Why Petrol Crisis May Not End Despite Creation Of Local Refineries

Oil marketers and energy experts remain divided on their potential to resolve the persistent fuel crisis, despite the Nigerian government’s efforts to reactivate its four local refineries with a combined capacity of 450,000 barrels per day (bpd).

0 ppl 0These refineries, located in Port Harcourt, Kaduna, and Warri, have been non-operational since 2019, compelling the country to rely on foreign refining of its crude oil—a situation that has significantly impacted fuel supply and economic stability.

In 2021, the Federal Government approved a substantial $1.5 billion for the repair of the Port Harcourt refinery, which alone has a capacity of 210,000 bpd.

However, despite initial promises of a restart in December 2022, operations have been continuously delayed, with the latest update suggesting a possible commencement by the end of July this year, according to the National Public Relations Officer of the Independent Marketers Association of Nigeria, Ukadike Chinedu.

Similarly, the Kaduna Refining and Petrochemicals Company’s rehabilitation, overseen by Managing Director, Mustafa Sugungun, is expected to conclude by the end of 2024.

Sugungun assured that the refinery would operate at 60% capacity by year-end during a Senate Adhoc Committee on Petroleum Downstream visit led by Senator Ifeanyi Ubah in April.

The acting Managing Director of the Warri Refining and Petrochemical Company (WRPC), Desmond Inyamah, announced that the Warri refinery is slated for full operations in December 2023.

He revealed that the last maintenance was conducted between 2004 and 2005 during a visit by the House of Representatives ad-hoc committee overseeing refinery projects.

Despite these advancements, oil marketers and experts voiced concerns in interviews with Punch, suggesting that even if the Tinubu administration successfully restarts all four refineries, the fuel crisis may persist due to potential crude oil supply constraints.

The President of the Petroleum Products Retail Outlets Owners Association of Nigeria, Dr. Billy Gilly-Harry, emphasized the importance of having all four refineries fully operational to effectively mitigate the fuel supply issues.

He said, “It is difficult for me to confirm any date for the Port Harcourt Refinery re-operation. But I had a physical visit to the place a few weeks ago and what I saw was good enough to go. But they (NNPCL) don’t want to announce anything again, because they don’t want Nigerians to have issues. We were hoping that on the 29th of this month, the Warri refinery would go live, while the Port Harcourt one would come onboard shortly after. But since the management of the PH refinery has projected a date for its reactivity in July, we can’t say anything more about it.”

On whether the full operationalisation of the four refineries would reduce the price of fuel in the country and the artificial scarcity of the product, he said that cannot be guaranteed, except the Consumer Protection Council and other agencies emplace strict price regulations in the market.

“The price of fuel in a deregulated petroleum product regime will be determined by the cost of demand and supply. If the Consumer Protection Council is working optimally, there should be a source of control so that we, the retail outlet owners, will not unnecessarily hike fuel prices once the refineries take off. Though we have our internal mechanisms to regulate ourselves in as much as we have the NMPDRA, the CPC should also put in their efforts to protect the consumers,” he explained.

Also speaking with Punch, IPMAN Vice President, Hammed Fashola, said full operation of both the Port Harcourt refinery and the Dangote Refinery would serve as a “big relief for everybody” in the country if it can be achieved.

He said, “It is very important and I believe the government is working towards that. If the Port Harcourt refinery can come up this year, and maybe the Warri refinery next year, my concern about the whole thing is the Kaduna refinery which has been abandoned for years. I don’t know if it is still good or available to transfer crude. I think the government has to look at that before they start pumping money into it. That is very key because there will be further constraints and it will be useless.”

However, in his submission, an energy expert and lawyer, Mr Ayodele Oni, stated that even though the refineries were completed, it would be difficult for them to meet Nigeria’s fuel needs, because there had been an onward sale of the country’s crude oil for years to come.

“There have been debates whether we have enough crude because of the faulty agreement the government has reached having sold out our future crude so even if you have a refinery and you don’t have enough crude, there is a challenge there,” he said.

The expert further urged the Federal Government to boost its investment in oil exploration and production to ensure a stable supply of fuel in the country.

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