Tuesday, August 11 2020 / 12:00 PM / by CSL Research / Header Image Credit: NNPC
In the recently published Nigerian National Petroleum
Company (NNPC) 2019 Annual Statistical Bullentin report, data on the
performance of the Nigeria Oil & Gas industry was provided. We focused our
attention on local petroleum refining capacity in 2019. In 2019, combined
capacity utilization of Nigerian refineries fell to 2.5%, an all-time low
annual activity level since 1998 when NNPC started providing the data.
The declining capacity utilization of Nigeria's refineries
has resulted in a significant rise in importation of refined petroleum
products. In 2019, Pipelines & Product Marketing Company (PPMC) reported
that it imported 9,158,528mt of refined products (PMS, HHK, AGO & ATK)
while it evacuated only 963,302mt of refined products from Nigerian refineries,
implying local production was just at 10.5% of total refined products available
for distribution. In 2014 when capacity utilization was reported at 14.4%, PPMC
evacuated 3,208,461mt of refined products from Nigerian refineries and imported
7,038,264mt of refined products which implies local production was 31.3%. This
even pales compared to 2005 where products like ATK & AGO where not
imported at all. As at today, Nigeria relies on imports for c.90% of its petroleum
products needs.
Resuscitating Nigeria's refineries has somewhat become
an impossible task for reasons that remain unclear. In our view, the refineries
need to be privatized. The government on its part, needs to implement policies
aimed at removing the bottlenecks in the downstream sector so as to attract the
much needed private sector investment. That said, we struggle to see how
competitive investments in those refineries will be when Dangote's 650,000
barrels a day ultra modern refinery comes on
stream.
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