· PMS production starts mid-September
· NNPCL Jerks up fuel price from N617 to N897/litre
· Presidency pledges transparency on Fuel Subsidies
By Obinna Nwachukwu and Sam Otuonye
Hope for an end to the lingering fuel scarcity in Nigeria appears to be real as the nation’s foremost Refinery, the Port Harcourt Refinery is set to begin the production of crude oil in the next two weeks. And in preparatory to this epoch making event, the refinery has already started the production of Naphtha. This is as Dangote Refinery has announced plans to commence sale of refined petroleum in the next 46 hours.
According to oil experts, these developments point to the expected positive changes once local refineries begin full operations as they are expected to reduce the need for fuel imports, stabilize petrol supply, and create job opportunities within the country.
This news about PH Refinery starting operation was disclosed recently by the Chief Corporate Communications Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Femi Soneye when he hosted New National Star Editors at the oil giant’s corporate headquarters in Abuja. He assured the nation that the Port Harcourt refinery was on track to meet its September deadline for producing petroleum products and that it would be able to supply petroleum products to marketers. He added that both the Warri and Port Harcourt Refineries have completed their mechanical upgrades
“Refineries in Nigeria have not been operational for decades. And for the first time, we are saying no more Turnaround Maintenance (TAM). Instead, we are opting for a complete overhaul. Both the Warri and Port Harcourt refineries have completed their mechanical upgrades. As we speak, Port Harcourt is already producing Naphtha and will be fully operation soon”, Soneye said
Naphtha is a generic term applied to a refined or partially refined petroleum fraction with an approximate boiling range of between 122 degrees and 400 degrees Fahrenheit. There is also Naphtha-type jet fuel which is fuel in the heavy naphtha boiling range having an average gravity of 52.8 degrees API, 20% to 90% distillation temperatures of 290 degrees to 470 degrees Fahrenheit, and meeting Military Specification MIL-T-5624L (Grade JP-4).It is used primarily for military turbojet and turboprop aircraft engines because it has a lower freeze point than other aviation fuels and meets engine requirements at high altitudes and speeds. Naphtha if further blended or mixed with other materials, experts say, can make high-grade motor gasoline or jet fuel. It is also used as solvents, petrochemical feedstocks, or as raw materials for the production of town gas.
Speaking in the same vein, the National Operations Controller of Independent Petroleum Marketers Association of Nigeria (IPMAN), Zarma Mustapha, said
the PH refinery will boost the supply of petroleum products in the country to about 11 to 15 million liters daily, and help ensure energy availability across the board.
According to him, the refinery is set to operate independently and sell at the prevailing market price with little or no government interference.
“There is this understanding that the Port Harcourt refinery is going to perform independently and sell at whatever prevailing market price for them to recover their cost.
“It is not going to be run like a government entity as it has been before. I believe that the refinery coming up, will really boost the demand and supply of PMS to nothing less than 11 to 15 million litres daily.
“I am confident and optimistic that this new deadline is going to be a realistic deadline. It will come on stream and fully produce all the necessary components that the refinery is supposed to produce. At least, at its capacity of 0,000 barrels, can give you 10 to 12 million litres of PMS,” he said.
On whether the refinery will help reduce the price of petrol in the country, Mustapha said that might be the case if the operators decide to sell at a subsided rate.
He, however, explained that the refinery has to recover its cost of operation, particularly the $1.5 billion loan it obtained from a creditor for its maintenance in 2021.
“ Since the operators are also buying crude at an international price, they will have to recover their cost also.
“It depends on how much they are willing to sell. How much did they get the crude? Because they’re buying the crude at an international price too. They have to pay back the loan they took also.
“The $1.5 billion is a loan they took from one of these African financial institutions. I don’t know which one among them. They took the loan with the promise of paying back with whatever recoup from the earnings of the refinery,” he added.
NNPC JERKS UP FUEL PRICE
In another development, the NNPCL yesterday directed its retail outlets to raise the pump price of petrol to fromN617/litre to N897 per litre.
A message purported to have emanate from the NNPC received by our correspondent on Tuesday afternoon reads: “This is to inform you that NNPC Retail Management has approved upward review of PMS pump price from N617/itre to N897/liter effective today, 3rd September . 2024.
