If they can refine on the run

Minabere Ibelema

One of Nigeria’s enduring anomalies is that it is a major importer of petrol even as it is a major exporter of crude oil. And despite the import, shortage of petrol remains a constant in Nigerians’ lives. The standard explanation for the shortage is that the official refineries cannot cope with the demand. In any case, they are frequently non-operational because of maintenance problems.

Yet somehow, a large number of daring entrepreneurs have set up refineries in the forbidding mangrove forests of the Niger Delta. They face immense obstacles. Because their enterprise is illegal, operate under cover, use improvised refining equipment and market their product covertly.

Above all, they are constantly on the run from security personnel who are tasked to arrest them and destroy their refineries. Just last April, this paper cited the Nigeria Security and Civil Defence Corps in Bayelsa as saying that more than 400 illegal refineries had been destroyed in that state alone.  And attributing the figures to the Chief of Naval Staff, Vice Admiral Ibok-Ete Ibas, Reuters reported early this month that 181 illegal refineries were destroyed last year in Ogoniland, 748 suspects were arrested, and crude oil and diesel worth 420 billion naira ($1.3 billion) were confiscated.

Against these odds, the illegal refineries continue to thrive. “Refinery owners say they make 2 million naira ($6,500) a month from producing petrol and diesel,” Reuters reports. One refinery operator boasted to Reuters: “We can process one thousand litres a night.”

The military campaign to wipe out the illegal refineries is evidently failing. To the extent that it is having an impact, it is largely negative. The search-and-destroy operations is rendering gainfully employed people unemployed thus providing more recruits for militant groups such as the Niger Delta Avengers.

One father of three children anonymously confided to Reuters: “The refinery is the only job I can find to feed my family. It’s very likely that we’ll end up as criminals if the army closes us down.”

Saturday Nuate, the head of the Kegbara Dere community in Ogoniland, concurred. “My youths have found a way of surviving with crude (refining),” he told Reuters. “It’s very difficult to ask them to stop this. People are very hungry.”

And then there is the problem of pollution from both the extraction of crude oil and the disposal of the waste from refining. I don’t know what the percentage is and I don’t think that anyone does, but I’d guess that a good proportion of the pollution of the Niger Delta comes not from oil industry misdeeds and mishaps, but from the theft and illicit refining of crude oil.

And then there is pollution from improper disposal of refining waste. “We could dispose of the waste better or even turn it into more products if this was legal,” a refiner told Reuters. “But since we are on the run we just dump it.”

All these concerns granted, it is entirely understandable that the Federal Government is attempting to put an end to illegal refining. All illegalities do some good to some of people. If that is the criteria for letting them be, then Nigeria will become much more lawless than it already is.

The more significant matter is that the illegal refineries expose the operational ineffectualness of the legal refineries.  It is another indictment of government monopolies. It has been my impression — and I am sure the impression of most Nigerians — that oil refining is a highly sophisticated process that requires advanced technologies. And furthermore, that because of their sophistication, they are difficult to maintain.

These may still all be true. Yet, that Nigerians — without expatriate staffing — can so efficiently refine crude oil in the bush and on the run puts some dent on the truthfulness. Even as the illegal refiners get it done in difficult circumstances, the highly monetized and well-protected operations find various explanations for not meeting the country’s needs. In fact, at any given time, these well-oiled government operations are either running at fractional capacity or not functioning at all.

That raises the question, do the illegal refiners know something that the legal refiners don’t? Can the efficiency and resilience of the illegal production be transferable to the government behemoths? Might Nigerians be better served if the government opens up the refining business to whomever demonstrates the capacity to refine crude oil to an acceptable standard? For that matter, might Nigerians be better off if the government adopts the American model, that is, get off the oil business entirely and focus on setting standards and collecting fees and taxes?

I am not sure this last option is viable at this time. What is certain is that the bunkering refiners have proved that the major refineries have grossly under-performed. The Punch reported in April last year that of the roughly 40 million litres of petrol consumed daily in Nigeria, the three refineries operated by the Nigerian National Petroleum Corporation (in Port Harcourt, Warri and Kaduna) account for less than half.

Late last month, Bafred Enjugu, the Managing Director of the Port Harcourt refinery, told a media workshop in Port Harcourt that that that refinery incurred an operating loss of N2.25 billion in 2015, according to a report by the Premium Times. Enjugu blamed the loss on the “absence of crude supply until July 15 when it received approval to process” (Premium Times’ paraphrase), equipment problems, and security issues.

Yes, a Nigerian refinery stopped refining for months because it was denied access to crude oil. And this was at a time of global glut and low demand for crude oil. Meanwhile, illegal refiners were able to siphon crude oil. They were able to maintain their equipment. And they continue to refine despite concerted efforts by security personnel to stop them.

Enjugu also said at the workshop that the Port Harcourt refinery rebounded by the end of 2016 to make about N13 billion. He projects that the refinery is capable of making a profit of N1.3 trillion yearly.

Presumably that also means that the refinery will be producing much more petrol and helping reduce Nigeria’s absurd dependence on imported petrol. Yet, the gap between the capacity and the reality is so much that Nigerians will be excused if they are not buoyed by Enjugu’s projection.

If anything, they may want to encourage Enjugu to consult with the illegal refiners on how to refine profitably in difficult circumstances. This is not at all a facetious suggestion. It would be comparable to the practice in the United States of recruiting computer hackers to help companies and national security agencies build more secure systems.

Yes, if you can’t beat them, recruit them.

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from Punch Newspapers http://ift.tt/2lbDjHM
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