NNPC’s proposed new refineries


LAST week, the Nigerian National Petroleum Corporation (NNPC) indicated that it was in the process of establishing two new 200,000 barrels-per-day condensate refineries to boost in-country refining capacity. Unlike the conventional refineries, condensate refineries primarily refine condensate, not crude oil, and produce mostly petrol. In a statement issued in the Federal Capital Territory (FCT), Abuja, the Group Managing Director of the corporation, Mr. Mele Kyari, stated that on completion, the refineries would help in transforming  Nigeria into a net exporter of petroleum products. According to him, the exportation of petroleum products from the condensate refineries would be achieved together with the 445,000bpd capacity of the existing refineries being refurbished, and the 650,000bpd Dangote refinery. These complementary efforts by the NNPC and the Dangote Group, he added, would guarantee energy security for Nigeria.

The NNPC boss was quick to add that the corporation was not in competition with the Dangote refinery for market share. Rather, he said, it would provide support for the project to boost in-country refining capacity. “Our objective is to make Nigeria a net exporter of petroleum products and you can only achieve that by complementing each other, both the public and the private sectors. We are going to do more and we actually need more of these private sector refineries for Nigeria to become a net exporter of gasoline (petrol) and other associated products.” The statement added that the Federal Government would support the 650,000 bpd capacity from the Dangote Refinery and Petrochemicals plant with crude oil feedstock and other necessary inputs. And according to the Minister of State for Petroleum Resources, Timipre Sylva, the refinery would, once completed, attract more foreign direct investment into Nigeria upon completion.

The NNPC has, we believe, offered no cogent justification for its new pet project of building refineries. As a national institution, the NNPC has, over the years, constituted a big disservice to the country. Truth be told, there is nothing that has changed in the sociology of the Nigerian government to warrant the corporation building two new refineries. For one, the corporation has been making losses consistently, and there is no reason to assume that if it succeeds in its latest venture, the factors responsible for its failures over the years, including poor leadership and massive corruption, would similarly not render the new refineries completely prostrate and unfit for purpose. An examination of the raison detre for state intervention in business would in fact easily demonstrate the hollowness in the NNPC’s proposal. Globally, states intervene in business for strategic reasons, including national security and lack of private capital. In the 1960s, for instance, there was hardly any Nigerian in possession of the kind of capital outlay required for investment in power, rail and other critical sectors. But the conditions that necessitated government monopoly are no longer present in the oil sector; which is why the Dangote group referenced by the NNPC and a few other private concerns have been given oil licenses.

The NNPC which plans to build two new refineries does not even refine crude oil on its own. Rather, it enters into joint ventures with the multinational oil companies. As we have said time and again, what we expect the government to do is to create an enabling environment for private investors in the oil industry, and to ensure, for the sake of Nigerians, that there is no monopoly by any private operator in the sector. In any case, the largest state-owned oil companies in the world, including Saudi Aramco,  are already going public, giving the green light to a small initial public offering of their stock, just as governments in many forward-looking climes are divesting from oil to focus on regulation. And speaking of regulation, this is an area in which the NNPC has failed spectacularly. Just how do you insist on being a producer and regulator at the same time when you have consistently failed in these ventures?


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