Oil Firms And Refinery Building In Nigeria

Recently, the out-going Executive Director of Shell Petroleum Development Company (SPDC), Mr. Malcom Brinded said the company cannot build a refinery in Nigeria because there are surplus refineries across the world. Brinded, who was in charge of the Upstream International unit of Shell made the statement in an interview with State House correspondents after a farewell visit to President Goodluck Jonathan at the State House, Abuja.

He said that rather than building new refineries, the company was divesting from those it had invested in around the world. “With respect to downstream, Shell is divesting from refineries all over the world because there is a surplus of refineries. We no longer own any refineries even in the United Kigdom. In today’s world, not looking at the past but where we are today, there is surplus of refineries which essentially means many refineries in the world run at a loss,” Brinded stressed.

For Mr. Brinded to have said this appears like the company, does not have any good agenda for Nigeria than to tap its resources to the detriment of the people, especially the oil producing areas. The Shell Petroleum Development Company is the first oil company to begin the exploration of Nigeria’s natural resources from Oloibiri, Bayelsa State in the past more than 50 years. It was then followed by others such as Chevron, Mobil,  Total, Agip and Texaco.

All these companies dominate the oil industry in Nigeria, controlling most of the known reserves for so many years and massively tapping the country’s vast oil reserves. In a country such as Nigeria where the oil industry plays a key role, there is an obvious demand for refineries to support the services of the oil and gas producing companies.

While Nigeria is better known as an oil province, the country has for many years been making efforts to promote higher production in the oil and gas industry. This could be attested to by the four refineries earlier built in the country. Although they are no longer functioning at installed capacity, but they added to the increasing popularity of the country among the international oil community. Now that Nigeria has epileptic  refineries to refine its crude, there is the urgent and pressing need for Shell and other oil multinationals to build refineries in the country.

It is in this regard that a lawmaker representing Obio/Akpor Federal Constituency of Rivers State in the House of Representatives, Hon. Kingsley Chinda sponsored a bill seeking oil companies operating in the country to build refineries as one of the conditions for renewal of their licenses.

According to the lawmaker, when passed into law, the bill would empower the companies to refine their crude locally for local consumption and would be free to export the excess.

The reason advanced by the outgoing Shell’s executive director that there are surplus refineries across the world and so the company will not build a refinery in Nigeria does not hold any water. It makes no sense at all. It only means Shell does not want to leave any legacy that would be enjoyed by Nigerians apart from its concentration on tapping the country’s resources and rendering the land infertile for food production.

Building of refineries in any oil producing country a is good vision that can fast-track oil production and ease the way for operating companies not just in Nigeria but  across the globe. In the robust and demanding environment in Nigeria, there is an obvious need for functioning refineries and services companies to smooth the ground. It is surprising to hear Shell which we call the first son in the oil and gas sector say it cannot build a refinery in Nigeria.

The presence of a refinery or refineries in Nigeria will enable oil companies to concentrate on their core business and make working in Nigeria a much smoother and simpler process, especially for the supply companies. Having refineries in the country will play a major role in the future development of the world’s dynamic energy industry and in the development of the West African oil and gas industry with a unique package of incentives and strategic advantage unrivalled throughout the world.

The absence of a robust refinery environment in Nigeria has resulted in the importation of refined petrol (PMS) after exporting crude, which has created room for the perennial scarcity of fuel currently suffered by Nigerians. There is a setback in the importation and distribution chain. Building new refineries in Nigeria will offer a whole range of other strategic benefits to companies within the oil and gas sector and guarantee availability of refined fuel for local consumption and exportation thereby encouraging the establishment of more complex downstream industries in support of the oil and gas sector.

It will also offer an easy way to do business for companies involved in the sector. This is why the Nigerian government has resolved to build three new refineries in some parts of the country. It is high time this plan was put into action in order to boost industrial and economic growth and strengthen Nigeria’s future role in the world’s oil and gas industry. In other oil markets around the world, refinery has been instrumental in ensuring greater level of foreign direct investment, technology transfer, manpower development, provision of employment opportunities and greater economic self-reliance.

The Nigerian government has been investing heavily in infrastructure development to support the oil and gas sector, and is determined to see the facilities grow into a major hub of activity supporting the world’s oil industry. There are incentives and profits derived by companies exporting or refining oil which include legislative provisions relating to taxes, levies, duties and foreign exchange regulations, which must apply to the advantage of the country.

Nigeria should be made to enjoy capital appreciation of its investment in oil and gas, profits and dividends earned from oil exploration. The incentives offered by a refinery globally far more exceed that of its competitors and such incentives and benefits are modeled and tailored to ensure success if properly maintained and sustained.

The incentives of a refinery exceed those offered by other leading businesses in the world as it offers quick and simple production, minimal bureaucracy, less red tape, faster services, no pre-shipment inspection at country of origin, saving time, while duties are only paid if the products are exported out of the country.

The presence of a refinery in an oil producing country like Nigeria will fast-track procedures at the loading centres and sea ports, airports, provide employment and create access to major projects onshore, offshore and regionally as well as ensure first hand port facilities. It will also support a highly efficient oil service centre, excellent sea, air and road links, highly trained and flexible management team and affordable and available personnel.

In addition, a functioning refinery climate in Nigeria will enhance first class port facilities, services support and strong infrastructure, a phased programme of further development to transform the country and the area of location.

There is the need for a legislative provision relating to the building of refineries by oil multinationals as they cannot just be tapping our resources without helping to refine, but only want us to continue to import from other countries a product that we have surplus in our land. A company as large as Shell and others ought to build local refineries in Nigeria.

If there is a law in place without an option, oil companies will comply with the law to build refineries in the country. Such law is inevitable, so it behooves the Senate and the House of Representatives to look at the bill as presented by Hon. Kingsley Chinda as it is of national interest. He has placed it before the House and it is imperative that it gets the attention of our lawmakers if they are worth their salt.

The Nigerian government is committed to providing the necessary infrastructure to support any refinery project in the country. It is also committed to providing quality port facilities, cargo links, adequate access roads, international airport facilities. The government will be ready to develop modern, efficient and well equipped support facilities within the area they are located.

With the firm commitment of the Nigerian government to ensure that the oil and gas sector continues to progress and expand, there is a bright future for any new refinery built now to thrive. There should also be a re-classification of the oil companies in the country to ensure better distribution. Government on its part should take stringent measures on the activities of oil multinationals. Despite the fact that government partners with Shell and other oil multinationals, it should be known that the country’s oil resources are critical national assets to our economy and should not be taken lightly.

The Federal Government should, as a matter of fact and urgency, bring back the nation’s refineries to produce at full capacity to end the importation of fuel and the perennial scarcity of  old petroleum products and others.

Shedie Okpara