At Dangote Refinery Commissioning, NNPC Boss Says N400bn Monthly Fuel Subsidy Becoming Increasingly Unbearable

The Group Chief Executive Officer of the Nigerian National Petroleum Company Ltd, Mr Mele Kyari has said that the commissioning of the Dangote Refinery and Petrochemical Company by President Muhammadu Buhari is a defining moment for the energy industry in Nigeria, the African region, and the global community.

Kyari spoke on Monday in Lagos at the Commissioning of the Dangote Refinery.

He stated further that the Dangote Refinery, with the new deal that the NNPC has been building, through the Petroleum Industry Act, are so transformative.

He also noted that the lingering challenge of Petroleum Motor Spirit subsidies is becoming unbearable as the burden is clearly getting out of the capacity of the state to bear.

He gave the monthly fuel subsidy burden at about N400bn monthly adding that something needs to be done urgently to stop the spending.

According to the NNPC Boss, the differentials that domestic refining will provide is insignificant and cannot compensate for the subsidies on petroleum products.

Kyari said, “Nigeria and Africa as a whole produce a very small amount of carbon emissions, but we profoundly suffer the consequences of the gathering climate emergency: flooding and drought, sometimes simultaneously; tensions over land use… it is a long list.

“This is why the Dangote Refinery, with the New Deal we have been building, through the Petroleum Industry Act, are so transformative.

“It wont of course resolve the lingering challenge of Petroleum Motor Spirit subsidies as the burden is clearly getting out of the capacity of the state to bear and the differentials that domestic refining will provide is insignificant and cannot compensate for the subsidies.”

The Federal Government is currently taking steps to stop the payment of fuel subsidy by the end of June this year.

In the 2023 budget, the federal government had made provisions of N3.36trn for fuel subsidy payment to cover the first six months of this year.

This is in line with the 18-month extension announced in early 2022 by the government.

Already, a Subsidy Removal Committee had been set up which comprises the Ministry of Finance, Budget and National Planning, Ministry of Petroleum Resources, Nigerian National Petroleum Company (NNPC) Limited, the downstream and upstream regulators, Central Bank of Nigeria (CBN) and the Chief Economic Adviser to the President.

The 2023 Fiscal Framework and Appropriation Act as well as the Petroleum Industry Act (PIA) have made the provision that government should exit fuel subsidy by June 2023.

The Refinery which was commissioned on Monday in Lagos is the world’s largest single-train refinery, with a 650,000 barrels per day facility built by Africa’s richest man, Alhaji Aliko Dangote.

Located in Ibeju-Lekki, Lagos, it covers a land area of approximately 2,635 hectares, which is seven times the size of Victoria Island.

The Refinery is the biggest refinery in Africa and also the biggest single-train refinery in the world. A single-train refinery uses an integrated distillation unit or one Crude Distillation Unit (CDU) to refine crude oil into various petroleum products, as against the use of multiple distillation units by big refineries.

Due to the large capacity of the refinery, its pipeline infrastructure is the largest anywhere in the world, with 1,100 kilometres to handle three billion Standard Cubic Feet per day (Scf/d) of gas.

The refinery has a 435MW-capacity power plant that is able to meet the total power requirement of Ibadan Electricity Distribution Company (IBEDC).

The refinery has the capacity to meet 100 per cent of the Nigerian requirement of all refined petroleum products, such as petrol – 53 million litres per day; diesel – 34 million litres per day; kerosene – 10 million litres per day; and Aviation Jet, two million litres per day. There is also surplus of each of these pro

The NNPC has already taken 20 per cent equity stake in the Refinery and will from this week start supplying 300,000 Barrels of Crude oil per day to the facility.

Speaking at the event, Kyari stated that the Refinery carries the potential to support security of supply for refined products and petrochemicals here in Nigeria, and in the region.

He said Nigeria and Africa as a whole produce a very small amount of carbon emissions, but the country profoundly suffers the consequences of the gathering climate emergency: flooding and drought.

Kyari stated that the NNPC is harnessing its own resources to meet the energy needs of the country.

According to him, NNPC Limited equity holding in this gigantic asset is strategic as the supplier of last resort to the Nigerian market.

The GCEO stated that the NNPC will continue to work with investors to develop hydrocarbons assets, using the most modern and innovative technologies, to realize the potentials of our resources and power the transition towards clean energy in the decades ahead.

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He said, “We are harnessing our own resources to meet our own needs. NNPC Limited equity holding in this gigantic asset is strategic as the supplier of last resort to the Nigerian market. We will continue to work with investors to develop hydrocarbons assets, using the most modern and innovative technologies, to realize the potentials of our resources and power the transition towards clean energy in the decades ahead.

“The scale of the ambition of the Dangote refinery is plain to see. The vision behind it, and the optimism it generates for a better future, is even more exciting. We should all be proud to be part of this historic occasion especially you Mr. President.”

He explained further that the Refinery opens the possibility of a genuine commercial market and a step forward, in the NNPC’s collective efforts to making Nigeria a net exporter of petroleum products to the international markets.

“This offers an opportunity for new efficiencies, better value and improved governance as healthy competition offsets market monopoly. The benefits will be real and tangible for consumers, as well as the economy and the country more generally.

“This remarkable achievement by this remarkable visionary is not taking place in a vacuum.

“The extraordinary facility we see here today is not standing on a reinforced concrete and steel platforms only, but also on the enabling business environment that the government of our country continued to provide,” he added.

According to him, the reforms that the NNPC has undertaken in the Nigeria’s Petroleum industry under the informed leadership of President Muhammadu Buhari were built around a clear set of principles that anticipate the tremendous changes that will take place in the international energy markets in decades ahead.

He added, “As was always intended, we are committed to continue to add value here at home from our extractive industries in order to maximize the benefits to all Nigerians.

“NNPC Limited will continue to support investment in domestic refining to satisfy growing demands for refined petroleum products in both local and regional markets, as against simply exporting unprocessed crude to diminishing markets overseas.

“While we continue to confront our persisting industry challenges with vigour, we will expand opportunities for production and processing of gas to produce clean energy for Nigeria and export markets to promote transparency and accountability, and build an industry that operates on commercial principles, free from undue interferences.”

He also said the NNPC is operating the highest environmental standards and industry best practice with new opportunity for energy companies, local and international.

He noted that the external shocks in recent years from Covid-19 and the conflict in Europe are tangible reminders that energy is not just a business but a vital component of national security.

“Reliable access to fairly priced energy is the key to domestic economic growth, job creation, sustained democracy and a stable international order.

“As the world transits to cleaner sources of energy on account of climate change concerns, many developing countries across Africa and Asia are left to contain with energy poverty while managing the impact of climate change,” he added.