“Most of the refineries that we procure from are actually shutting down their operations because of the clamour for green energy and COP26 compliance” – Chief Financial Officer of NNPC, Umar Ajia.
Yes, many refineries around the world are closing shops and Nigeria has to work harder to import petrol. This is consistent with my playbook that investing in modular refineries (not the multi-product type Dangote is building), which just refine crude oil, and give the core byproduct of petrol, may not be a good business decision if you are looking at an investment that would require more than a decade to break even. In other words, we’re in a transition phase on energy (Russia-Ukraine war or not) with many factors going to be programmed outside the capacity of Nigeria.
Many people are pushing for modular refineries in Nigeria. It is indeed a very exciting business, on the face of it: Nigeria needs fuel to run our generators and drive our cars. And with our refineries not producing the capacity the nation needs, we have been importing for years. Indeed, government will like to substitute the imports with locally refined products especially in this age of foreign exchange scarcity. It makes economic sense because Nigeria has the crude oil and we have no business importing refined products.
That is the optimistic exuberance why most people are getting into this. According to the Vanguard, Nigerian National Petroleum Corporation (NNPC) expects about 20 investors to pump in $20 billion in the business.
Indeed, if they decide not to make fossil-fueled cars in Japan, Europe and the US, there is nothing you can do since they will not run those factories to serve only Nigeria. Our new car import is insignificant to shape global car production strategy.
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The implication will then become: once the old fossil cars have been shipped to Nigeria, and the world moves into green energy, some of those modular refineries may see low demand. Of course, you can argue that we have at least three decades for that redesign to become a full reality.
The Nigerian National Petroleum Company (NNPC) Limited has raised an alarm over the decision of most of the refineries supplying Premium Motor Spirit (PMS), otherwise known as petrol, to Nigeria are shutting down their operations due to clamour for green energy.
This is as the state-owned oil company has put the volume of petrol consumed in Nigeria at 66.7 million litres per day as against the average of 98 million being reported in some quarters.
This was made known by the Group Managing Director of NNPC, Mele Kyari, during the continued investigative hearing of the House of Representatives Ad-hoc Committee to investigate the petrol products subsidy regime from 2013 to 2022, on Monday in Abuja.
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Comment: Well I know that you have been consistent with your position but my take remains that 200 million people have energy needs and their energy needs can be produced at a profit. We need refineries that can make aviation fuel available, we need refineries that will make diesel available for at least 2 decades. Lot’s of our companies that have embraced the green option try to make it hybrid. We can produce for ourselves and Africa. I believe that it will help if we had options within our country.
My Response: Actually, I have no position. I am just trying to analyze data. NNPC is saying that it is finding it harder to buy petrol because the global refiners are closing shops. My point is this: Nigeria cannot dictate the future on this and that we need to have a strategy. If Wall Street refuses to fund new refineries, even if you build one in Nigeria, you may not have the parts. Yet, this is not happening tomorrow. But it will come! Meanwhile, other use cases of crude oil are marginal and largely inconsequential to make a refinery profitable without petrol!
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It is for Nigeria to have its own strategy and run with it, no nation has ever become great by listening to news and being indecisive. North Korea is still surviving, I don’t know who sells technology or petrol to it. We cannot be too worried about using what we have, else Russia would have been irrelevant today.
Dull brains everywhere.