Monday, 14 September 2020 15:13

Dangote Refinery may not significantly crash fuel price - FG

Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed on Monday dashed the hopes of many Nigerians who thought that the coming on stream of Dangote Refinery in 2021 would automatically lead to a huge price slump of petroleum products.

She said such thoughts should be buried as the refinery will sell products  at the prevailing international prices, since it is located at the Export Processing Zone in Lagos State.

 

Ahmed, who made the disclosure on NTA’s ‘Good Morning Nigeria’ programme, explained that the only fundamental change is that Nigeria will no longer be paying huge freight cost to import petroleum products.

She said: “What we are doing is enabling the petroleum sector to actually grow. There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime that we had where fuel was controlled.

“The Dangote refinery is sitting within an Export Processing Zone so they are insulated from that. When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping.

 

“But we will still have landing cost; labour cost and the marketers will still have to put a margin. These refineries being those that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits.”

The Minister stoutly defended the deregulation of the downstream sector of the petroleum industry, describing it as the right path to toe to realise economic growth, though it led to products price hike.

She noted that having a deregulated sector was a vital stimulant to attract investors into building refineries.

“It will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries.

Last week, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr Mele Kyari disclosed that the government’s four refineries were inevitably shutdown because of the difficulties in feeding them with crude oil via the pipelines that have been completely compromised by vandals.

“That means you’re not able to deliver crude oil to them to operate to the maximum of their capacity.

“Secondly, what you call rehabilitation is different from turnaround maintenance (TAM). TAM is a routine endeavour. When you talk about rehabilitation, that means you have colossal loss of capacity in the refineries. It means you’ve not done TAM properly, you’ve not replaced parts and when due and it has gotten to a point where you’re not able to operate the refineries in the full installed capacities.

“Every refinery is expected to operate at 90% of installed capacity.

“With all the TAM down, it was impossible to run any of these refineries at 90% capacity. Our estimate was that we could run at 60% capacity but if we do that, it’s simply value destruction. You take a $100 crude and bring out $70 product, it doesn’t make sense.

“We want to make them work and that’s why we’re doing full rehabilitation. Refineries are like aircraft. I’ve visited refineries that are over 100 years old that are still still functioning. Refineries don’t die like cars or other assets.

“You saw our 2018 financial statement which indicated that we’ve lost money in the refineries.

So, our target is that when they come back to life, they’ll run over 90% capacity. We’re also working with the private sector to establish condensate refineries”, he said.

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