monthly Financial and Operations Reports since the NNPC began publishing its business transactions, the Corporation recorded a Two Billion, Seven Hundred and Fifty Million Naira (N2.75billion) reduction in its trading deficit in the period under review putting the total trading deficit at N14.26billion.

“This represents about 16.19 percent improvement compared to N17.01billion recorded in December, 2016, in spite of the Corporation’s challenging situations which limit its aspiration to profitability”, the report stated.

It listed some of the factors that impeded the Corporation’s performance to include the production shutdown of the Trans Niger Pipeline and Nembe Creek Trunkline due to leakages; the shutdown of Agbami Terminal for a mini Turn-around-Maintenance; and the subsisting Force Majeure declared by SPDC as a result of the vandalized 48-inch Forcados export line after its restoration in October 17, 2016.

Recent data analysis carried out by Business Time revealed that Nigeria spent more money on refined oil importation than it made from crude oil export in 2015.

According to a document obtained from OPEC, Nigeria which is a majorly oil-based economy, spent the sum of $53,087 million on oil imports in 2015.

On the other hand, the country earned lesser in crude export to the tune of $45,365 million in 2015.

According to OPEC, Nigeria’s refining capacity as at 2015 was 445.0 barrels per day.

Without challenges with oil militants in the Niger Delta, Nigeria produces between 2.2 million barrels per day to 2.8 million barrels per day however, no one can tell exactly how many barrels the country exports and how many is left for local consumption.

Placing the Nigeria’s export/import figure side by side with other members of OPEC, only four among its 13 members’ value of import exceeded the amount made from exports- Nigeria being one of them, the country ranked first among the three countries.

Following the export/import order, for the four countries whose import exceeded money made from exporting the product, country like Algeria had $ 37,787m/$ 51,501m, Ecuador $18,366m/$20,458m, Libya $10,861m/ $11,236m, while Nigeria had $45,365m/$53,087m- Nigeria obviously spent more importing crude oil in 2015.

Angola had $32,637m/ $20,052m, Indonesia $150,283m/$142,695m, IR Iran $150,283m/$67,285m, Iraq $77,974m/ $51,581m, Kuwait $54,667m/ $31,895m, Qatar $77,294m/ $28,496m, Saudi Arabia $205,447m /$ 167,484m, United Arab Emirates $333,370m/$287,025m, and Venezuela $38,010m / $37,243m.

Importation of refined oil into the country has been a big problem which is present government is battling to end. However, the case has continued to be pushed back and forth with the federal government’s stand contradicting at various times.

In December 2015, The then Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, who also doubled as the Minister for Petroleum, Ibe Kachikwu, said Nigeria will continue to import fuel beyond 2016.

“The future is that, Nigeria is still going to import fuel in 2016and beyond. Until we begin to get individuals who can co-locate, we are going to be doing a mixture of local and importation of fuel to meet up demands. Best case situation is 25% local and 75% importation,” he said.

Speaking, Kachikwu said that importing Premium Motor Spirit, PMS, also known as petrol, is cheaper than producing the product in the country’s refineries.

According to him, until the upgrade and total refurbishment of the refineries are concluded, as well as ensuring that the pipelines are fixed, it would be uneconomic and very expensive to refine PMS locally.

He maintained that local refining of PMS would make much more economic sense if all the refineries undergo full set of repairs and Turn-Around Maintenance, TAM, and when new refineries are set up in the country through co-locative initiative.

“Most modern refineries are configured in such a way that your stock of PMS outage is a lot higher, 70 to 80 per cent. So when we do import the product, we actually save money; we get it less expensive than when we do it here.

But having said that, the reality is that until we have alternatives in terms of co-locative refineries which we are looking at; until we finish the total refurbishment to improve and upgrade the refineries, it does not make sense to use it with some of the deficiencies,” he said.

Kachikwu further noted that even if the current set of refineries were working on a 100 per cent basis, they would only be able to account for 20 million litres of PMS per day, about 50 per cent of the country’s total consumption. This means that the country would still resort to importation to meet up with the shortfall.
Nigeria currently produces between 2.2 million barrels per day and 2.8million b/d.