₦airaland Forum

Genius100:
I bet you did not even know that the entire refinery was not sold to the consortium. A 51% stake was sold. Second, the amount it was sold for was $50 million more than the China oil company bid for it. Third, the refinery today will only sell for a fraction of the amount it was sold in 2007. Take that to the bank

vision2022:
There is no power supply, but their bringing outrageous bills
every month and intimidating people to pay or they cut your line
that does not have current on it and go with your cable you use
your hard earn money to buy. am tired of this country. black out where.

jln115:
Fvck!!!!You really are r#tarded!!

"the farther away you get from the earth, the thinner the atmosphere gets. The total heat content of a system is directly related to the amount of matter present, so it is cooler at higher elevations."
http://www.scientificamerican.com/article/if-heat-rises-why-does-th/

"Altitude is the height you are above sea level. The higher up you are the lower the temperature will be. This is because air that is higher up is less dense than it is at lower altitudes and air temperature depends on its density. As a general rule for every 1,000m higher you go the temperature will drop by 6.5 °C."
http://en.wikibooks.org/wiki/Basic_Geography/Climate/Climate_Elements

"air at higher altitudes is less dense. Since fewer air molecules exist in a certain volume of air, there are fewer molecules colliding with each other, and as a result, there will be less heat produced. This means cooler air."
https://water.usgs.gov/edu/watercyclecondensation.html

jln115:
Dude i fail to believe someone can be as r3tarded as this, Please tell me ,this has all been a joke all along!!!

OneNaira6:
Let us worry about that. Nigeria is already a failed country so anything short of that nation to me is an improvement. so trust me, we really don't care about any of what you just proposed. It's better to try and fail and know you failed by yourselves than stay in a nation stabbing you to death and smearing you with their constant failure. What's best, a known failed nation (Nigeria) or a nation that might or might not fail (Biafra). I think I'll choose the unsure(might or might not fail biafra) anyday over the sure(failed nigera)

philips70:
Neconde actually acquired the 45% stake from the former operators (Shell and co) but NPDC as government representatives now turned the new operators because obviously Neconde do not have the technical know how and maybe other logistics to operate it. According to that Punch article, NPDC now in turn brought in other Nigerian middlemen who do not even have the funds to operate it and be making some millions of $ in shady manners. In my opinion even if GEJ will go scot free of all these, the frog eye woman must vomit enough and cool off in gaol for some years. Let's see if the Nairaland warriors will help her to escape the doom that awaits her.

Genius100:
Dude, what kind of silly question is "where will Dangote have gotten the oil to refine in 2005? Again, it's becoming clear to me you don't know what you are talking about. First the refinery was sold to a consortium not just Dangote... Other parties that made up the consortium had oil interests. Outside of that, what stops the consortium from buying Nigerian crude oil at market price, refine it, add their profit and sell it to the populace? Asking where the consortium would have gotten crude oil is like asking why Dangote gets the raw materials for cement from.

Regarding your take on Sanusi, suffice it to say if you want to be taken seriously, you have to stop being crudely partisan. You are a real joke...

nerodenero:
The fear of hackers is the beginning of wisdom.

989900:
December 10, 2011, if you stopped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.

They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria .

We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.

Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high. Let us continue with some basic energy economics.

The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel.

This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.

Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.

This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.

So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).

There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.

The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.

Izielen Agbon Izielen Agbon writes from Dallas, Texas. izielenagbon@yahoo.com

He is former HOD , Petroleum Eng Dept, former ASUU chairman University of Ibadan, trained many operators in nation's energy industry with pratical experience on our practices and policy focus in the last 20yrs

http://saharareporters.com/2011/12/15/real-cost-nigeria-petrol-dr-izielen-agbon

Chibuhealth:
if u re a guy, how many onye ocha have u befriend? You are mentally deranged

eromoko:
Dear All,
45% of OML 42 was sold to Neconde Enegy ltd by Shell, Agip and others sometime in 2011/2012, 55% belongs to corrupt FG/NNPC, but the operations and maintenance (o&M) belongs to NPDC. NPDC gave the O&M to a 3rd comany company called Century energy which belongs to Allison (Minister of petrol.-dollar and Oilpayroll) husband.
What happened is that NPDC can not meet the tasks and target so the owners (Neconde) requested to handle al the affairs of OML 42 themselves because the loan interest is going higher, like other owners Seplat etc.
NPDC lazy staff should shut up because all the fat pocket allowances will not be coming in again. Lets move a motion to remove all the OML from NPDC and return them to the owners. If you are in doubt "google"" seplat and see how profitable the company, and how the host communities are benefiting from the company.

