How Buhari Can Save the Oil Industry, an Expert’s Guide
Domestic petrol production deficit has always been balanced with importation. However, the proportion of the imports has risen in the past few years to a high of about 80% or more of national domestic consumption, and this trend may continue considering the claim by energy officials that “there is no alternative to fuel importation”. Besides petrol, some other finished petroleum products particularly jet fuels, domestic kerosene and diesel are also imported. For many years, enormous foreign exchange has been spent perhaps unnecessarily in the name of finished white hydrocarbon importation thus putting avoidable pressure on the Naira.
The excuse has always been the inability of our refineries to stream the fluidized catalytic cracking (FCC) units. These expensive units no doubt are very useful in reducing fuel oils to gases, naphtha and middle distillates. In Nigeria however, the employment of FCC units in seeking higher yields of light to middle distillates can be circumvented (at least for now). Alternatively greater quantities of motor and aviation fuels, domestic kerosene and diesel could be made from less expensive refinery configurations.
Realizing these products to meet and even surpass our domestic consumption through appropriate options and technologies that are not only economically favourable but also strategic in good energy management, and minimizing the huge financial mismanagement occasioned by the massive and ‘lucrative’ fuel importation is the thrust of this paper.
Refining Policy for National Economic Needs
Nigeria like most developing or under-developed economies exhibits a peculiar trend in the comparatively higher demand of petrol, kerosene and gas oils against fuel oils. Moreover, the declining global market for heavy fuel oils as a result of oil substitution by coal and other energy resources coupled with the relatively low and unattractive price value of heavy fuel oils, paves way for what in the future may ultimately be the all premium distillate product refining operation.
In pursuit of Premium Distillate Intensive Refinery configuration, it is important to note that the bulk of crude oils produced in Nigeria are indeed light to super light oils which constitute about 65% of the country’s total production with sulphur content of < 0.15% by weight. To be specific, Nigerian crude oils with API gravity greater than 45° which are the prime choice refinery feedstock for higher yields of major grade products are virtually sulfur free.
Therefore, one would expect that the choicest of Nigeria’s oil production should naturally be reserved and utilized by the owner of the resources. Unfortunately the reverse is the case. It is only in Nigeria that we forego the best part of our oil production for the benefit of the people and national economic growth at no advantage and for no logical reasons .
Maximum Premium Distillate Production and Refinery Crude Selection
Premium Distillate production maximization would have been achieved by adopting refinery configuration and administration that would have gone beyond minimizing import deficits but actually maximizing export surpluses of products of comparatively higher economic value.
Instead, what we have presently is a refinery structure that imports more than 80% of the more expensive products (petrol, kerosene and diesel) and exports the less fancied and very low economic value fuel oils.
Exploiting Condensate and High API Crudes for Maximum Refinery Premium Grade Yields
Condensate and light crude oils (≥ 40° API) present the best choice as regards refinery feedstock in search of maximum premium grade yields. From the author’s monograph on Atmospheric Distillation Yield of Crude Oils, it is deduced that for certain light crude oils (condensates with API > 52°), only premium grade products are produced by simple atmospheric distillation.
From the said monograph, the atmospheric distillation of condensates of about 47 – 48° API (similar to Oso condensate but depending on peculiar composition) are expected to yield about 82 – 90% v/v of main grade products as follows;
- Gasoline (Petrol) = 51 – 53% v/v,
- Kerosene = 13 – 17% v/v,
- Diesel = 18 – 21% v/v
- Non-viscous lube = 7.5 – 9.5% v/v
- Residuum & loss = 2.5 – 4.5% v/v
Therefore, the selection of condensate or a blend of condensate and light oils of more than 40°API (so long as the choice exists) as refinery feed would not only ensure higher yields of middle distillates but would also ensure attractive cost effective premium grade production against the relatively costlier refining of medium to heavy crude oils.
Chapter Four: Fuel Deregulation – Taking the Last Step First./ 2001
For the avoidance of doubt, deregulation of the petroleum downstream sector is long overdue and it must be said that this is inevitable. The earlier our people get to understand this the better for everyone. However, deregulation particularly the pricing aspect is not only the last stage of an enterprise reform process but is fundamentally driven by market forces and not executive fiat. In all consciousness deregulation of the petroleum downstream at this point in time is quite suspect because the entire administrative and commercial infrastructure is essentially in the control of the main beneficiary of any price increases. It should be clearly understood that the central government runs the refineries in Nigeria at the moment and administers the bulk trading in petroleum products – issuing of import licenses, import allocation, and subsidy payments to the lucky beneficiaries. Therefore, one would say that the government has the monopoly of not only refining petroleum but also determines who joins it to trade in the very lucrative petroleum products importation business.
