—-Crude Oil production challenges in Nigeria may trigger fresh importation.
The Nigerian National Petroleum Company Limited (NNPCL) may begin importation of 110, 000 barrels of crude oil per day from Venezuela or Saudi Arabia to operate the Kaduna Refinery due to come on stream next year.
Also, the Dangote, Bua and other refineries may be forced to import about 1.322 million barrels of crude oil per day amid oil production challenges in Nigeria, existing contracts on crude oil swap as well as other commercial issues.
Currently, the Dangote Refinery, with 650, 000 barrels per day refining capacity, is relying on imported crude, while the Bua Refinery within the South South region would need about 200,000 barrels per day of crude oil from next year. NNPCL is also looking to bring back its 445,000 barrels per day refineries between next month and next year, while the existing modular refineries will require 27,000 barrels per day.
Nigeria has been struggling to sustain its crude oil production. The country currently records 113.52 million barrels shortfall in meeting Organisation of Petroleum Exporting Countries (OPEC) output quota. That loss alone is about $8.9 billion in the first seven months of 2023.
While OPEC’s production quota allocated to Nigeria stands at about 1.742 million barrels per day, figures from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that output has been averaging about 1.1 million barrels.
The NNPCL is with current obligations to supply crude to contractors, but the recent borrowing of $3 billion from Afreximbank would drastically reduce the volume of crude the national oil company could provide to the local market.
The Nigerian Upstream Regulatory Commission is currently dragging oil producers in an attempt to enforce Section 109 of the Petroleum Industry Act (PIA), which introduced Domestic Crude Supply Obligation (DCSO) to Nigeria’s oil industry to ensure domestic refineries are not starved of crude oil supply.
Although the regulator is threatening a fine of $10,000, a penalty of 50 per cent of their fiscal price per barrel of crude oil not delivered to refineries and denial of export permits, many of the crude oil producers are worried over commercial issues that may come up in such a transaction.
They are concerned about the logistics side of supply and safety of their data with NUPRC.
They added that refiners would need to convince them that the off-takers have dollars to pay for crude oil sustainably. Besides, most of the producers are divesting owing to crude oil theft, insecurity in the Niger Delta region and other problems bedevilling the oil and gas sector.
Renowned energy expert, Dan Kunle, said crude oil importation would not be ruled out next year for NNPCL-owned refineries because the daily local production is being hampered by poor investment.
“As long as the Federal Government continues to hold controlling shares in all the petroleum companies in Nigeria, there will be no crude oil and gas. Once the assets are transferred to private sector investors, the industry will shape up,” Kunle said.
He alluded to the fact that the country’s product pipelines are very weak and long out of use.
“There are too many cross cuttings issues in infrastructural framework. It is very highly likely that the Port Harcourt Refinery may not resume operations,” he said.
He noted that there is huge local add-on cost to a litre of petroleum products owing to inefficient and unreliable infrastructural facilities to support movement of products.
Energy economist, Prof. Wunmi Iledare, stated that the coming on stream of the Kaduna Refinery and others was gratifying.
According to him, refineries are designed for a crude oil type and product yields, therefore, the Kaduna Refinery, being designed for a heavy crude type, would need import from Venezuela and Saudi Arabia for bitumen and heavy fuel, which are for industrial use. The Gaurdian
