Research Document: Domestic Refining of Crude Oil in Nigeria

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Posted Mon, Apr 29, 2024 3:12 PM

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Nigeria’s oil and gas sector operational landscape has undergone a significant transformation, primarily driven by sweeping reforms. These reforms reached a monumental milestone with the enactment of the Petroleum Industry Act (PIA) in 2021, heralding the onset of a transformative era. Central to these changes are pivotal measures such as the restructuring of the Nigerian National Petroleum Corporation (NNPC) into a Public Limited Liability Company (PLC), the deregulation of the downstream sector, and the imminent operationalisation of two out of five large-scale refineries in the country. The anticipated outcomes of these evolving events include a resilient oil and gas sector that supports Nigeria’s economic growth and enhances consumer welfare as prices of refined petroleum products reduce significantly.

However, global experience and industry insights are lining towards a position that the presence of functional refineries in Nigeria's oil and gas sector does not automatically translate into optimal business and economic outcomes for all stakeholders, including the government, businesses, and households. Citing global trends where countries with abundant petroleum resources and refineries do not significantly differ in pricing from those without such facilities, this confirmed that the availability of operating local refineries is insufficient for having low-priced petroleum products in Nigeria.

This situation has also triggered similar sentiments in the public sector and among local energy experts that simply having a few refineries does not necessarily lead to lower prices for refined petroleum products in Nigeria. This assertion stems from structural and policy challenges within the Nigerian oil & gas sector, such as widespread oil theft, deteriorating pipeline infrastructure, inadequate logistical systems, and the lack of supporting value-added activities for crude oil refining.

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