Hurray!!! 65 more refineries….

The release of licenses, in June this year, to 65 Nigerian companies to establish local refineries must be welcome news to everyone who is unhappy with the overwhelming Foreign Exchange bill for our fuel imports. The licenses were granted barely two weeks after President Buhari’s inauguration, and probably provide a strong indication of PMB’s burning desire to reduce Nigeria’s huge fuel import bill and hopefully also reduce or eliminate the incidence of subsidy in fuel pricing.

 

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Indeed, in an attempt to attract investors to this venture, the Department of Petroleum Resources(DPR) is reported to have reduced the licensing fee for new refineries from $1million to just $50,000. It is however, not yet clear if the 18 companies which had earlier paid $1m and received licenses since 2002 to establish refineries would now be favored with a partial refund to maintain some level of equity in the application fee.

Nevertheless, Nigerians may also wonder why, till date, only one of the 18 licensed companies had actually come on stream with a modest capacity for just 1,000 bpd output of diesel.

Curiously, industry observers may similarly wonder why nothing came out of the celebrated Memorandum of Understanding signed between the Federal government with an American and Nigerian Joint Venture Group in July 2012 for the construction, within 12 months, of six modular refineries, with a combined capacity of 180,000 bpd at an estimated cost of about $4.5bn.

Incidentally, the promoters of the project had claimed that, within 30 months, “the six refineries would produce 30m litres per day of refined products, as the entire modular refinery complex, including all piping and electrical fittings would be built and test operated in the United States to ensure that each of the six plants will achieve 100% of their projected average 5m litres per day production capacity before 2015.

The firm assurance by Olusegun Aganga, the serving Minister of Trade and Investment, at that time, that his ministry would work together with the DPR and the NNPC to ensure the actualization of the project, makes the apparent failure of the venture, more disturbing. Instructively, Nigeria’s estimated daily domestic demand of about 40m litres would have been adequately covered if existing government refineries produced just 10m litres to compliment the output expected from the 2012 MOU with the American-Nigerian consortium.

Indeed, in July 2012, we had cautioned in a related article titled “6 new refineries, Hurray, but not yet Uhuru” that “in its anxiety to facilitate adequate fuel supply, the Nigerian government appeared constrained to fetch water with a porous and poorly cellotaped basket! The ultimate result can only be frustration and failure”.

The unanswered question therefore, is why companies which received licenses to establish refineries continue to dash our expectations for self sufficiency in fuel supplies. With this hindsight, what changes, we may ask, have now been made to guarantee that the 2015 batch of 65 licensees would not also disappear and frustrate our country’s hopes of ultimately becoming a net exporter of fuel.

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