Nigeria Loses $1,000 Per Barrel Of Crude Oil It Exports

Nigeria Loses $1,000 per Barrel of Crude Oil It Exports

By Charles Kennedy

Nigeria is losing $1,000 on every barrel of crude oil it exports, due to a lack of the added value from refining, Nigerian media quoted energy policy expert Henry Adigun as saying at a conference.

This loss is no longer sustainable, Adigun said.

The Nigerian federal government is supporting local refineries, but the regulator, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), is not empowered in its statutes to support a monopoly of fuel supply and distribution, the local newspaper The Sun quoted Adigun as saying.

Nigeria is looking to boost both crude oil production and domestic refining.

Africa’s largest refinery, the new Dangote facility in Nigeria, has recently started up production. With a capacity of 650,000 barrels per day (bpd), the refinery is expected to meet 100% of Nigeria’s demand for all refined petroleum products and have a surplus of each of the products for export.

Meanwhile, Nigeria’s national oil company NNPC Ltd has declared a state of emergency on production in Nigeria’s oil and gas industry as Africa’s largest oil producer struggles to boost output.

NNPC believes that Nigeria needs to take urgent action to address the challenges that have plagued the oil and gas industry for years, NNPC Group Chief Executive Officer, Mele Kyari, said in July.

“We know what we have to do at the level of assets. We have engaged our partners, and we will work together to improve the situation,” NNPC’s Kyari said.

The combination of pipeline vandalism and oil theft with a lack of investment in capacity has made Nigeria the biggest laggard in crude oil production in the OPEC+ alliance. Due to the underproduction, OPEC even reduced last year the quota for Nigeria’s oil production.

An analysis of the oil and gas assets in Nigeria has found that the largest OPEC producer in Africa can easily pump 2 million bpd of crude oil without deploying new rigs, Kyari said.

How could Nigeria lose $1000 in every barrel of crude oil it exports due to lack of added value from refining? This impossible.

Selling a barrel of of Brent crude today may fetch $76 while selling it as petroleum products could fetch an estimated $250 more or less. If this is the case, how could then Nigeria lose $1,000 with every barrel it exports as crude?

It is possible that the Nigerian expert who came up with this figure is thinking along Keynesian economic principles of a £1.0 spent by the government on public projects to stimulate the economy could add £5-£6 to GDP, accelerate its growth rate and also raise the level of employment

Applying it to a barrel of crude refined and either exported or consumed domestically, It means generating employment domestically, paying salaries to the refinery employees who will spend their earnings on satisfying the needs of their households from buying food to purchasing a car to travelling within the country and investing in a house or an apartment.

Even then I find a loss of $1,000 from selling a barrel of oil as crude rather than as refined products unbelievable if not impossible,