Oil & Gas
SOME oil and gas experts have called on the Federal Government to take decisive steps to boost crude oil supply in Nigeria.
They emphasised the need for allocating more licenses, facilitating new acreage discoveries and improving financing for exploration.
The experts made the call in seperate interviews with the News Agency of Nigeria (NAN) on Sunday in Lagos, while addressing concerns over low local crude oil supply from the Nigerian National Petroleum Company Ltd.
NAN recalls that on Jan. 30, Dangote Refinery disclosed it had resorted to importing crude due to local supply challenges, hindering its efforts to reach full refining capacity at its new 20 billion dollars refinery.
Mr Henry Adigun, an oil and gas consultant, said that crude oil importation for Dangote Refinery might not stop soon, with even more imports potentially needed when other refineries come online.
According to him, while low production levels are part of the problem, Nigeria has also committed substantial funds, but there is a need for more proactive measures.
To improve crude supply, he called for the allocation of more licenses, increased acreage discoveries, and better financing for exploration.
“The price of the product depends on many variables,” Adigun noted.
“The cost of production, financing, product quality, and the terms agreed by suppliers all impact pricing. It’s difficult to control a market governed by supply and demand alone.”
Adigun added that the Port Harcourt refinery’s production remained low to meet current demand, stressing, ‘it is not operating at full capacity’.
He, however, said that if otherwise, its scale would not have a major impact on the market.
The expert also highlighted the high cost of doing business in Nigeria, including taxes and security concerns, noting that it needed to be addressed for domestic refining to be more impactful.
Similarly, Dr Ayodele Oni, a partner at Bloomfield Law Firm, urged NNPC to address the infrastructural deficits affecting the industry to boost crude oil production and supply.
Oni emphasised the need for investor-friendly laws and policies that ensure fiscal stability and security for oil and gas assets to attract both foreign and local investors.
“Enforcing the Domestic Crude Oil Supply Obligation (DCSO) and possibly increasing the volume required from lessees under the Petroleum Industry Act (PIA) through a transparent process is essential.
“Persistent oil theft and pipeline vandalism have been major obstacles to Nigeria’s production potential,” Oni advised.
He also pointed out that Nigeria’s crude oil reserves, especially deep-water fields, remained underutilised due to limited technical expertise and inadequate equipment.
“If these challenges are addressed, crude supply levels would significantly increase,” Oni said.
He added that the price disparity between imported and locally produced petrol is largely driven by the economies of scale enjoyed by foreign refiners.
Oni said that these refineries operate on a larger scale, which lowers per-unit production costs.
He said that the removal of fuel subsidies in Nigeria might have caused some distortions in price comparisons due to older subsidised stock still circulating in the market.
“High operational costs, including logistics, regulatory compliance, and security expenses, further drive up the cost of locally produced petrol,” Oni explained.
Oni further discussed the challenges facing the Port Harcourt Refinery, which has a refining capacity of 210,000 barrels per day (bpd).
“Despite plans to ramp up efficiency to 90 per cent, the refinery’s output is still far below Nigeria’s daily fuel demand, which is estimated to be 45 million to 50 million liters of petrol per day.
He maintained to inadequate crude feedstock, often caused by pipeline vandalism and theft.
He suggested that the Port Harcourt refinery could be supported by modular and privately-owned refineries to help meet domestic needs.
“Additionally, the government must play a key role in ensuring adequate crude feedstock and ensuring the DCSO obligations are enforced.
“Government should invest in infrastructure, such as pipeline networks, to facilitate the efficient and secure distribution of refined products.
“Policies that incentivise investment in the refining sector will be crucial for achieving a steady and affordable supply of petrol,” Oni noted. (NAN)
2nd February, 2025.
C.E.
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