CRUDE OIL REFINING OR PETROLEUM PRODUCTS IMPORTATION: WHICH IS ECONOMICAL FOR NIGERIA?
ABSTRACT: One of the most crucial challenges facing Nigeria is being able to meet the energy need of the energy hungry populace; the exponential population growth makes it even more challenging. The approach adopted to meeting this need has impacted severely on the economy of the nation as reflected in the year-on-year economic figures. This can be attributed to her choice of net importer of petroleum products status to the much more economic domestic refining option. This paper analyses the best economic option between refining crude oil and importing the products in Nigeria, at the end making probable suggestions.
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With the production of 229,008,126 barrels of crude oil and condensates increased in the third quarter of 2010 with an average of 2.49 million barrels per day of domestic production in recent years, four refineries of 445,000 b/d refining capacity, the issue of meeting domestic oil demand should have been substantially addressed. However, with the 0 – 15% refining capacity in 2009[2], which is often the case over the years, importation became the only available alternative. Hence, Nigeria though a leading exporter of crude oil in the world is also, ironically, a net importer of petroleum products.
This paper is divided into four chapters; chapter 2 looks at crude oil refining in Nigeria, offering an overview and challenges that confronts it. In chapter 3, crude oil refining and petroleum products economics is examined and chapter 4 looks at the implications of both crude oil refining and importation vis - à – vis the economy. The chapter 5 concludes the paper with few suggestions as to what the best economic option should be in meeting the petroleum products demand in Nigeria.
2. CRUDE OIL REFINING IN NIGERIA
2.1OVERVIEW
The petroleum products consumed in Nigeria had been imported from refineries abroad; this continued even a couple of years after the discovery of crude oil in a commercial quantity in the country. However, as the demand for the products increased and with the availability of
Niger Delta region, placing the Nigerian oil output down to a third of its capacity” (Klare 3).
oil in Nigeria. Nigeria’s large supply of high quality crude oil helped Shell climb to the top,
In the modern world energy has become very important since it helps drive most industrial as well as home based activities. For more than a hundred years, oil has been used to provide to this vast energy requirements. Oil companies around the world have facilitated the exploration, drilling, refinery and distribution of oil in their defined regions. The industrial part that oil companies play can be considered to be much greater than the domestic role. Oil companies produce diesel, petroleum, liquid petroleum gas and other products which are used to drive industrial machines used in production of various commodities. By this virtue, oil companies become an integral part of an economy (Marcel, Valerie, and John V. Mitchell, 98).
Since summer 2014, the price of oil in the global market has drastically fallen. As measure by the U.S dollar, oil price has declined by around 50 percent from last year. The declining oil price is widely deemed as the effects of the increasing oil supply and decreasing demand in the global market among other factors. Future pricing predictions indicate that the price of oil will hardly be restored the level it was in recent years. The focus of this paper is to describe how the basic supply and demand mechanism has contributed to the decline in global oil prices and the subsequent effects of the prices on various national economies.
In the recent years, overall demand growth for oil is strong in Asia pacific region and North America. The consumption of energy resources in major developing and industrial countries, namely, China, India and Brazil is expanding rapidly, but on the other hand, G7 countries where most of the demand of oil are consumed, demand for oil has been static and seems to be reduced from last few years. In 1990s, U.S and G7 countries were top consumers of oil, at present BRICs countries and China, are becoming greatest consumers of oil, although G7 countries and U.S are reducing their demand as compared to past two decades but still their demand is higher even from BRICs and China.
From the middle of twentieth century, due to exceptional importance of the crude oil in the supply of the world's energy demands, it has become one of the major indicators of economic activities of the world. Even after the appearance of alternate forms of energy like solar power, water and wind, the importance of crude oil as the main source of energy still cannot be denied.