Eruditor:
I wish people can understand what is happening here. The former MD of NPDC was sacked few months after he refuted the lies that 5.11B USD of the unaccounted 20B was in his custody by Deziani and Andrew Yakubu.

Immediately, they employed a lawyer, Muoneke to head the institution. The same Muoneke who has no experience whatsoever in the oil and gas industry. This is the same man who vehemently refused to cooperate with PwC during the reportage of that audit. Now this same Muoneke, in connivance with Deziani has sold off OML 42 to GEJ and herself through a front.


If you want to know the essence of the rush and illegal proceedings leading to the sale, you have to bear in mind that GEJ didn't think he would lose. They had already planned they would allocate it to themselves under the false pretext of a bidding process but since GEJ lost, they just accelerated the process.

Let me make it clear to all Nigerians that not a dime was paid for the asset. GEJ (through Deziani) instructed the asset be given to the front with immediate effect. A comprehensive audit post May 29th will prove what I am saying right.

It is this sort of sleaze and chicanery that had been going-on under Deziani's watch and some f.ools on NL had the temerity to tell us they were revamping the Industry.

Waper2:
NPDC does nt hv d technical capacity to operate an oml ok, look at d other omls they took over, everything is going down, if u wonna known challenge me ok.

philips70:
Don't waste your energy on these pro-GEJ folks. They see nothing wrong with whatever his government does even if it directly impoverishes them. I just read it and it's no news. Diezani has sold off almost all NPDC assets to cronies at give away prices. Neconde is currently working on Odidi flow station and accompanying assets which she also sold to them.

Neconde now has a production asset too? that is serious, yet Nigerians still don't understand why their refineries are not working
They are still stuck in the diversion of subsidy removal and addition, lol, Jonathan the sharpico guy man

anonimi:
The workers are simply concerned about their INCOMPETENCE arses being kicked out.

NITEL employees cried as well but today we have BETTER telecoms service at a falling price!

wiseoneking:
Dont be an infant while an adult. Existence of new biafra does not mean you must come back to biafra or stops all your investments in nigeria. U can move in all your investment to biafra.Some nairaland land reasons like toddlers. The essence of biafra is to be a sovereign self governing state, map out economic and techology road map to be the emerging face of blacks and Africa to the world. But come to think of it, Biafra would be the richest country not in Africa but among the richest in southern hemisphere: because if all their money outside the SE is pulled out from Nig bank, all their trillions dollars investment especially industrial equipment etc sent back home, their uk/us/eu igbo diasporas start returning in mass, biafra will be the greatest. NIGERIA WOULD LOOSE ALL. They dont even have a PIN or investment in SE to take back to nigeria. Dont be afraid bro. Freedom is greater than your wealths in jos etc where it is not even guaranteed. Think biafra, think about your unborn children and grand children.

can I ask a few questions, do you have a memorandum of understanding with the Niger delta if they want to be part of Biafra?
Ojukwu's inability to secure that MOU was his achilles heel, have you secured it yet?
Assuming for the sake of argument that you did not secure it, do you realize that Biafra is as good as land locked, (do not be decieved by the River Niger, Omamballa river mantra) afterall, Ethiopia and Egypt have not been having fun with the River Nile alone.

Now, the Niger delta, they have oil (which is miserable at the moment), have you thought of how much oil is produced in the Nigerdelta and how much is produced offshore, let us even assume that Biafra/Nigerdelta alliance will lay claim to offshore oil, do you expect Nigeria to fold her arms?

That leads to the question of defense, Nigeria with a huge defense budget and an over whelming population could only maintain 130,000 soldiers (or less, no thanks to Boko haram) how many soldiers do you think you can raise in Biafra?

Do you know that when South Sudan broke away with their oil, Sudan locked their export pipeline which rendered their oil useless, guess what; Omar Al Bashir is proposing now, a redraw of the South sudan map to bequeath some oil fields to the north, supposing that same scenario plays out in Nigeria (which is likely by the way) what will be your contingency plan? perhaps Join NATO

Dr Ikedife that I know very well from Otolo Nnewi is a deranged old man, I dont expect sane persons like yourself to take him seriously,
I understand how tenaciously he held the ojukwu doctrine by virtue of being his brother's paddy man, nevertheless, enlightened youths like you should be in the position to remind him that the world has changed and the Biafra ideology has been over taken by events.
If Dr Ikedife needs to be relevant on the international space, he can as well lobby his PDP/Igbo cherished government to give him a diplomat job, even countries like Sao tome may not reject a nuisance (forgive my language) like him.

BTW, has any of you seen the said invite? did you see them in Addis Ababa after the first AU invite?

You guys should be very careful what you wish for.

Genius100:
I took you serious at first as you came across as an industry expert but certain aspects of your submission are so nonsensical, I now question your entire submission. Your submission that Dangote was going to tear down the refineries to stack cement is so dumb, I can't understand how an educated person can make such a statement. Why the hell will Dangote pay millions of dollars for a refinery only to tear it down to build a cement factory? The fact that Dangote is now building a brand new refinery confirms that he really was trying to refine. The truth is that OBJ got it right by selling 51% equity of the refineries. The government cannot adequately maintain the refinery and it needs to sell some of the equity and hand over the operational arm to the private sector.

Second, your claim that Sanusi failed as a CBN governor completely proves that you are a clown. I really can't take you or anything you've written seriously...

Like you said, it doesn't make sense to you because you had no idea what the plan was, Yaradua was not stup!d afterall, this is what I will bet you, it will take you 5yrs to snap out of the lies you were told in 2012.

Read from the first page, people continue circulating Jonathan's lies, I feel sorry for you guys.

Let me ask you, where would Dangote get the crude to refine in 2005? because
I know where he is gonna get crude in 2017 when his refinery will be ready.

Most times it is better to keep some opinion to yourself because you never can tell if the other person is seeing what you are not seeing.

I don't care what an ignorant person think of my opinion, Sanusi can be your God for all I care.

Sanusi that told you that without a total subsidy removal that the economy will collapse, we are yet to see that happen with a partial removal

Sanusi that Managed UBA and UBA was the only old generation bank acquired by a new generation bank during the consolidation exercise.

Sanusi that told you that Your banks are featherlite yet the Nigerian banks he inherited was the first multinational institution in Nigeria even the NNPC after over 30yrs of operation are yet to cross seme border, meanwhile GTB is in Gambia and Sierra leone.

Sanusi who told you that the share holders funds were eroded due to mismanagement, till date he is yet to admit the effect of the Economic melt down on the Nigerian banks, when asked to present his evidence, he published list of bank debtors with oil and gas exposure
He opted to bail them out exactly what other countries did to mitigate the effect of economic melt down in their countries.

Sanusi who claimed $46b was missing, reverted to $12b then $20b, is that the man you take seriously in your life?
How are we sure you are a serious person yourself, Sanusi is a walking confusion, failure is an understatement.


Imagine if we don't have ignorant people like you, where lies the fun!!

Sunnybobo3:
Dude that was a theoretical eexplanation. First of all, the guy got me wrong by alluding that I proposed investing in Togo other than Nigeria, I never did. Yes, the refining company sets up business in Nigeria, sells to distributors, I as a retailer who own a filling station go to the depot to lift my 30,000 litres tanker load of PMS, will I sell in Nigeria or just take the consignment across the border where I can get immediate cash at a substantially high margin instantly from readily available buyers?

If tonychristopher is an Igbo man, he will definitely do the later.

onegig:
Your analogy is not only wrong but faulty. Does Nigeria produce Oranges in large scale? Would it make sense if we did to first export raw oranges to South Africa and later reimport extracted juice at cut throat prices. Wont it make sense to extract and make such juice here.?

There are some things you cant rationalize away. Local refining is one of it. The price of petrol is tied to virtually everything in Nigeria. A significant reduction in pump price would lead to reduction in cost of running business, reduced price of food stuff, reduced cost of transport which in turn give more Nigerians especially the middle class and lower more disposable cash to pursue more project thus spurning retail sales and spendings and this in turn create real economic growth not the ones we hear on paper.


Also, we daily lose around 400, 000 barrels of oil. Lets assume we have a serious government that stems the theft of crude oil by 50%. that's almost 200k barrels.

If you plough into local refining . That's around 18million litres of petrol or pms. That is if you multiply by 90litres derivable from each barrel of oil. 18million litres is half the estimated daily comsumption. So question i ask you is with all these information. Do you still think we can afford it or not ;or would you rather give untaneable excuses why government is abdicating in its responsibilities.


