A London-based petroleum and energy market information provider, Argus, has said Nigeria must improve its refining capacity by having at least one size Dangote Refinery every five years to guarantee an in-country supply of petroleum products that would meet the country’s growing population and demand.
The Vice President, Crude and African Markets, Argus, Mr. James Gooder, stated this yesterday, during an online workshop for journalists organised by the Major Oil Marketers Association of Nigeria (MOMAN), with the topic, “Fuel Pricing in International Market and Nigeria.
Argus is an independent provider of price information, market data and business intelligence for the global petroleum and energy industry including natural gas, electricity, emissions, biofuels, biomass, Liquefied Petroleum Gas (LPG), metals, and petrochemicals, among others.
Gooder said contrary to the impressions out there, Dangote’s 650,000 barrels per day refinery under construction in Lagos would not solve all the challenges associated with petroleum supply in the country.
He argued that Nigeria was growing in terms of population, wealth and consumption, adding that with the demand rise against the low production capacity, the country would definitely need more refineries of Dangote capacity to be able to meet the growing demand.
Gooder said: “On whether Dangote Refinery will solve all the petroleum issues in the country, the sure answer is no. It will not, because Nigeria is a growing country, it’s growing in terms of population, it’s growing in terms of wealth and it’s growing in terms products consumption.
“And so, if you are to look at the rising Nigeria’s consumption against Nigeria’s production of refined products, you will see a kind of rise in line of demand and a very low line of production with a bump up to 650,000 barrels a day.
“But that’s nowhere close. So, in order to meet that demand, you will not only have to have Dangote now, you will have to have another Dangote every five years or so, just to keep up. And so, it’s not going to happen, I fear.
“The truth is, even if you have a new Dangote every five years, you will still have to pay the market price. So, that wouldn’t necessarily solve the problem.”
He, however, pointed out that the Dangote Refinery would have some positive impact on the nation’s economy, saying a significant amount of foreign exchange would be saved as freight costs since the products are being refined in Nigeria.
“The impact of Dangote – it’s because of the freight advantage. You have production right here in Lagos. So, the crude doesn’t have to be sent to Europe, refined and brought back. All of that freight saving is made. And what that will do is, it will reduce the marginal price that others have to compete with,” he said.
He said when the refinery comes on stream, Dangote could become the price-setting refinery for the country.
Asked about what would be the actual pump price of petrol if subsidy was removed, the Argus vice president said the pump price should reflect the market price of the time.
He maintained that the market would determine the price and reward those who are efficient in supplying the market, whether through domestic refinery like Dangote or through an importer who has got a particularly efficient way of doing things.
He said currently, based on the prevailing exchange rate, the pump price of petrol should be somewhere above N400 per litre.
Gooder pointed out the dangers in imposing such high price at this time in the country, stating that doing that would trigger some shock to consumers.
