Declining Crude Production Challenges Nigeria’s Refining Ambitions – As Nigeria gears up for a resurgence in local oil refining, the declining rate of oil production casts a shadow over the nation’s aspirations. As the much-anticipated Dangote Refinery nears its operational debut, it’s clear that challenges persist.
The Port Harcourt refinery, also slated to begin operations later this year, confronts issues like crude theft, pipeline vandalism, and the illicit export of oil. These problems jeopardize Nigeria’s efforts to enhance its oil output.
The Dangote Refinery, despite facing setbacks from political interference, environmental challenges, and various critical projects, is slated to commence operations soon. Boasting a projected capacity of 650,000 barrels per day, this refinery has the potential to make Nigeria self-reliant in fuel production and even yield a surplus for export. This is a stark contrast to the current scenario where Nigeria, despite being Africa’s largest oil producer, imports all its refined products, draining its foreign exchange reserves. The delays and escalating costs have led to skepticism regarding Aliko Dangote, Africa’s wealthiest individual, and his capability to fulfill these promises.
Amidst the backdrop of crude theft, rampant inflation, and a foreign exchange crisis, there’s pressure on Nigeria to bolster its oil production swiftly. Experts emphasize the urgency for a dialogue between the federal government, international and national oil giants, and local communities on the economic ramifications of crude theft and sabotage.
Muyiwa Adekoya, an energy specialist, suggests appointing a special envoy to negotiate with local stakeholders. He identifies the root of Nigeria’s crude production challenges as sabotage and theft, mainly by local entities within the Niger Delta. Adekoya advocates for immediate agreements to ensure uninterrupted crude production, followed by long-term strategies addressing socio-political concerns.
Despite past promises, public trust in the government’s assurances remains shaky. President Bola Tinubu’s administration envisions Nigeria as a net petroleum product exporter by next year, but previous timelines for the Port Harcourt refinery’s rehabilitation have been repeatedly postponed.
Jide Pratt, country manager of Trade Grid, emphasizes the need for immediate security measures to prevent losses from theft and vandalism. He suggests that refineries should prioritize high-margin products to ensure profitability, especially in light of the re-emergence of petrol subsidies.
Restoring faith in oil corporations and encouraging them to continue drilling is crucial, Pratt mentions, citing ExxonMobil’s activities during the United Nations General Assembly as an example.
However, S&P Global analysts offer a more cautious perspective, predicting that the Dangote Refinery might not achieve its full operational capacity until mid-2025, with potential for further delays.
In summary, while Nigeria stands at the cusp of a refining renaissance, the journey ahead remains fraught with challenges. Ensuring crude production, restoring faith, and fostering dialogue are critical for the nation’s energy future.
