nigerian petroleum policy (downstream)

Nigerian Petroleum Policy (Downstream)Dr. Adeoye AdefuluOdujinrin & Adefulu

Barristers Solicitors & Notaries PublicBarristers, Solicitors & Notaries PublicLagos – Abuja – Port‐Harcourt

OutlineOutline

• National Oil and Gas Policy

• RefineriesRefineries

• Product distribution network

Odujinrin & Adefuluestd. 197221/09/2009 2

National Oil and Gas PolicyNational Oil and Gas Policy

• Uniform pricing to remain

• Petroleum Equalization Fund should be madePetroleum Equalization Fund should be made orivate sector driven and managed

PEF i l d i i d i i• PEF to include riverine and interior areas

• Jetties to be available on an open access basisp

• Railway facilities should be upgraded to l t i li t d d dcomplement pipeline system and reduce road

haulage


National oil and gas policy (contd.)National oil and gas policy (contd.)

• Coastal bunkering and export of refined products and expansion of Nigerian retail p p goutlet 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 productsleast 50% of their products


RefineriesRefineries

• Nigeria has four refineries– Old Port Harcourt Refinery‐60,000 bpd, y , p ,commissioned in 1965. Simple hydro skimming plant comprising of 3 Processing units:p p g g

• ‐Crude Catalytic Unit (CDU)

• ‐Catalytic Reforming Unit (CRU)Catalytic Reforming Unit (CRU)

• ‐Liquid Petroleum Gas Unit (LPGU)


Refinery capacityRefinery 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



• 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 polymerPolypropylene Plant installed capacity 35,000 tons of polymer per year

• Carbon Black Plant – installed capacity –18,000 metric tons of i d f b bl kvarious grade of carbon black per annum

• Utilities and Offsite Facilities: Power Plant, Tank Farms, Jetty etc



• Kaduna Refinery and Petrochemical Company Limited– Commissioned sequentially between 1978 and 1988, with installed capacity for refining 100,000 bpd

F l P i Pl bl f i 60 000 b d f Ni i• Fuel Processing Plant – capable of processing 60,000 bpsd of Nigerian 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

Odujinrin & Adefuluestd. 1972

g

• Offsite Plants comprising tankage and oil movement21/09/2009 8

Refinery capacity problemsRefinery 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 fully35 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 yearsthe years


Refinery capacity problems (contd.)Refinery capacity problems (contd.)

• Refinery business previously operated as state monopolyp y

• Private sector operators were licensed in 2002 but very little progressbut 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


Policy solutionsPolicy solutions

• What is government’s current policy solution?

• How do we resolve the refinery situation?How do we resolve the refinery situation?– Privatisation?

D l i ?– Deregulation?

– Additional state‐led financing?

– Other options?


Product distributionProduct distribution

• Currently the preserve of the Petroleum and Products Marketing Company which carries g p yout its functions through a network of pipelines and depotspipelines and depots– Over 5,000 km of pipelines

d d f b d l– 17 depots and 3 refinery‐based petroleum product tank farms

– 2 jetties and 1 export terminal

• Operates as a monopolyOdujinrin & Adefuluestd. 1972

Operates as a monopoly21/09/2009 12

Product distribution network under the PIB

• PPMC & NGC pipeline and depot assets to be transferred to a National Transport Logistics p gCompany

• Product pipelines and depot assets to be• Product pipelines and depot assets to be divided into segments, to be managed by f lfacility management companies– Why? y


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 yby the Authority”


Product PricingProduct Pricing

• Pricing to remain regulated and shall be set by PPRA

• Will subsidies remain?

Sh ld b idi i ?• Should subsidies remain?


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?


nigerian petroleum policy (downstream)

Documents

y21092009 odujinrinadefuluestd

b d f ni

li td d d haulage

refinery situation

productpricing product

monopoly operatesasamonopoly

bpsdofnigeriani pl bl

depots over5