Crude oil refining is a unique and important link in the supply chain of petroleum products from the wellhead to the end user. Refining adds value through conversion of crude oil and other flows into dozens of co-refined products. Nigeria is probably the largest importer of refined petroleum products on the continent, creating a lucrative refinery market in Europe and the United States. Subsidies have also contributed to the low capacity utilization in our refineries. The current situation of the four National refineries and high dependency on crude oil proceeds has made Nigeria government a full time exporter of crude oil. Because of our population, the demand for refined products which are imported in foreign currency have induced pressure on our local currency; thus, presenting a large cost to the economy. Instead of looking for international crude oil traders or embarking on discounted sales of our sweet crude in this era of low crude oil price, it will be profitable to utilize this crude oil in Nigeria. We will not only export the raw crude but also enrich our petrochemical industries and agricultural sector with the byproducts or co-products from its refining. Investment in petrochemical industry will really bring about an astounding effect in our economy because of enlargement of private domain which will usher new phase of life by reducing inequalities in the nation’s income. There has never been a doubt about the large size of the Nigerian market for refined crude oil and petrochemical products. As more countries are discovering crude oil, Nigeria’s crude oil export will gradually drop leaving us with excess crude oil instead of excess crude account. There is a need for government to develop industrial sectors that support or leverage its energy resources. The actualization will make it possible for Nigeria to change from raw material supplier to value-added product supplier.
Crude oil refining is a unique and fundamental link in the crude oil supply chain from the wellhead to the pump. Refined crude oil adds value in a range of refined products, including transport fuels. The main economic purpose of refining is to maximize value in the conversion of crude oil to finished Petroleum products [
Crude oil refineries are large production facilities and high capital intensity, with extremely complex processing schemes.
Currently there are five (5) refineries in Nigeria; of which four (4) plants are owned by the Government of Nigeria through the Nigerian National Petroleum Corporation (NNPC), while the other is owned and operated by Niger Delta Petroleum Resources. Apart from the unique petrochemical plant, two of the refining plants, Kaduna Refining and Petrochemical Company (KRPC) and Warri Refining and Petrochemical Company (WRPC) complexes have to use their intermediate refinery products to produce petrochemical precursors [
Nigeria’s four refineries operated on average of 10.46 percent of its combined capacity of 445,000 barrels per day according to the December 2016 report of the NNPC. Average daily sales of refined products in 2016 were 24.24 million liter for gasoline, while the average daily diesel sales and kerosene were 1.06 million liters and 3.12 million liters respectively [
Exports of raw crude oil (petroleum and natural gas) are the factors behind Nigeria’s growth and account for 91% of total exports. In 2014 43% of total sales were in Europe; 29% Asia; 12% Africa and 13% America [
Nigeria is arguably the biggest importer of refined petroleum products on the continent, creating a lucrative market for refineries particularly in Europe and the United States. The Nigerian National Petroleum Corporation (NNPC) spends US $16 m to $20 m dollars per day on fuel imports. This amounts to about $1.9 bn dollars per quarter [
According to Dr. Peter Ozo-Eson, “Our domestic refineries must be made to work. Appropriate incentives need to be worked out to attract new investment in refining. While domestic refining by itself is not sufficient to guarantee product price stability, there are clear gains to be derived from domestic refining as opposed to imports.”
“Subsidies have also contributed to low capacity utilization at refineries. In Nigeria, for example, current subsidy schemes lead producers to sell crude overseas rather than to local refineries and therefore add to increasing volumes of refined product imports, which present a large cost to the economy”, said KPMG in its 2014 Africa Oil and Gas Report, while noting that problems in the refining industry on the continent include corruption, poor maintenance, theft, and operational problems.
According to the report in Special Issue on Business and Social Science, inflation has become so serious and contentions a problem so serious and contentious a problem in Nigeria. Though inflation rate is not new in the Nigeria economic history, the recent rates of inflation in two digits have been a cause of great concern to many. From literatures, inflation in Nigeria can be attributed to two related factors; which are:
1) The way Nigeria organizes and conducts the production and exchange of goods and services in the country and,
2) The policies Nigeria uses to sustain her chosen system of production.
Thus, this study tend to provide an insight on clear gains to be derived from domestic or in-country utilization of Nigerian Crude Oil as this will increase production of goods and service which is the most effective solution to inflations.
Knowing the refining value of crude oil requires a complete description of crude oil and its components, which means that there are many properties. In contrast, the characteristics particularly useful for rapid classification and comparison of Crude oil: API density (a density measure) and sulfur content (see