Olanrewaju Aladeitan, Associate Professor of Energy and Natural Resources at the University of Abuja, and an oil and gas expert said that the upcoming operation of both the Port Harcourt and Dangote refineries may lead to a slight decrease in the cost of petroleum products, rather than a significant price crash.
He noted that ancillary expenses such as freight and port charges could have been eradicated to achieve this marginal reduction.
On December 21, the Federal Government announced the mechanical completion and flare start-up of the Port Harcourt Refining Company Limited (PHRC), with phase two set to commence in 2024, as stated by the Minister of State for Petroleum (Oil), Sen. Heineken Lokpobiri. This development marks the beginning of petroleum product production following the Christmas break.
The PHRC consists of two refining units, with the old plant boasting a refining capacity of 60,000 barrels per day (bpd) and the new plant 150,000 bpd, totalling 210,000 bpd.
Reacting to this development, Aladeitan, according to Leadership, suggested that there could be a marginal reduction in petrol prices due to the elimination of certain ancillary costs.
However, he clarified that the price of petroleum products might not significantly decrease to the extent of being termed a crash.
“The price may not decrease significantly because crude oil and condensates supplied for the domestic market under the Petroleum Industry Act will be based on willing seller-willing buyer negotiations.
“And the fact that the supply of crude oil will be commercially negotiated having regard to prevailing international market price for similar grades of crude,” he said.
He said that there is no specified percentage of crude dedicated to local refineries, indicating that international market prices, typically in dollars, would still determine the cost of the crude oil refined.
“Hence international market price which of course is denominated in dollars will still be the determinant of the cost of the crude oil that would be refined. So I do not see how the price of petroleum products will crash,” Aladeitan said.
But Mr Yushau Aliyu, an economic expert, said reaching a mechanical test of the refinery after a very long fruitless effort was an indication that part of our refined Premium Motor Spirit (PMS) deficit would be attended.
Aliyu described it as a good signal of recovery in the forex deficit which dominated the dwindling liquidity crisis.
He anticipated a reduction in pump prices at NNPC Ltd.’s retail stations due to the absence of landing costs in the short term.
“In addition, the new Nigerian National Petroleum Company Limited (NNPC Ltd.) is responding to the immediate solution for the availability of PMS in the economy.
“We are expecting the NNPC Ltd.’s retail stations to reduce their pump price due to the absence of landing cost in the short-term effects,” he said.
Expressing scepticism, an anonymous oil and gas expert criticised the sector’s apparent sabotage. He said he would maintain a wait-and-see stance until the refineries in Port Harcourt, Warri, and Kaduna became operational.
“They claim that the 60,000 barrels capacity refinery in Port Harcourt is back on stream, while the 150,000 barrels capacity will work soon.
“We are waiting to see them work, including that of Warri and Kaduna. When they are put to use, let’s see why fuel prices will not crash,” the expert said.
The pump price of PMS has risen to over N660 per litre at various fuel stations, while NNPC Ltd.’s retail outlets sell at N617 since the subsidy was removed in May 2023 due to soaring crude costs and high foreign exchange rates.
The aftermath of the subsidy removal and high fuel costs brought about considerable hardship and suffering for Nigerians due to inflation and increased costs of goods and services.