The ceremonial inauguration of the Dangote Refinery has added a new dimension to the conversations regarding the need to rebound the hitherto declining situation of the Nigerian petroleum industry and the long-standing desire to locally refine and provide all essential commodities in the oil and gas value change.
There is no doubting the fact that the refinery project, referred to as the biggest in the world, has marked a new chapter in the evolution of Nigeria’s energy sector, signally a historic turning point and a raised expectation for expanded domestic refining capacity and decreased dependency on petroleum products importation.
It was seen as a beacon of progress and a testament to the entrepreneurial spirit driving Nigeria’s economic growth and driven mainly by private sector initiatives, of course with enabling environment and support provided by the government. Commencing in 2013, the refinery’s advanced technology, efficient processes, and commitment to international quality standards have garnered global recognition, positioning it as a flagship project in Africa’s energy landscape.
However, interesting questions have been raised by industry experts regarding the Nigerian National Petroleum Corporation’s (NNPC) decision to provide Dangote Refinery with exclusive access to 300,000 barrels per day for a refinery that according some experts has not been technically completed.
This concern is arising from the seemingly neglect and abandonment of other existing indigenous refineries. Many of these refineries that have been completed and producing skeletally have not received crude supplies from the NNPC to boost their operations to maximum installed capacity.
In a recent statement, the Crude Oil Refineries Owner’s Association of Nigeria (CORAN) while applauding the decision of the NNPC to supply daily 300’000 barrels of Crude Oil to Dangote Refinery, as made known by the Group Chief Executive Officer of the NNPC, Mele Kyari, the association raised concerns to the effect that NNPC seem to have neglected its members.
Understandably so, the decision of the NNPC to allot 300,000 barrels per day of crude oil to the Dangote Refinery is meant to support the refinery’s start-up activities and assure its successful operation. However, some industry watchers have said that similar special treatment ought to also be extended to other refinery owners, but instead, it has put other refinery owners in a precarious situation and at the mercy of Dangote Refinery which will become a monopoly on the first day.
It is necessary to highlight that many of the refinery owners now face a more uncertain future as they struggle with having to deal with restricted or no access to crude oil supplies while having made considerable investments in their refining plants.
While the NNPC deserves praise for its decision, it must make sure its plan addresses the issues of distribution of crude to other players in the market, as the majority of independent and privately owned refineries have been severely hampered by a lack of crude since they were founded.
The issue at hand is one of fairness and equitable distribution. There is no gain saying that the existing refineries require a steady crude oil supply to operate optimally. By disproportionately allocating crude to one refinery, the NNPC risks stifling the growth and viability of these other existing facilities, which also contribute to the nation’s refining capacity and provide employment opportunities.
In every sense, there is an urgent need to provide a level playing field for all the operators and a transparent and inclusive approach to crude oil allocation. A fair and level playing field would not only foster healthy competition but also ensure that Nigeria maximizes its refining potential and benefits from a diverse range of players in the market.
In any case, the near redundant refineries only require less than 10% of the crude supply of what the Dangote refinery has been promised (300’000 pbd), therefore the NNPC must come to the aid of these other private refinery owners whose desire it is to contribute to refining and improving the standard of living of the nation.
The NNPC can do so by ensuring that there is equal and equitable access to crude, and ensuring that there is a general level playing field for all businesses in that sector. Independent Oil refineries in Nigeria, such as Walter Smith refinery, OPAC refinery, Niger Delta Petroleum refinery, and Edo Refinery, have faced numerous difficulties along the way that have tried their resilience and hampered their ability to expand. Among these challenges, top is the serious problem of the starving of crude oil engineered by the NNPC which has put a shadow over their activities, impeding their ability to properly contribute to the nation’s refining capacity.
In spite of the phenomenal ceremonial inauguration of the Dangote Refinery, it cannot be said to be an ‘uhurru’ yet as, according to industry experts, the refinery may need up to another 12 months to be in full capacity. According to the report of the Nigerian Midstream and Downstream Petroleum Regulation Authority (NMDPRA), the Technical Acceptance Test (TAT) that is mandatory for any refinery to run must still be passed by the Dangote Refinery. Since this procedure takes a while, technically the Dangote Refinery’s full operation could start in about a year. This underscores the urgent need for the NNPC and the government to put interest in the operations of the existing and ready refineries
While the Dangote Refinery undoubtedly holds immense promise for Nigeria’s energy independence, the aspirations of other refinery owners must not be disregarded. A collaborative approach that encourages synergy and coexistence among all refineries will ultimately benefit the nation as a whole. The NNPC’s commitment to allowing all participants to actively engage in the market will help in increasing the supply of critical commodities and lessen persistent scarcity in the market.
Kayode-Jacobs, a petroleum industry analyst writes from Abuja
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