A review of Nigeria\'s policy in the Downstream sector

1. Nigerian Petroleum Policy
(Downstream)
Dr. Adeoye Adefulu
Odujinrin & Adefulu
Barristers, Solicitors & Notaries Public
Barristers Solicitors & Notaries Public
Lagos – Abuja – Port‐Harcourt

2. Outline
• National Oil and Gas Policy
• Refineries
• Product distribution network
21/09/2009 Odujinrin & Adefuluestd. 1972 2

3. National Oil and Gas Policy
National Oil and Gas Policy
• Uniform pricing to remain
• Petroleum Equalization Fund should be made
Petroleum Equalization Fund should be made
orivate sector driven and managed
• PEF i l d i i
PEF to include riverine and interior areas
di i
• Jetties to be available on an open access basis
p
• Railway facilities should be upgraded to
complement pipeline system and reduce road
l t i li t d d d
haulage
21/09/2009 Odujinrin & Adefuluestd. 1972 3

4. National oil and gas policy (contd.)
National oil and gas policy (contd.)
• Coastal bunkering and export of refined
p
products and expansion of Nigerian retail
p g
outlet business to West Africa to be promoted
• Strategic reserves to be set up; both private
Strategic reserves to be set up; both private
(60 days) and government owned (90 days)
• Major producers to be encouraged to refine at
least 50% of their products
least 50% of their products
21/09/2009 Odujinrin & Adefuluestd. 1972 4

5. Refineries
Refineries
• Nigeria has four refineries
– Old Port Harcourt Refinery‐60,000 bpd,
y , p ,
commissioned in 1965. Simple hydro skimming
p
plant comprising of 3 Processing units:
p g g
• ‐Crude Catalytic Unit (CDU)
• ‐Catalytic Reforming Unit (CRU)
Catalytic Reforming Unit (CRU)
• ‐Liquid Petroleum Gas Unit (LPGU)
21/09/2009 Odujinrin & Adefuluestd. 1972 5

6. Refinery capacity
Refinery capacity
– New Port Harcourt Refinery –150,000bpd,
commissioned in 1989‐ more complex refinery
with 8 processing units:
• Crude Distillation Unit(CDU)
• Vacuum Distillation Unit(VDU)
Vacuum Distillation Unit(VDU)
• Naphtha Hydro treating Unit(NPU)
• Catalytic Reforming Unit(CRU)
• Kerosene Hydro treating Unit(KHU)
• Fluid Catalytic Cracking Unit(FCCU)
• Dimersol Unit (DIMU)
Dimersol Unit (DIMU)
• HF Alkylation Unit
• Gas Concentration Units
21/09/2009 Odujinrin & Adefuluestd. 1972 6

7. Refinery capacity
Refinery capacity
• Warri Refinery and Petrochemical Company
Limited
– Refinery commissioned in 1978
– Petrochemical Plant commissioned in 1988
Petrochemical Plant commissioned in 1988
• Fuels Plant
• Polypropylene Plant – installed capacity –35,000 tons of polymer
Polypropylene Plant installed capacity 35,000 tons of polymer
per year
• Carbon Black Plant – installed capacity –18,000 metric tons of
various grade of carbon black per annum
i d f b bl k
• Utilities and Offsite Facilities: Power Plant, Tank Farms, Jetty etc
21/09/2009 Odujinrin & Adefuluestd. 1972 7

8. Refinery capacity
Refinery capacity
• Kaduna Refinery and Petrochemical Company
Limited
– Commissioned sequentially between 1978 and 1988, with
installed capacity for refining 100,000 bpd
• F lP
Fuel Processing Plant – capable of processing 60,000 bpsd of Nigerian
i Pl bl f i 60 000 b d f Ni i
crude into white petroleum products, namely LPG, Gasoline, Kerosene,
Diesel Oil and Fuel Oil
• Lubricating Oils Processing Plant‐ designed to process 50,000bpd of heavy
crude oil imported from Kuwait or Venezuela, or Saudi Arabia Light Crude
into lubes base oils, waxes and asphalts.
• Petrochemicals Plant (Linear Alkyl Benzyl Plant)
• Utilities Production Plants
• Manufacturing Plants
g
• Offsite Plants comprising tankage and oil movement
21/09/2009 Odujinrin & Adefuluestd. 1972 8

9. Refinery capacity problems
Refinery capacity problems
• Refineries have a total nameplate capacity of
445,000 bopdp
– Insufficient to meet Nigeria’s demand of about 30
– 35 million litres per day even when fully
35 million litres per day even when fully
operational
– currently operating at between 20 to 30 percent
currently operating at between 20 to 30 percent
of capacity inspite of significant investments over
the years
the years
21/09/2009 Odujinrin & Adefuluestd. 1972 9

10. Refinery capacity problems (contd.)
Refinery capacity problems (contd.)
• Refinery business previously operated as state
p y
monopoly
• Private sector operators were licensed in 2002
but very little progress
but very little progress
– All private licenses revoked in 2007 due to lack of
progress
– Amakpe refinery license revalidated
• Capacity not likely to exceed 12,000 bopd in the short
term
21/09/2009 Odujinrin & Adefuluestd. 1972 10

11. Policy solutions
Policy solutions
• What is government’s current policy solution?
• How do we resolve the refinery situation?
How do we resolve the refinery situation?
– Privatisation?
–DDeregulation?
l i ?
– Additional state‐led financing?
– Other options?
21/09/2009 Odujinrin & Adefuluestd. 1972 11

12. Product distribution
Product distribution
• Currently the preserve of the Petroleum and
g p y
Products Marketing Company which carries
out its functions through a network of
pipelines and depots
pipelines and depots
– Over 5,000 km of pipelines
– 17 depots and 3 refinery‐based petroleum
d d f b d l
product tank farms
– 2 jetties and 1 export terminal
• Operates as a monopoly
Operates as a monopoly
21/09/2009 Odujinrin & Adefuluestd. 1972 12

13. Product distribution network under the
PIB
• PPMC & NGC pipeline and depot assets to be
p g
transferred to a National Transport Logistics
Company
• Product pipelines and depot assets to be
Product pipelines and depot assets to be
divided into segments, to be managed by
facility management companies
f l
– Why?
y
21/09/2009 Odujinrin & Adefuluestd. 1972 13

14. Product distribution network under the
PIB
• Open access to:
– Pipelines,
p ,
– jetties,
– import terminals
import terminals,
– loading facilities,
– Storage depots
– “on commercially viable terms to be determined
y
by the Authority”
21/09/2009 Odujinrin & Adefuluestd. 1972 14

15. Product Pricing
Product Pricing
• Pricing to remain regulated and shall be set by
PPRA
• Will subsidies remain?
• Sh ld b idi
Should subsidies remain?
i ?
21/09/2009 Odujinrin & Adefuluestd. 1972 15

16. Product pricing (contd.)
Product pricing (contd.)
• Petroleum Equalisation
– Fund to remain under PIB for the purpose of:
p p
• Reimbursing petroleum products marketing companies
for any loss sustained by them solely and exclusively as
a result of sales by them of petroleum products at
uniform prices throughout Nigeria
– Primarily funded by government subvention
• A form of subsidy
• Who benefits?
21/09/2009 Odujinrin & Adefuluestd. 1972 16