I would prefer kunu or zobo. Lol.

Sweetguy25:
These aren't reasons why the refineries can't work. The refineries can work if they're fixed and managed properly.
What you gave are reasons why there's a lack of private investment in the downstream sector.

baralatie:
bros refining supplies the Downstream!

tonychristopher:
Bro you see that UK did not teach you that oil is a product and like other products follows same principle

Petroleum economics 101

Now buy me oh mpa

ifyan:
My bro thanks for the info but learn to pass on message on the right manner.

You know. ......

ifyan:
My bro politics is different from academics.

Besides what was his contribution in lagos state.

tonychristopher:
Now you have displayed your knowladge here and let me answer you..as an investor okay let me use myself and as an igbo guy I will invest in Nigeria selling 130 instead of Togo and Benin..ask my why

it boils down to what i told you before, economics is not theory but common sense..... and this simple common sense determines how we react to money amtters and as a shrewd Igbo dude i will dump TOGO AND BENIN selling 140 per litre and invest in NIGERIA selling one 130 per litre

let me make it simple the way I can make it for my 6 yr old girl

NIGERIA HAS ABOUT 180 million population and the market is vast and while TOGO and GAHANA,WITH BENIN doesnt not have upto 80 million so street wise economics comes to play

NIGERIA IS A BIGGER MARKET AND RICHER, I will sell faster in Nigeria and that is turnover in business and the dude in togo will be selling to a country that has about 10 million cars all together while I in nigeria is in a market that have about 70 million cars with higher disposable income...in economics it is called TURN OVER nad higher ROI


Now we are selling the same products lets say bottled water and you are selling 100 naira per bottle and i decide to sell 80 naira per bottle...our cost price is 50 naira but your margin is 50 naira as profit mine is 30 naira ...dont think i am crazy(I am playing Julio Inglesia here) I will sell 10 you will sell 5 and that is turnover..i did not learn this in school, i learnt it from ALABA international

so to answer your question..i will invest in NIGERIA selling 130 and forget TOGO,GHANA AND BENIN selling 140...

the answer is turn over


Thankls bro


Streetwise economics

Which of these industries does Nigeria have an advantage? Only one. The business of having crude oil. We have crude oil and many others don’t. Does Nigeria have an advantage in the business of getting crude oil out of the ground? Not really. It is of course cheaper to drill oil in Nigeria than it is to extract shale oil in Canada. However if you think of the advantage in terms of Nigerian firms vs foreign firms drilling for oil in Nigeria then there is no real advantage. Although we have tried to rectify this by making that section of the industry very hostile to foreign firms. It is kind of working but the side effect of that strategy is the increase in costs for all firms. Which is not necessarily a good thing but more on that in a bit. Do we have an advantage in the transporting of crude oil? No. Do we have an advantage in the refining of crude oil? No. Marketing? No. So in essence the only part of the industry that we have a real advantage is in having crude oil.

You are wrong here, Nigeria has the crude oil advantage and extraction advantage as well, we have quality advantage which gave birth to market advantage. Our Bonny light is the most traded oil on the commodity market world over, so you need more research.

As a matter of fact, No derivative of crude oil need advertisement to be sold, the Nigerian market alone can swallow as much we can never imagine. If the first real paragraph of your article is superfluous I wonder what the rest of your article hold.

You can not make the Nigerian oil industry hostile to foreigners, Jonathan scammed you with his local content policy, the foreigners still own the technology and you can not easily replicate the technology because it is always under a patent, so what you call "hostile" is a fabricated fallacy kissing the lips of madueke.
The so called local content company will get the technology from the foreigners, inflate his contract sum (mark up) to accommodate his "middle manship", the IOC, NNPC by extension pays a higher contract sum while the middle man smile to the bank for doing nothing and the foreigner still does the job, guess who the middleman is??

NIGERIAN POLITICIANS

In general fuel will be imported if it is cheaper on international markets compared to local markets. Does having crude oil imply that it would be cheaper to refine locally? The answer is no. Many countries may not have crude oil, but every country can buy crude oil. If any country can buy crude oil then having crude oil is not really an advantage. International fuel markets are highly competitive given that any country can buy crude oil, refine it and sell. So if the local industry cannot compete on efficiency and costs then fuel will be cheaper on international markets. And marketers will opt to import fuel rather than buy locally. Which then means your local refineries will disappear.

Why can’t our local oil industry compete?

