Operators of Modular refineries have speculated that the pump price of premium motor spirit also called fuel should drop to N300 per litre. They said this on Sunday according to Punch.
However, the issue remains of adequate crude oil supply getting to local refineries as the exportation of crude oil remains a major source of foreign revenue for Nigeria.
According to OEC World, in 2022 Nigeria exported $52.1B in Crude Petroleum, making it the 9th largest exporter of Crude Petroleum in the world. At the same time, Crude Petroleum was the 1st most exported product in Nigeria. The main destination of Crude Petroleum exports from Nigeria were India ($7.35B), Spain ($6.72B), France ($4.18B), United States ($4.02B), and Netherlands ($3.8B). This totals to $26.07 billion in 2022.
Also, Nigeria imported $412 billion in Crude Petroleum in 2022. This makes it the 152nd largest importer of Crude Petroleum in the world. At the same year, Crude Petroleum was the 1173rd most imported product in Nigeria, and Nigeria imports Crude Petroleum primarily from: Slovenia ($412).
This figure shows that Nigeria is importing more than exporting, and these importations are done by local refineries who do not get adequate supply of crude oil from the oil blocks.
Operators of modular refineries earlier stated that aside from the five that are in operation currently, the remaining plants are embattled due to the major challenge of crude oil unavailability, a development that has stalled funding from financiers.
“Only about five of our members have completed their refineries. The others are having a major challenge.
“This challenge is that the people who are supposed to finance them have not disbursed financing for construction because they want some level of guarantee.
“A guarantee that if they finish the refinery, they are going to get feedstock, which, of course, is crude oil,” Idoko had explained.
The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, in a previous interview complained about sufficient availability of crude petroleum to local refineries. He complained that the bulk of crude are being exported and are starving the modular refineries in Nigeria. He attributed this lack to affecting the price of petroleum products. He said:
“If you look at the foreign exchange rate and you combine it with the fact that the key determinant of the cost of refined products in Nigeria is the forex, and you also consider international prices, you will agree that Dangote may not be wrong. He may be using that as a yardstick.
“Dangote recently said his cargoes of crude oil are coming from the United States because he can’t get enough crude from Nigeria. So nobody should blame him when he regulates his price in line with the international market.”
The major issue becomes the availability of crude petroleum to Modular refineries.
According to Value Chain, “Nigerian citizens own 52% of the blocs in Nigeria why foreign oil companies own 48%. There are 388 oil blocks in Nigeria, 173 are active”
Nigeria currently has 25 licensed modular refineries. Five of them are operating and producing diesel, kerosene, black oil and naphtha. About 10 are under various stages of completion, while the others have received licences to establish.
The establishment of more modular refineries weighs heavily on the availability of crude products. Foreign investors are said to have withdrawn their finances for funding the establishment of new modular refineries. According to Eche Idoko:
“Only about five of our members have completed their refineries. The others are having a major challenge. This challenge is that the people who are supposed to finance them have not disbursed financing for construction because they want some level of guarantee.
“A guarantee that if they finish the refinery, they are going to get feedstock, which, of course, is crude oil,”
Speaking further, Idoko said, “When we approached the regulator, it said it cannot give us that kind of guarantee, this was before the Petroleum Industry Act became implemented. It cannot give us a guarantee because it thinks we will take the feedstock to sell and will not build the refineries.
“This, for us, is neither here nor there, because what the financiers were asking for is not that you should supply them the crude, but that we should be able to give them what we call a Conditional Term Sheet and Heads of Terms. And this means that when you finish your refinery as an investor, you will be supplied feedstock.”
A conditional term sheet is a nonbinding agreement outlining the basic terms and conditions under which an investment will be made. Head of terms is a document which sets out the terms of a commercial transaction agreed in principle between parties in the course of negotiations.
As exemplified by Diesel price which dropped from N1700 to N1200 upon production by Dangote refinery, there is hope that when petrol is massively produced in Nigeria, it would reduce the fuel price. This was explained by the crude oil refinery owners Association of Nigeria (CORAN).
CORAN which is a registered association of Modular and Conventional refinery companies, gave insights on the benefits and effects of petroleum products importation in Nigeria.
According to the Publicity secretary CORAN, “A lot of companies today benefit from the importation of petroleum products at the expense of Nigerians.”
Mr Eche Idoko stated that “if we begin to produce PMS today in large volumes, provided there is adequate crude oil supply, I can assure that we should be able to buy PMS at N300/litre as the pump price.”
https://oec.world/en/profile/bilateral-product/crude-petroleum/reporter/nga
https://www.thevaluechainng.com/northerners-with-the-majority-of-oil-blocs-and-oil-wells-in-nigeria
