ABUJA, Nigeria – The Nigerian National Petroleum Company Limited, NNPCL, is poised to begin the importation of approximately 110,000 barrels of crude oil daily from either Venezuela or Saudi Arabia in a bid to ensure the operational readiness of the Kaduna Refinery slated to resume activities next year.
This move comes amid Nigeria’s continued struggle with sustaining crude oil production and fulfilling OPEC output quotas.
The Dangote, Bua, and other refineries are also facing the potential need to import around 1.322 million barrels of crude oil per day due to the aforementioned challenges alongside existing contracts on crude oil swap and various commercial issues.
Currently, the Dangote Refinery, with a refining capacity of 650,000 barrels per day, relies on imported crude.
Similarly, the Bua Refinery in the South-South region is projected to require about 200,000 barrels per day starting next year. In light of these developments, NNPCL is also gearing up to revive its 445,000 barrels per day refineries incrementally from next month onward, while existing modular refineries will need 27,000 barrels per day.
Nigeria has faced a significant shortfall in meeting its OPEC quota, with a recorded deficit of 113.52 million barrels translating to an estimated loss of $8.9 billion in the first seven months of 2023.
Although the country’s quota is about 1.742 million barrels per day, data from the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, reveals that the actual output has been hovering around 1.1 million barrels.
The constraints in local production have been exacerbated by the NNPCL’s existing obligations to supply crude to contractors and a recent $3 billion loan from Afreximbank, which could substantially diminish the volume of crude available for the domestic market.
Amid enforcement efforts by the NUPRC to uphold the Domestic Crude Supply Obligation (DCSO) under Section 109 of the Petroleum Industry Act (PIA), crude oil producers are apprehensive about logistics, data safety with NUPRC, and the assurance of dollar payments for crude oil.
Concerns are also being raised due to the growing trend of divestment by producers because of oil theft and insecurity in the Niger Delta region.
Energy expert Dan Kunle has emphasized that poor investment is hindering daily local production, and until the Federal Government relinquishes controlling shares in petroleum companies to private sector investors, the industry will not thrive.
He also highlighted the dilapidated state of the country’s product pipelines.
Conversely, energy economist Prof. Wunmi Iledare finds the impending operation of the Kaduna Refinery and others promising, though he acknowledges that infrastructure for roads and pipelines poses a significant challenge.
Former CIBN President and economics professor Segun Ajibola expressed concerns over the sustainability of supplies to the Kaduna Refinery and the economic viability if imports continue from Saudi Arabia or Venezuela, which could affect pump prices.
As the nation awaits the refurbishment of the Port Harcourt Refinery, communities nearby are anxious about potential risks associated with NNPC product pipelines or tanker transportation.
President Bola Tinubu, following his deregulation of the downstream petroleum sector, announced the expected resumption of the Port Harcourt Refinery, aiming to address the subsidy burden that has strained Nigeria’s foreign exchange.
The NNPCL has been reticent about detailing plans for the transportation of crude to Kaduna amid pipeline rehabilitation challenges.
Last month, contracts were awarded for the repair of pipelines, but the transparency of the process and the timeline for completion remain unclear.
Pipeline expert Osaro Gomba has warned of severe risks, including possible explosions, if the NNPCL were to transport products through the compromised pipelines.
Yusuf Othman, National President of the Nigerian Association of Road Transport Owners (NARTO), along with Muhammed Giwa, Chairman of the NURTW Monitoring Committee for Heavy Trucks in the South-South/South-East, highlighted the profound difficulties in product distribution due to poor road conditions and the prevalent threat of kidnapping, exacerbating the challenges faced by the transport sector.
With this array of complex issues, stakeholders within the industry and affected communities are closely monitoring the unfolding developments, hoping for sustainable solutions that will support Nigeria’s crucial oil and gas sector.
