Minister of state for petroleum, Emmanuel Ibe Kachikwu, has stated that the newly approved National Oil policy targets turning Nigeria into a refining processing environment and away from exporting to refining petroleum products.
The policy notes that refining excess crude would bring value addition and allow the country to also earn more foreign exchange value, just as it will aid diversification of the economy.
Oil and gas stakeholders also say now that the country’s crude oil production is capped at 1.8 million per day by OPEC, the Federal Government should aggressively pursue setting up of Modular Refineries and expand the existing 455,000 barrel per day refineries so that the country can begin to refine excess crude produced for export.
According to Felix Amieyeofori, managing director of Energia Petroleum, one of the alternatives to this current situation is for the country to refine the excess crude, which can also help in diversifying the economy through the derivative that are gotten from processing crude oil.
He said through processing, the crude petrochemicals, fertilizer, methanol companies could spring up, which can help boost employment.
Wumi Iledare, a professor of Petroleum Economics and Policy Research, and the director of Energy Information Division of the Centre for Energy Studies, said domestic refineries dedicated primarily to domestic market for energy security purpose and economic output expansion was the solution, saying there were no solution in the short run beyond export outlet diversification, which target West African countries.
“Again and simply, government must begin to look at oil not from revenue generation but for power to drive the economy. As I have said often time, you get far more from oil as a source of energy to drive the economy than as a source of direct revenue! The final destination of crude oil is the refinery,” he said.
For the country to have only 445,000 thousand barrels per day refining capacity leaves much to be desired, he said, saying that the way to go is to expand Nigeria’s capacity and focus more on export of excess petroleum products rather than crude.
John Uwajumogu, CPA Partner, Transaction Advisory Services, Ernst & Young, said while OPEC was showing determination in its effort to recapture market share from the US shale oil producers, Nigeria’s membership in OPEC limited her autonomy and ability to react, at least in the interim, to shifts in the industry dynamics.
“Most oil exporting nations, including Nigeria, are trapped in a prisoners’ dilemma at the instance of their membership of the Cartel. Nigeria, as of yet, have not earned the right to be agnostic about shifts in the economic dynamics of the oil market,” he said.
The potential adverse fallout of a production cap underscores the importance of a sound economic diversification strategy, he said, adding that there are no quick fixes.
He said the approach to mitigate the impact of such potential decline in crude oil production would be for the government to immediately start investing in economic enablers that would aid in pushing and sustaining diversification.