Why setting up new refinery in Nigeria is difficult’

The Group General Manager of Greenfield Refineries, a division of the Nigerian National Petroleum Corporation (NNPC), Mohammed Usman, has said it is difficult to set up new refineries in Nigeria because many companies do not have the financial muscle and technical expertise.

Usman, who made this known during an interview published in the February edition of NNPC News, the monthly publication of the corporation, said this partly accounted for why the NNPC was currently the sole refiner in Nigeria.

“The other issue why it is difficult for people to set up refineries in the country has to do with liberalisation of the downstream sector. Most of the companies want to operate in a free market environment where the price of petroleum products is determined by market forces (where the price is not regulated),” he said.

Explaining further, he said, “They want total deregulation. If the price of petroleum products goes up in the international market because of a rise in crude oil price and you are made to sell at a fixed price in Nigeria, it creates a problem of how to run the refinery at a profit on sustainable basis. Even marketers who import petroleum products stay off the business when prices rise above a point where they can make a margin not to talk of refiners. So these are the challenges.”

Usman said passing the Petroleum Industry Governance Bill (PIB) could help solve the issue of funding which he added was one of the biggest challenges.

“If the PIGB is passed, I believe it would free up NNPC to source for funding from whoever it could to execute its projects. That could help a great deal because it would build investor-confidence in would-be partners that NNPC is now operated as a commercial outfit and not a government agency,” he said.

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