UGO AMADI, Assistant Business Editor
Federal Government resolve to reduce importation of petroleum products from the present 95 per cent to 60 per cent by 2018 may be a mirage if investors do not collaborate and invest in developing a refinery in the country.
Reacting to a recent statement credited to the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, an Energy expert ,Dolapo Oni , Head Energy Research, Eco Bank Plc disclosed that the federal government need to provide incentives to private refiners on crude oil feedstock and taxes, while fully deregulating fuel prices.
According to him the federal government can achieve something pretty close to 30 % local production and 70% imports or just over that. The refineries have operated at more than 20% capacity for a while now and with some of the efforts put in recently, we might see them achieve an average 30% capacity in 2017, which would translate into about 30% of local consumption.
He also stated that the issue of Forex may not be a serious challenge for now because it is being resolved gradually and one can see diesel prices are starting to ease.
However, he explained that the way forward is for investors to make serious investment in refinery and government should compliment investors with good incentive .
Also making his remarks, Mr. Reginald Stanley, a former Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), and Chairman, Board of Advisors urged investors to collaborate and invest in developing a refinery in the country.
He maintained that , a single marketer cannot invest in building a refinery because refinery costs more than 250 million dollars for 20,000 barrels today.
“Refinery is not going to work with the present structure of management.
“This is a very tough business and should not be under government management in order to achieve its purpose.
“Today, refineries are such that you must be extremely efficient, because it’s a tough business and it is only the toughest that will survive, and interested investors in modular refineries should plan well,’’ he said.
It could be recalled that Minister in a function in Lagos said that with the proposed construction of modular refineries in the Niger Delta and more investments in the sector, the importation of refined products would be reduced to 60 per cent by 2018.
According to him, the country will start exporting refined products with the commencement of Dangote Refinery in 2019. Stressing that “The nation is at the turning point where the downstream industry is more critical than ever and will drive the economy.
Currently, the NNPC imports over 95 per cent of petroleum products owing to challenges being faced by marketers in accessing Foreign Exchange.
“It is achievable as Federal Government has shown a strong will to revamping the refineries coupled with the plan to bring about 20,000 barrels per day from modular refineries set to come on stream soon,” he said.
Kachikwu said the country’s refining capacity for the first quarter of this year presently peaked at 10 million barrels of crude oil.
This he noted was against eight million and 24 million barrels recorded for the entire years of 2015 and 2016 respectively.
However, Industry experts in various fora has called for total deregulation of downstream which remains a great challenge to the development of the industry. According to them the downstream business is at a verge of shut down over the huge debt log of two billion dollars owed marketers, which is posing serious challenge.
They are of the opinion that deregulation of downstream will allow market forces drive the industry. As of now with the current price of crude oil in the market and the cap on price set out by the Federal Government at N145 per litre, it does not encourage importation of petroleum products.
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