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Ibe Kachikwu raises hope Nigeria will stop importing fuel by 2019

|  By Anayo Ezugwu  |  Feb 20, 2017 @ 01:00 GMT  |

NIGERIA will be self-sufficient in fuel production by 2019. This is the promise of Ibe Kachikwu, minister of state for petroleum resources, that within two years, the federal government will revive refineries that are non-functional to contribute about eight million out of over 20 million litres of petrol consumed in the country daily.

He made the promise at the public hearing on the review of petroleum pricing template for Premium Motor Spirit organised by the House of Representatives on Tuesday, February 7. Kachikwu explained that the federal government initiated a model which attracted foreign investors to partner with the Nigeria National Petroleum Corporation, NNPC, to repair the country’s refineries within the two years period.

“This has consistently served as a target for this government so that by December 2018, NNPC must be able to deliver on some of the terms given them, one of which is to reduce petroleum importation by 60 percent. By 2019, we should be able to exit completely on the importation of petroleum products in this country. Cognisant of the fact that Dangote is building one refinery, we expect to have an excess situation.”

The minister said Nigeria must also have the capacity to stop exporting crude oil. According to him, selling crude oil is not different from selling agricultural produce in an unprocessed manner. “The world is leaving that, every member of OPEC is leaving that because of the pricing, volume and market challenges is now shifting from selling crude to selling refined petroleum products. That is what this country must do and there is a template we are working on.”

Kachikwu noted that the ministry intends to create an enabling environment that would promote local refining of crude oil. “The issue is not giving licences to illegality; the issue is how do we ensure that we create an investment environment that pulls individuals from illegal creek activities to legal business activities.

“We are looking at modular refineries, about 60 licences were given out just before this government came in and none of that was utilised because it requires a lot of money, land and crude security. But now we are going out to identify refineries, get individuals who can build refineries on the same platforms where our refineries are and identify some key specific modular refineries backed up by foreign investments working with state governments. Hopefully this will address the restiveness you see in the Niger Delta.”

On the possibility of reducing the fuel pump price, Kachikwu said there was no padding in the petroleum pricing template for fuel currently sold at N145 per litre. According to him, 71 percent of the cost is for the production and freight, 18 per cent balance is covered by depot charges and retailers margin.

“In other words, the storage tanks, the amount you get by verge of operating a filling station takes another 18 per cent, the output of those is already taking you to roughly about 90 per cent. The transportation is less than 10 per cent; we probably can do better; the templating is an insignificant 1 per cent or 2 per cent but that’s not where the problem is.

“The problem is with foreign exchange rate. There are two key elements in the template, how much you buy it is internationally fixed, it is not a Nigerian issue the cost of foreign exchange is a monetary policy issue. So, at the time we did the template the Central Bank of Nigeria monetary policy was N245 that was the basis upon which we calculated the pricing, today N305 is the exchange rate. And what we have tried to do is to ensure that anybody who sells us foreign exchange follows basically the instructions of the CBN in terms of the amount,” he said.

Kachikwu had in 2016 raised alarm that the refineries could end up as scrap in 2019 once Aliko Dangote began processing crude oil at his refinery in Lagos. Kachikwu, who spoke at the stakeholders’ consultative forum in Abuja, said, “Refineries will have to work; it is really not an option anymore. And not only should it work, it has to work very quickly.

“The reality is that if we do not privatise and we do not support concession, which is not what we are doing, then we have a responsibility to find private capital to get them to where they should be. This is because if we do not get them to work, in 2019, I can assure you that if Dangote system works well, we would have scrap; we won’t have refineries because by then, it would be too late to do anything.”

The federal government in its road map for the oil and gas sector tagged Seven Big Wins unveiled recently by President Muhammadu Buhari, stated that it would spend between $1.4 billion and $1.8 billion to rehabilitate the country’s refineries within two years in a bid to reposition the industry.

It stated that the rehabilitation would be carried out with the participation of the private sector as the road map represented the short and medium-term priorities to grow the Nigeria’s oil and gas industry from 2015 to 2019.

Part of the implementation strategy of the road map is for the government to ensure integrity assessment of all existing refineries and formulate investment plans to refurbish the facilities and improve their capacities. The government, in the report, said the short-term objective within two years would be the execution of a comprehensive rehabilitation programme under private sector participation to improve operations and increase capacity utilisation.

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