It is estimated that more than 2 million barrels of oil a day are extracted in the Niger delta, making Nigeria the biggest West Africa’s producer of petroleum. Its first operations begun in 1950s and were carried out by multinational corporations. The biggest gas flaring company was Shell Petroleum Development company of Nigeria Ltd, of which many of its shareholders were the Royal Dutch from Britain. Despite of legal regulation
Oil is the world economy’s most important source of energy and is therefore critical to economic growth. At its most basic level, the supply of crude oil is determined by the ability of oil companies to extract reserves from the ground and distribute them around the world. Its value is driven by demand for refined petroleum products, particularly in the transportation sector. Petroleum products power virtually all motor vehicles, aircraft, marine vessels, and trains around the globe. In total, products derived from oil, such as motor gasoline, jet fuel, diesel fuel, and heating oil, supply 33% of all the energy consumed by households, businesses,
Nigeria is the largest oil producer in Africa, and currently its most populous country. After the oil discovery in the Niger Delta area of Oloibiri in 1956, the country has had oil has its main income producer. Before this, agriculture had the center stage; it accounted for 50% of revenue. Most of the oil exploration is done in the Niger Delta;a region that’s made up of nine states which includes; River, Cross River, AkwaIbom, Delta, Edo, Bayelsa, Imo, Abia, and Ondo. This region has an estimated population of 28 million, amounting to16.7% of Nigeria population (Emmanuel, 2004). It has however suffered the environmental impact of oil exploration with its attendant environmental degradation for years. Unfortunately, the influx of oil companies and the heightening of their operations in Niger Delta are not matched with an agenda for the development of Nigeria in general and Niger Delta in particular. The oil companies claim to have executed several projects in the host communities as part of their Corporate Social Responsibility. The claims include: construction of hospitals, roads and schools, provision of portable water, electricity, sponsorship, scholarships, and; supporting health campaign programmes among others. However, the host communities in Niger Delta seem not to have acknowledged these acclaimed community development projects by oil companies as they continue in their hostile disposition to the companies. According to Omole (2000), the relationship of
Before 1973, petroleum products pricing was not uniform in Nigeria. The retail prices of petroleum products were dependent on the point of sale, relative to the only primary distribution depot then, at the Shell-BP Refinery, Alesa Eleme, near Okrika, near Port Harcourt, Rivers State.
Proshare Nigeria Limited explained that “While the 2012 budget set the oil revenue benchmark at $72/ barrel, with the country’s Excess Crude Account taking in whatever comes in over the benchmark, a fall in oil prices from the recent highs of over $120/ barrel to say $90/ barrel will imply a loss of almost N1 billion in revenues for Nigeria and a diminution in
Even though it has caused Ghana 's economic growth to slow, Ghana 's economy has been able to persevere through the global recession. This is through the exportation of oil. (Isser) In recent years Ghana 's industrial sector has grown consistently especially in 2011 with 36% increase. Besides oil, mining and quarrying have been quite productive by growing by over 250%. Ghana happens to be a large exporter of plastics and electronic goods, as it is home to Volto Aluminum Company (VALCO), a large distributor of electronic goods (AEO.) It is expected that Ghana has a fruitful future when discussing oil. It is "on the verge" of being a significant producer of oil. (GPJ)
In this section we would look at the Royal Dutch Shell Oil company operations worldwide and in particular the Nigeria operations from several different angles. We will look at how Shell Nigeria operations can impact upon the three stakeholders; The CEO of Shell, an investor and a local Shell employee. Then we would look at this wicked problem with the oil spill in the Niger delta.
Through our studies we came to a conclusion that there is a vast opportunity to increase domestic oil refining which will eventually be a boom for refineries and distribution companies. This could be achieved through following strategic actions like approving 100 percent foreign ownership, promoting the involvement of private organizations and joint-ventures. Tax holidays to new investors and advancing technology are another measures to enhance the oil refining and distribution industry in India.
In the history of Nigeria, there is no Oil and Gas Station or Companies that ever strengthen their borders in letting customer regulate the pump on their own, it is only seen in the most developed countries but as for the plans of Salam Oil and Gas company, we shall be emphasizing on