“Please ensure all your pumps and totems (price boards)/MIDs reflect the new PMS price of N897/liter.”
This development came barely two days after the company admitted to challenges in importing fuel due to an $6 billion debt.
“NNPC Ltd has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers. This financial strain has placed considerable pressure on the Company and poses a threat to the sustainability of fuel supply.
“In line with the Petroleum Industry Act (PIA), NNPC Ltd remains dedicated to its role as the supplier of last resort, ensuring national energy security. We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide,” the statement by the company’s Chief Corporate communications Officer, Olufemi Sonoye said on Sunday.
Our correspondent gathered from depot operators that N250 had been added to the pump price. It was also observed that some major marketers had raised their pump prices to N860 per litre.
New National Star investigations showed that some NNPC filling stations in Lagos and Abuja have adjusted the pump price of fuel from N568 to over N800 per litre.
In Alausa Ikeja, the pump price of the NNPC station reads N865 while others in Ikeja and Ikorodu displayed N868 and N897
It would be recalled that the Nigeria’s downstream petroleum sector has been in turmoil as signs emerged that the Federal Government might be unable to maintain the current petrol subsidy. This development, spurred by a steady increase in petrol import costs, has sparked concerns that the pump price could soon be hiked to enable the Nigerian National Petroleum Company Limited (NNPCL) to cover its growing financial obligations to international suppliers.
Industry experts said the pump price might soon surge to ₦1,000 per litre or more, with the landing cost of petrol currently estimated at about ₦1,200 per litre, excluding distribution costs to filling stations.
NNPC Ltd was reportedly struggling to secure sufficient supply to meet the nation’s demand, a situation exacerbated by some suppliers’ reluctance to continue delivering fuel on credit. This supply shortfall has intensified fuel scarcity in the past week, leading to severe disruptions in the transportation sector and widespread hardship for Nigerians.
According to a transactional analysis obtained by a news medium, the total landing cost of petrol—including expenses such as freight, insurance, and port charges—has risen to ₦1,205.52 per litre. When additional costs like transportation and marketers’ margins are factored in, the estimated official pump price could reach ₦1,405 per litre.
Even at a proposed price of ₦1,000 per litre, the subsidy burden remains high, putting the government in a difficult position. Officials are now weighing the possibility of either fully eliminating the subsidy or finding a compromise to share the cost burden between the government and consumers, the analysis stated.
Amidst these challenges, the Dangote Refinery has announced 48 hours plans to commence petrol production, a development that has raised hopes that the refinery, with its capacity of 650,000 barrels per day, could help alleviate Nigeria’s dependence on imported fuel.
Experts in the oil and gas sector have called for greater cooperation between the Federal Government and local refineries to ensure the efficient processing of crude oil for domestic use. They also urged the government to conduct a forensic audit of NNPC’s financial records and fully implement the Petroleum Industry Act (PIA) to stabilize the downstream sector.
Obviously, the new pump price would take a heavy toll on transportation and daily life across the country as the ripple effects are not far-fetched.
Presidency Defends Transparency on Fuel Subsidies, Debunks Allegations of Deceit
in another development, the Federal government has responded to ongoing criticisms concerning it’s stand on fuel subsidies, asserting its commitment to transparency. Special Adviser to the President on Information and Strategy, Bayo Onanuga, addressed the issue on Tuesday, September 3, via his X handle, stating that the Tinubu administration “did not lie about fuel subsidies.”
Onanuga clarified that since President Bola Tinubu’s deregulation of the Premium Motor Spirit (PMS) sector in May 2023, the government has upheld its policy of no longer paying fuel subsidies, with such provisions being excluded from the national budget.
“I have read a series of articles attacking the Federal Government for not telling the truth about fuel subsidy payments, following NNPC Limited’s admittance it was owing suppliers some $6 billion,” Onanuga stated. “The truth is that there is no discovery. No lie uncovered.”
He emphasized that the NNPCL has been absorbing rising petrol costs, despite the financial strain caused by increased crude oil prices and the devaluation of the Naira. This move, according to Onanuga, reflects the government’s effort to protect Nigerian consumers from further hardship.
“The NNPC cried out recently because it can no longer sustain the price differential on its balance sheet without becoming insolvent. The situation has greater implications for the ability of the three tiers of government to function,” Onanuga explained.