Nigerian Petroleum Policy (downstream)
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Nigerian Petroleum Policy (Downstream) Dr. Adeoye Adefulu Odujinrin & Adefulu Barristers Solicitors & Notaries Public Barristers, Solicitors & Notaries Public Lagos – Abuja – Port‐Harcourt
Outline • National Oil and Gas Policy • Refineries • Product distribution network
21/09/2009
Odujinrin & Adefuluestd. 1972
2
National Oil and Gas Policy National Oil and Gas Policy • Uniform pricing to remain • Petroleum Equalization Fund should be made Petroleum Equalization Fund should be made orivate sector driven and managed • PEF to include riverine and interior areas PEF i l d i i di i • Jetties to be available on an open access basis p • Railway facilities should be upgraded to complement pipeline system and reduce road l t i li t d d d haulage 21/09/2009
Odujinrin & Adefuluestd. 1972
3
National oil and gas policy (contd.) National oil and gas policy (contd.) • Coastal bunkering and export of refined p products and expansion of Nigerian retail p g outlet 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 products least 50% of their products
21/09/2009
Odujinrin & Adefuluestd. 1972
4
Refineries Refineries • Nigeria has four refineries – Old Port Harcourt Refinery‐60,000 bpd, y , p , commissioned in 1965. Simple hydro skimming p plant comprising of 3 Processing units: p g g • ‐Crude Catalytic Unit (CDU) • ‐Catalytic Catalytic Reforming Unit (CRU) Reforming Unit (CRU) • ‐Liquid Petroleum Gas Unit (LPGU)
21/09/2009
Odujinrin & Adefuluestd. 1972
5
Refinery capacity Refinery capacity – New Port Harcourt Refinery –150,000bpd, commissioned in 1989‐ more complex refinery with 8 processing units: • • • • • • • • •
21/09/2009
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 Odujinrin & Adefuluestd. 1972
6
Refinery capacity Refinery capacity • Warri Refinery and Petrochemical Company Limited – Refinery commissioned in 1978 – Petrochemical Plant commissioned in 1988 Petrochemical Plant commissioned in 1988 • Fuels Plant • Polypropylene Plant Polypropylene Plant – installed capacity installed capacity –35,000 35,000 tons of polymer tons of polymer per year • Carbon Black Plant – installed capacity –18,000 metric tons of various grade of carbon black per annum i d f b bl k • Utilities and Offsite Facilities: Power Plant, Tank Farms, Jetty etc
21/09/2009
Odujinrin & Adefuluestd. 1972
7
Refinery capacity Refinery capacity • Kaduna Refinery and Petrochemical Company Limited – Commissioned sequentially between 1978 and 1988, with installed capacity for refining 100,000 bpd • FFuel Processing Plant – lP i Pl capable of processing 60,000 bpsd of Nigerian bl f i 60 000 b d f Ni i 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 g • Offsite Plants comprising tankage and oil movement 21/09/2009
Odujinrin & Adefuluestd. 1972
8
Refinery capacity problems Refinery capacity problems • Refineries have a total nameplate capacity of p 445,000 bopd – Insufficient to meet Nigeria’s demand of about 30 – 35 million litres per day even when fully 35 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 years the years
21/09/2009
Odujinrin & Adefuluestd. 1972
9
Refinery capacity problems (contd.) Refinery capacity problems (contd.) • Refinery business previously operated as state p y monopoly • Private sector operators were licensed in 2002 but very little progress but 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 21/09/2009
Odujinrin & Adefuluestd. 1972
10
Policy solutions Policy solutions • What is government’s current policy solution? • How do we resolve the refinery situation? How do we resolve the refinery situation? – Privatisation? – Deregulation? D l i ? – Additional state‐led financing? – Other options?
21/09/2009
Odujinrin & Adefuluestd. 1972
11
Product distribution Product distribution • Currently the preserve of the Petroleum and g p y Products Marketing Company which carries out its functions through a network of pipelines and depots pipelines and depots – Over 5,000 km of pipelines – 17 depots and 3 refinery‐based petroleum d d f b d l product tank farms – 2 jetties and 1 export terminal
• Operates as a monopoly Operates as a monopoly 21/09/2009
Odujinrin & Adefuluestd. 1972
12
Product distribution network under the PIB • PPMC & NGC pipeline and depot assets to be p g transferred to a National Transport Logistics Company • Product pipelines and depot assets to be Product pipelines and depot assets to be divided into segments, to be managed by f l facility management companies – Why? y
21/09/2009
Odujinrin & Adefuluestd. 1972
13
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 y by the Authority” 21/09/2009
Odujinrin & Adefuluestd. 1972
14
Product Pricing Product Pricing • Pricing to remain regulated and shall be set by PPRA • Will subsidies remain? • Should subsidies remain? Sh ld b idi i ?
