Landing cost of fuel now stand at N180 per litre while the pump head price is N145 leaving a gap of N35 per litre which the NNPC is said to be bearing on behalf of the federal government. The subsidy has climbed to N68 billion between January and May 2017. This fact was disclosed in a presentation made by PriceWaterHouse and Coper at the 2017 Second Business Clinic Programme Theme Modular Refinery – Merits & Challenges organised by the Lagos Chamber of Commerce and Industry. In the presentation PWC said “NNPC is currently bearing the subsidy cost on behalf of the government, with landing cost at over NGN180/litre and pump price at N145/litre, NNPC’s under recoveries between January 2017 and May 2017 is N68 billion”.
PWC said that petroleum products marketers are still faced with challenges accessing foreign exchange despite the government’s intervention through the pairing of IOCs and downstream companies . Continuing it said “Nigeria’s downstream sector has been characterised by insignificant domestic refining output with imports accounting for over 80 per cent of supply. Nigeria’s refineries continue to operate at abysmally low utilisation rates. 8.5 per cent combined utilisation as at 2016 and 37 per cent as at 2017. Refineries have been forced to halt operations multiple times as crude supply lines have been routinely targeted by militant groups. When operational, refineries are optimised to produce heavier oils”. It said that $1.4 to $1.8 billion of private investment is required for intervention and rehabilitation projects of existing refineries. Imports it further said currently account for 90 per cent of Premium Motor Spirit (PMS) supply and 60 per cent of Automotive Gas Oil (AGO) supply.
According to PWC, Nigeria consumes over 17 billion litres of PMS annually and consumes over 3 billion litres of AGO. Transportation and power are the major drivers of demand for PMS in the country while increasing the demand for self-generation options such as AGO powered generators is the major driver of AGO demand. Imports currently account for over 90% of PMS supplied in the country and while imports currently account for about 60% of AGO supplied and 80 per cent of Kerosene supply.
The Presentation said that Nigeria consumes over 2.5 billion litres of kerosene annually. Kerosene it said is used primarily as a cooking fuel by low-middle income households. Its imports currently account for over 80 per cent of kerosene supplied in the country. It said that West Africa’s refining output has also remained insignificant with imports accounting for 80 per cent of supply and imports currently account for over 80 per cent of West Africa’s refined product supply. Current demand for refined products in the region is estimated at 39 billion litres and refineries such as SIR (Ivory Coast), SOGARA (Gabon) and SAR (Senegal) cannot meet this There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available. This PWC argued creates a compelling business case for domestic refining.
It said “For countries with size and complexities like Nigeria, modular refineries can be scattered throughout the country to serve the needs of the various regions of the country. The modular refinery, is a cost effective supply option for investors especially when middle distillates are the lightest product yield. It suggested that To actaulise the country’s quest for self sufficiency and end reliance on importation of refined petroleum products by 2019, modular refineries provide a cost effective, flexible and commercially viable option with the following benefits:
