Importation problem not going away soon

Domestic petrol

Nigeria’s quest to stop the importation of refined petroleum products by 2020 appears to need a reconfiguration in the minds of the population as this quest may not be realized anytime soon. The major reason for this is that sources familiar with the matter have said that the messianic saviour on which the hope of putting a stop to the foreign reserves draining fuel import regime, the Aliko Dangote refinery project in Lagos, is unlikely to start production until 2022, two years later than the target date.

The country currently has no idea how much refined petroleum products (petrol, diesel, kerosene, amongst others) it consumes daily, but according to the country’s data collector,  the National Bureau of Statistics (NBS), an estimated 52 million litres of petrol was consumed in a day in the second quarter of this year.

The continuous resort to importation is despite the fact that it is the largest crude oil producer in Africa and home to one of the highest reserves in the world. The country currently has four existing refineries located in Port Harcourt, Kaduna and Warri, all operating well below installed capacity of 445,000 barrels per day due to years of crippling mismanagement, corruption, lack of investment and utter neglect.

As a result, the petroleum products needs of the country’s 190 million inhabitants and businesses are met through the importation of refined products.

The country says it is taking steps to correct this though, as Ibe Kachikwu, minister of state for petroleum resources, last week told journalists in Abuja, that Nigeria approved N17 billion for an automated fuel system management and censor network aimed at revealing the daily fuel consumption, by tracking fuel delivery from the point of entry into the country to its final delivery at the petrol station.

He said this was expected to be done over a period of three years but promised that within one year, the real effects of this will begin to show.

“Obviously, you need time to train and to continue to improve the system. We hope that by the time we start doing the 2020 budget in 2019, we would have gotten to a point where the losses that you are seeing are being tracked and substantially, impact will be made in monies that come into the federation accounts,” Kachikwu explained.

Going back to Dangote’s refinery, the sources, who have been on the site many times, said they do not expect petrol or diesel output before early 2022 and even then, many units at the refinery and accompanying petrochemical plant would not be complete.

The sources explained a refinery on such a scale would likely need five years to complete and the piling underpinning the plant had only started in the second half of last year and would take some more months to complete.

The 650,000 barrel per day refinery located at Lekki free trade zone in Lagos, would transform Nigeria from an importer of refined products into an exporter.

However, Devakumar Edwin, executive director, Dangote Group, who oversees the project, described the suggestion that the refinery is unlikely to start production until 2022 as the product of “someone’s wild imagination”.

“Ninety-five percent of engineering has been completed, 90 percent of procurement has been completed,” Edwin gushed.

“We started civil works in July last year and we have scheduled 2-1/2 years for mechanical completion,” he said, referring to the point where a plant is ready to be handed over for commissioning.

The project is expected to cost $12-14 billion, and Dangote said in July that he has raised more than $4.5 billion.

Another reason that might delay the refinery from coming on stream by 2020 is the fact that major pieces of equipment to be used in the refinery have yet to arrive or are still being constructed overseas.

The first producing unit of the fertilizer plant at the same site is complete but the pipeline that was supposed to bring its key input, natural gas, is not finished, meaning that the end year start would also be missed, the sources also said.