Nigeria Eyes Reduction of Pump Prices for Fuel With Local Refining on the Radar

In Summary

• Nigeria plans to resume local refining of crude oil in early August, aiming to reduce fuel prices and end years of idleness at state-owned refineries.
• The Nigerian National Petroleum Company (NNPC) announced that one of the two Port Harcourt refineries will begin operations in two weeks, with the other following by the end of the year, positioning Nigeria to become a net exporter of refined oil.
• Despite previous unsuccessful attempts to resume operations, officials remain optimistic about the economic benefits, though industry experts express skepticism due to past challenges and ongoing issues like theft and corruption.

Nigeria to Resume Local Oil Refining, Aiming to Reduce Fuel Prices

Nigeria plans to resume local refining of crude oil in early August, national petroleum authorities announced Monday. This move aims to end years of idleness at Nigeria’s state-owned refineries and, if successful, could lower fuel prices, according to analysts.

The Nigerian National Petroleum Company (NNPC) made the announcement during an emergency session at the National Assembly. Lawmakers convened the session to interrogate central bank authorities, the national economic management team, and the NNPC about the country's economic standing.

Mele Kyari, the chief executive officer of the NNPC, stated that one of the two Port Harcourt refineries in the oil-rich Niger Delta region will begin operations in about two weeks. He added that the second refinery will come online by the end of the year, enabling Nigeria to start exporting refined oil.

"We're very optimistic that by December this country will be a net exporter,” Kyari said, “that is [in] combination of production coming from us and the Dangote refinery and other smaller producing companies."

The Dangote refinery is a privately owned facility being constructed near Lagos.

Nigeria's minister of state of petroleum resources, Heineken Lokpobiri, expressed optimism about the impact of the revived refineries. "The easiest way for Nigeria to come out of its economic problems is through the oil and gas sector,” Lokpobiri said. “As a sector, we have a clear plan to gradually ramp up production. Right now, we have a clear plan to see how we can get 2 million barrels and more."

This is not the first time officials have announced the resumption of domestic oil refining. Similar announcements were made in December and March, but unforeseen technical difficulties delayed those plans. All four government-owned refineries, capable of processing about 450,000 barrels of crude per day, have been dormant for years, forcing the country to rely on imports to meet its petroleum needs, estimated at 66 million liters (17.4 million gallons) per day.

Oil industry analyst Faith Nwadishi voiced doubts about the refineries' operation. "I'm just keeping my fingers crossed and trying to be very optimistic about this because it will go a long way in reducing the hardship and perhaps also reduce the pump price ... especially,” Nwadishi said. “But being somebody who's in the sector, I become a little bit skeptical. We have an allocation of about 445,000 [barrels per day] for domestic consumption, which, if properly refined, we'll have about 70 million liters. That covers our daily consumption."

The Nigerian oil industry has been hampered in recent years by theft and corruption. On Monday, the Nigeria Extractive Industries Transparency Initiative said about 140,000 barrels of crude oil were lost to theft every day between 2009 and 2018.