The next obvious question is why our local refineries cannot compete with international players. The simple answer is the way our local industry is structured. Picture 2 below explains it perfectly.

Basically the NNPC and its subsidiaries run the entire oil industry. Prices across the entire industry are also set by the government, with the exception of the export price of crude oil which is beyond its powers. In essence you have the perfect worst case scenario for business. On the one hand you have a government corporation controlling everything from oil drilling, to crude oil pipelines, to refineries, to fuel pipelines, to marketing and distribution. On the other hand you have a government that sets prices of everything from the retail price of fuel to pipeline use chargers etc. Yes there are independent private players across the industry but most are mandated to partner in some form with the NNPC. The result of this industrial structure is an entire local industry that cannot compete with international players. First there are almost no legal private refineries. So we are not even at the point where locally refined fuel is available but more expensive. It is not even available. The government owned refineries are unsurprisingly in a state of perpetual turn-around maintenance. And so we import.

So what is the plan?
According to most the plan for the oil industry revolves around the petroleum industry bill. The bill aims to break up the NNPCs hold on the oil industry and make it look something like this see picture 3 below.

The idea is to break up the industry into bits to reduce some of the corruption and lack of transparency. Disclaimer: there are many other agencies in the PIB not in the diagram above. Plus the positions of the new agencies in the industry are not as rigid. Will this new structure lead to the resurgence of refineries? Probably not. The new refineries will still have to compete with international players and it is not clear that they will be able to do so. The PIB also doesn’t say much about deregulation implying that the government still plans to keep the price controls. All this implies that the post PIB oil industry will probably not  be able to compete with international players. Which means we will probably still import fuel.

What do we need to do to have a fighting chance?

First we need to get rid of the idea that government run refineries can work if we just try harder. They can’t. And even if by some kind of miracle they did finish their perpetual turn-around-maintenance, they cannot possibly compete with international players. Its difficult to imagine a scenario where government run refineries will be more efficient and reliable than the cut throat international market.

Second, pricing across the entire industry needs to be deregulated. The government needs to allow a more efficient market driven pricing structure from intermediate supply contracts to the retail end of the industry. Given that we know government run refineries cannot possibly compete, the only alternative is private refineries. But private refineries will not move anywhere near an oil industry where the prices are dictated by the government. Consider the current scenario where the private refineries have to buy crude oil at international prices but sell their refined products at the government mandated prices. No private player will knowingly enter a guaranteed loss making business.

Third, we need to use the natural advantage we have to tip the scales in favor of domestic use of crude oil. Recall the part of the industry we actually have an advantage is in having crude oil. And the determining factor influencing importing or domestic refining of fuel is the relative price. Selling fuel to private domestic refineries at a discount could provide the necessary incentive to build a refinery. Of course by discount I do not mean a fixed price for crude sales to local refineries but a fractional discount. So actual prices paid will still move in tandem with international prices. How much of a discount should be given? Obviously not a Tam David-West style discount where he argues to just give away crude oil for free. Intuitively the discount should be less than the welfare gains from jobs created in refining, Forex savings from not having to import  fuel, and perhaps even gains from becoming a fuel exporter. If the discount is larger than the potential gains then its really just a net loss for the entire country.

Finally we need to think small and long term. The government seems to be stuck on the idea of few giant players with giant mega refineries and short term profitability. Nothing wrong with having big players but small players might be key to a fluid and flexible domestic industry. Strategies for multiple small players need to be explored. Small scale refineries with long term crude oil discount deals and expropriation risk guarantees might be the best shot we have at domestic refining.

Irregardless of these ideas it may be that the myriad of problems make domestic refining in Nigeria impractical. Oil refining is after all a cutthroat business globally with relatively small margins. It would be a shame though if we can’t make it work somehow.

iamrealdeji:
Where did you see a masonic sign or anything that has to do with freemasonry,we're talking about illuminati here and not freemasonry,if you don't know something,you keep shut instead of saying something meaningless,

Lildreezy:
very insightful article. u should be out next petroleum minister.


this was one of the reasons I said that Jonathan and Dezianni had a foresight on how to operate a 21st century crude oil industry with the advent of the PIB.. but too many folks were blind to see it. If Buhari is who people wish he'd be, passage of that PIB should be a front burner of his agenda, else... everything is hogwash!

GodsMercy1:
This could serve as a thesis for sure with all the graphic presentations. Kudos to @op. We pray things work out for the best.


Please check my signature too. Thanks.