The coming on stream of the Dangote refinery may not offer Nigerians the much desired relief in the cost of premium motor spirit aka Petrol, Orient Energy Review has gathered.
Speaking on NTA “Good Morning Nigeria” on Monday, the Minister of State for Petroleum Resources, Timipre Sylva, said the pump price of petrol would not drop significantly even if Nigeria is refining crude oil locally.
He said that crude oil remains the major determinant of the cost of petrol, stating that as long as the price is high, the cost of petrol will not drop.
Sylva said the cost of shipping is the only thing that could make local production cheaper since there would not be a need to pay for shipping.
Speaking further, he said that the cost of labour would not be too different from the international price because local refineries would be paying expatriates.
“For now, our supply is coming mostly from imports as we all know.
“And that doesn’t really have an impact on the price as people would think.
“The only difference that will happen if our supply was coming from in-country would have been the freight price.
“But whether it is coming from outside or coming from within, it will be about the same cost because when you import, the only difference is that you will have to pay the freight.
“It is the same cost of crude and whether you are refining or not, you will have to pay the market price for the crude.”
Also speaking, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said that Dangote refinery may not significantly reduce the price of petrol because it will be selling at the international price.
According to Ahmed, this is because the indigenous refinery which is expected to kick off next year, is located at the Export Processing Zone in Lagos State.
She said the difference will be the cost of shipping that Nigerians won’t be paying.
“What we are doing is enabling the petroleum sector to actually grow.
“There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime where fuel was controlled.
“The Dangote refinery is sitting within an Export Processing Zone, so they are insulated from that.
“When we buy fuel from Dangote, we will be buying fuel at the international market price.
“The only savings that we will be making is the savings of freight which is shipping.
“But we will still have landing cost, labour cost and the marketers will still have to put a margin.
“These refineries being those that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits,” Ahmed said.
She said the deregulation of the sector which led to the increase in petrol price was good for the economy as it would encourage investments in refineries.
“It will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries.
“Those refineries are old and even if we turn them around, we will not be able to operate them at optimal capacity.
“So, while the NNPC is trying to rehabilitate them, we also need to encourage the private sector refineries to come on stream and even state governments that have the capacity.”
The Dangote refinery is expected to commence operations next year with a capacity of refining 650,000 barrels of crude oil per day.
Other Nigeria Oil and Gas News from Orient Energy Review