Nigeria lingering fuel crisis may linger till 2018 when the 650,000 barrels a day Dangote Oil Refinery and Petrochemical Company will come on stream.
Bloomberg Economists said on Thursday that Nigeria’s refineries have the installed equipment to process 445,000 barrels of crude a day, yet they operated at an average of 5 per cent of that capacity in 2015.
“Financing the revamp of the refineries will be a strain on the lean finances of NNPC, yet it may not reach optimum capacity because of the age of the refineries which were built in the 70s and 80s,” they said.
The President Muhammadu Buhari administration said it will not sell the aged facilities, preferring to finance their revamp, even as government revenue has been cut to less than half as a result of the fall in oil prices.
The government insists there will be room for the refineries to operate alongside the private ones. Yet with the NNPC burdened by debt of about $5 billion owed to its jointventure partners, it is unlikely to compete efficiently with private refineries, according to the head of energy research at Ecobank Transnational Inc, Dolapo Oni.
The target is to “keep them consistently producing at above 90 per cent of their capacity,” Emmanuel Kachikwu, Petroleum Resources Minister of State, said in an interview on Tuesday in Abu Dhabi.
“Simultaneous with that, I’m also going to be announcing a programme, hopefully before the end of January, for others to come in and build new refineries.”
The Dangote Refinery and Petrochemical Company has the capacity to produce 55.2 million litres of Premium Motor Spirit (PMS) daily, and will also produce other fuels as well as fertiliser and polymers, according to Devakumar Edwin, chief executive officer of the Dangote Group.
“It’s a very large refinery. We can produce the entire fuel requirements of the country,” he said.
On completion, the refinery would be the fifth-biggest in the world after plants in Venezuela, South Korea and India, according to data compiled by Bloomberg.
It would also be the world’s largest single-train refinery, Dangote told some reporters at the construction site in Lagos on January 10.
“From Nigeria all the way down the coast to Senegal and all the countries in between, there’s almost no functional refinery except the one in Cote d’Ivoire. Dangote is going to be able to plug that market,” he said.
Meanwhile, the Central Bank of Nigeria Governor Godwin Emefiele, during a visit to the site of the plant on last Sunday, said the refinery could earn foreign income of $6 billion a year, helping ease exchange rate pressures.
He pledged to provide the Dangote Group the assistance it required to secure foreign exchange to complete the plant estimated to cost about $14 billion.
While Nigeria has more than 30 licenses issued for the building of privately owned refineries, Dangote is the first to start construction.
If Dangote is successful “it means that Nigeria can process more than its local fuel needs and also process on behalf of others so that we may start exporting refined products rather than exporting crude,” said Bismarck Rewane, chief executive officer of Lagos-based business advisory Financial Derivatives Co. Nigeria uses about 35 million liters of petrol per day, according to the Nigerian National Petroleum Corporation