21/09/2009
Odujinrin & Adefuluestd. 1972
15
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?
21/09/2009
Odujinrin & Adefuluestd. 1972
16
Outline • National Oil and Gas Policy • Refineries • Product distribution network
21/09/2009
Odujinrin & Adefuluestd. 1972
2
National Oil and Gas Policy National Oil and Gas Policy • Uniform pricing to remain • Petroleum Equalization Fund should be made Petroleum Equalization Fund should be made orivate sector driven and managed • PEF to include riverine and interior areas PEF i l d i i di i • Jetties to be available on an open access basis p • Railway facilities should be upgraded to complement pipeline system and reduce road l t i li t d d d haulage 21/09/2009
Odujinrin & Adefuluestd. 1972
3
National oil and gas policy (contd.) National oil and gas policy (contd.) • Coastal bunkering and export of refined p products and expansion of Nigerian retail p g outlet 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 products least 50% of their products
21/09/2009
Odujinrin & Adefuluestd. 1972
4
Refineries Refineries • Nigeria has four refineries – Old Port Harcourt Refinery‐60,000 bpd, y , p , commissioned in 1965. Simple hydro skimming p plant comprising of 3 Processing units: p g g • ‐Crude Catalytic Unit (CDU) • ‐Catalytic Catalytic Reforming Unit (CRU) Reforming Unit (CRU) • ‐Liquid Petroleum Gas Unit (LPGU)
21/09/2009
Odujinrin & Adefuluestd. 1972
5
Refinery capacity Refinery capacity – New Port Harcourt Refinery –150,000bpd, commissioned in 1989‐ more complex refinery with 8 processing units: • • • • • • • • •
21/09/2009
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 Odujinrin & Adefuluestd. 1972
6
Refinery capacity Refinery capacity • Warri Refinery and Petrochemical Company Limited – Refinery commissioned in 1978 – Petrochemical Plant commissioned in 1988 Petrochemical Plant commissioned in 1988 • Fuels Plant • Polypropylene Plant Polypropylene Plant – installed capacity installed capacity –35,000 35,000 tons of polymer tons of polymer per year • Carbon Black Plant – installed capacity –18,000 metric tons of various grade of carbon black per annum i d f b bl k • Utilities and Offsite Facilities: Power Plant, Tank Farms, Jetty etc
21/09/2009
Odujinrin & Adefuluestd. 1972
7
Refinery capacity Refinery capacity • Kaduna Refinery and Petrochemical Company Limited – Commissioned sequentially between 1978 and 1988, with installed capacity for refining 100,000 bpd • FFuel Processing Plant – lP i Pl capable of processing 60,000 bpsd of Nigerian bl f i 60 000 b d f Ni i 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 g • Offsite Plants comprising tankage and oil movement 21/09/2009
Odujinrin & Adefuluestd. 1972
8
Refinery capacity problems Refinery capacity problems • Refineries have a total nameplate capacity of p 445,000 bopd – Insufficient to meet Nigeria’s demand of about 30 – 35 million litres per day even when fully 35 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 years the years
21/09/2009
Odujinrin & Adefuluestd. 1972
9
Refinery capacity problems (contd.) Refinery capacity problems (contd.) • Refinery business previously operated as state p y monopoly • Private sector operators were licensed in 2002 but very little progress but 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 21/09/2009
Odujinrin & Adefuluestd. 1972
10
Policy solutions Policy solutions • What is government’s current policy solution? • How do we resolve the refinery situation? How do we resolve the refinery situation? – Privatisation? – Deregulation? D l i ? – Additional state‐led financing? – Other options?
21/09/2009
Odujinrin & Adefuluestd. 1972
11
Product distribution Product distribution • Currently the preserve of the Petroleum and g p y Products Marketing Company which carries out its functions through a network of pipelines and depots pipelines and depots – Over 5,000 km of pipelines – 17 depots and 3 refinery‐based petroleum d d f b d l product tank farms – 2 jetties and 1 export terminal
• Operates as a monopoly Operates as a monopoly 21/09/2009
Odujinrin & Adefuluestd. 1972
12
Product distribution network under the PIB • PPMC & NGC pipeline and depot assets to be p g transferred to a National Transport Logistics Company • Product pipelines and depot assets to be Product pipelines and depot assets to be divided into segments, to be managed by f l facility management companies – Why? y
21/09/2009
Odujinrin & Adefuluestd. 1972
13
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 y by the Authority” 21/09/2009
Odujinrin & Adefuluestd. 1972
14
Product Pricing Product Pricing • Pricing to remain regulated and shall be set by PPRA • Will subsidies remain? • Should subsidies remain? Sh ld b idi i ?
21/09/2009
Odujinrin & Adefuluestd. 1972
15
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?
21/09/2009
Odujinrin & Adefuluestd. 1972
16
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