It would seem that the government’s hold on the petroleum downstream enterprise (which is consider economically unnecessary) should be reformed before ever focusing solely on pump price increase by agencies of government which appears to be the key motivation of the fuel deregulation plan.
Fuel scarcity in Nigeria is deplorable and has been persistent due to strange factors that can be grouped broadly into two – greed and ignorance. It is confounding that a country like Nigeria that is in the midst of plenty sources of motor fuels seem not to know how best to exploit the array of options at its disposal
In this regard, the following relevant questions remain unanswered over the years:
- Why should Nigeria permit the export of Natural Gasoline produced in the various gas plants operating in the country instead of harvesting and utilizing such high value liquids as motor fuels blending stock?
- When will Nigeria commercialized LPG (propane and butanes) as motor fuel?
- Why must Nigeria not see wisdom in stopping the export of condensates/volatile oils and reserving this special resource as refinery feedstock for simple Hydroskimming refinery configuration not exceeding NCI-3?
This should be a reasonable thing to do because the capital and operating costs of a simple Hydroskimming refinery is much lower than those fitted with de-oiling processes like catalytic cracking and coking, which are featured in the configuration of Kaduna, Warri and new Port Harcourt refineries.
What should be done?
- Isolate Condensate as feedstock for Local Refining
Isolate this special oil (condensate and volatile oil) from the bulk export crude and reserve it for domestic refining. Make no mistake about it, condensate or volatile oil is the dream of every refiner.
- Exploit NGL as Motor Fuel
Liquefied Petroleum Gas. Liquefied Petroleum Gas (LPG) is already established as motor fuel.
Natural Gasoline. These liquids have clear motor octane numbers of between 70 and 80, and can frequently be used in regular grade motor fuels of about 84 octane number without any disadvantage.
Total production of Natural Gasoline (from various gasp plants in Nigeria including the NLNG) as at September 2000 is estimated to be about 10,000 bbls/day are either exported separately or spiked into crude oil.
3 Refinery Administration
Regardless of the perspective from which the prevailing downstream oil sector is examined, one thing is clear, the need to reform existing refinery administration.
Deregulation or government disengagement from the monetary liabilities of running the fuel sector is a reform that is inevitable if the sector is to witness some sanity.
A reform is a process that addresses structural anomalies and redefines ways and means of removing identified vices and imperfections. It takes time naturally to complete a process. Therefore, it will be wrong judgement to first seek just one product of a process (i.e. price increase or price adjustment) when the process has not even taken off.
Specifically the envisaged products of deregulation are more refineries, unrestricted internal trading in crude and products, the elimination of preferential treatment in the offshore merchandise of products and conservation of tax payers money with the elimination of subvention in any form to government owned refineries. Other products are sustainable fuel availability, more job opportunities, competition and appropriate fuel prices increase. Besides these products, deregulation will certainly reduce the high incidence of product pipeline vandalization and corruption. This will in turn eliminate the need for product pipeline surveillance, which is an avenue for wasting huge sums of money.
National Interest with respect to Fuel Security
Every right thinking Nigerian should see the fuel mess as a plague, a moral evil that has all the trappings of a war. It has dealt a heavy blow not only to our economic growth but it has also injured our psyche and values – staggering man-hours wasted in fuel queues, physical and verbal abuse meted out on hapless citizens, fire incidents resulting from desperate handling and black market trading in petrol, etc.
Do not forget that the casualty is already high, running into several hundreds of deaths and injuries courtesy of pipeline explosion and fires, kerosene stove/lamp explosion and fires and sundry life liquidating circumstances encountered in this war. Even as I write this paper, Nigeria’s economy continues to bleed under the yoke of fuel importation and fuel import subsidy; and people are still hoarding fuel or vandalizing products facilities or receiving burns or dying from one petroleum explosion or the other. Just like in other wars, we must have a valid and uncluttered plan furnished by Nigerian experts – engineers with the right engineering and economic competencies. Unless this is done, the “fuel war” may remain a protracted and very costly one. On many occasions we have gone shopping for offshore expertise and solutions to our problems from the same group that exploit our problems as goldmine.
Author: Dili Nwabueze, an Engineer with an Oil and Gas firm bas