A 2023 House of Representatives report revealed that the Nigerian National Petroleum Company Limited (NNPCL) spent N4.8 trillion between 2010 and 2020 on the Port Harcourt, Warri, and Kaduna refineries, which have operated at less than 30% of their combined 445,000 barrels per day capacity.
Despite being dormant for years, these refineries have incurred significant costs while Nigeria relies heavily on imported petroleum products, costing approximately $28 billion annually, according to Blackgold Data Services.
Rehabilitation Efforts and Challenges
All three refineries are currently undergoing rehabilitation. In 2021, NNPCL signed an Engineering, Procurement, and Construction (EPC) contract with Maire Tecnimont SPA for the Port Harcourt Refinery Company.
Warri and Kaduna refineries are also under rehabilitation. Mele Kyari, NNPCL’s Group Chief Executive Officer, stated in a Channels Television interview that supply chain issues in the global marine sector have delayed equipment delivery, pushing back the timeline for the refineries to become operational by the end of 2023.
Kyari expressed optimism that their activation would position Nigeria as a net exporter of petroleum products.
Local Refining and Fuel Subsidy Debate
Oil and gas stakeholders advocate for active local refineries to reduce Nigeria’s reliance on fuel imports and mitigate the impact of fuel subsidy removal.
However, a PricewaterhouseCoopers (PwC) report cautioned that local refining is not a complete solution.
While it could reduce costs like haulage and insurance, fuel prices would remain high unless global crude oil prices drop significantly, as importation costs are not the primary driver of pump prices.
Management Recommendations
The House of Representatives report, cited by Bloomberg, recommended that NNPCL consider outsourcing the management of the rehabilitated refineries to reputable international firms to improve efficiency and productivity.
Stakeholders have long argued that the government’s track record demonstrates an inability to effectively manage the oil and gas sector, urging it to focus on regulation and leave business operations to the private sector.
