Exploring option of importing crude from Niger to Kaduna

The decision to construct the third refinery by the Nigerian National Petroleum Corporation (NNPC) in Kaduna was taken in 1974 by the Federal Government. It was to come after that of Warri.

Based on the feasibility studies carried out, which took into consideration the consumption pattern of the various petroleum products within the Northern Zone, and finding adequate means of disposal for the whatever is surplus, a refinery with crude oil capacity of 42,000 barrels per stream day (BPSD) was at the time easily justified.

Hence, the refinery was designed for a capacity of 60,000 BPSD. It was much later that the Federal Government decided that the capacity for any refinery in Nigeria should not be below 100,000 BPSD.

In order to do this, the whole project plan had to be modified, so that what initially was planned to be simply a hydro skimming type refinery, developed into an integrated refinery.

The refinery would now be able to produce a wider variety of petroleum products, some of which should be lubricating base oils. Hence, it became necessary to import suitable paraffinic-based crude oil from Venezuela, Kuwait or Saudi Arabia, according to an NNPC statement.

Therefore, the Kaduna Refining & Petrochemical Company (KRPC), constructed by Chiyoda Chemical Engineering and Construction Company (now Chiyoda Corporation) of Japan, was designed to process both imported paraffinic and Nigerian crude oils into fuels and lubes products.

The decision to link a network of pipelines of oil from Niger Republic to Kaduna Refinery was not thought of until recently, when renewed attacks on the nation’s crude oil infrastructure in the Niger Delta rendered the Kaduna refinery and other refineries in the country idle for most part of the year.

For some experts, it was only wise for the Federal Government to utilise Kaduna refinery that is capable of refining both local and international crude.

Disclosing the plans to commence the construction of pipeline from Niger Republic to Kaduna recently, the Group Managing Director of NNPC, Dr. Maikanti Baru said the government would build 1,000 kilometres of pipeline from Agadam, Niger Republic, to supply crude oil to Kaduna refinery.

Baru said high-level contacts have been made with Niger Republic on the possibility of importing crude from the country.

While some experts and stakeholders believe that the decision would serve general interest, others are of the opinion that the new move and government’s intense exploration exercise in the Northern region are all geared towards reducing over-dependence on crude oil supplies from the Niger Delta.

Some believe there is need to support the government on this new move as crude oil supply pipelines to both Warri and Port Harcourt refineries are being breached, as much as, the Trans-Niger trunk line that supplies the Kaduna Plant from Escravos.

Speaking on the possible cost implication of going to Niger, Head of Energy Research at Eco Bank, Dolapo Oni says an estimated $1b would be required to construct the proposed 1,000-kilometre crude oil pipeline from Agadam in Niger Republic to Nigeria’s Kaduna Refinery and Petrochemical Company.

According to him, the standard cost for laying a pipeline is $1m per kilometre, while distance and terrain are key determinants in cost.

Nigeria’s crude production, which was 2.1 million barrels per day at the start of 2016, fell by half following a series of attacks, since January, by Niger Delta militants.

Speaking with The Guardian on the issue, Chairman of Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor, who applauded the new arrangement, says it is a bankable project, which can pay for itself. “I do not see any problem in its funding,” he added.

Okoroafor said that Kaduna refinery alone cannot supply all the needed fuel supply in Nigeria, “but at least it will be working and supplying part of the North and reducing our dependence on imported refined products, which is a great drain on our foreign exchange.”

According to him, the Kaduna refinery can produce an average of about 1.6 million litres of PMS daily once in full operation, which is less than five per cent of Nigeria’s daily consumption.

He allays fears that this new move would reduce government’s efforts at solving the Niger Delta crisis. He said: “It is in the government interest to solve the Niger Delta crisis and pipeline vandalisation, because Niger Delta is the goose that lays the golden egg and this cannot change for a very long time.

“The insecurity of assets is a major source of concern for government, the oil industry and Nigeria as a whole. It is possible that government’s efforts to solve the protracted crisis in the Niger Delta has not been fully communicated to the people. I still believe that what we need is a plan for the rapid development of the Niger Delta area.

“Those who fail to learn from history are condemned to repeat it. We must start with tangible developments that can create sustainable employments, entrepreneurs and ensure 24 hours power supply. By creating opportunities for many, businesses can thrive, the security of lives and property can improve and we will not be discussing this bilateral agreement with neighbouring countries to import crude oil. All this will take time but the result will be sustainable and a win-win formula for both the Niger Delta region and the government. We should not fool ourselves that it will be easy, but it will stabilize the goose that lays the golden egg – the Niger Delta region and our oil industry at large. Also, government must continue to engage constructively and sincerely with Niger Delta no matter the difficulties. This problem took long time to manifest and cannot be solved easily. It will take time but will be solved.”

Speaking in the same vein, Director, Emerald Energy Institute, University of Port Harcourt, Prof Wumi Illedare said the planned importation is a brilliant idea that must be nurtured and delivered.

He said: “Importing heavy crude from Niger Republic to the Kaduna refinery is a brilliant idea if we take sentiments out. The overall benefits of that decision is significant. The other alternative is to let Niger build a refinery in their land and then send the product to us. The value chain added is significantly higher at the refining end of the crude than at where you get crude. In fact, let me say here that we do not even need to pay for it. All we need do is to give them oil from the Niger Delta from Forcados or Bonny that is equivalent to what they give us in Kaduna.

“Apart from increase in employment in the region and increase in the economic output of the region, apart from wage earned by people in Kaduna area working in the refinery and petrochemical, the infrastructure live would be extended. Trucks carrying petroleum from Port Harcourt to the northern parts of the country would be eliminated. We would no longer worry about vandals attacking Warri and Port Harcourt refineries. The products refined in Kaduna would be available if there is any disruption in these refineries. There are tremendous benefits. One of the things that we are doing is that we sacrifice economic exigency on the altar of sentiments and political expediencies and that is why we found ourselves where we are. Do we know how long this idea has been in the offing? This idea has been around since Rilwanu Lukman’s days. In fact, Lukman wanted to build refinery to refine crude from Niger instead of them to build pipes to Cameroon through the sea. All we needed do is to source the crude equivalent of what is coming to Nigeria’s soil from what they need.”

He wondered why the hullabaloo over the proposal, saying, “As we speak, the crude that is utilized by the Kaduna refinery is not produced in Nigeria. We are already importing crude for the refinery anyway.”

Iledare insisted that Nigeria is better off in this period of low price of crude to go into such business venture because the heavy crude is quit low as things stand now than the light crude that Nigeria produces.

The Varsity don also dispelled the anxiety over cost of the project, saying a consortium would execute the job.

“The cost of the pipes that would be laid would be borne by a consortium and the pipes that would be laid now would be different from those old ones laid in the Niger Delta because there are new technology that would make tampering with new pipes more difficult. Most of the pipelines in the Niger Delta were laid decades ago when the pipeline technology was completely different from what we have today. Pipes can be buried a lot deeper into the ground now at less cost and it will not be done by the NNPC alone,” he explained.

A Geology and Oil and Gas Policy Analyst, Ifeanyi Izeze, described the move as means to blackmail the Niger Delta people. He feared the ability of the Federal Government to fund the pipeline project in the midst of the present economic recession.

According to him, Niger Republic’s 20,000 barrels per day crude oil production is too low for an over 100,000 bpd Kaduna refinery.

He stated: “So, as the Federal Government is thinking of a 1,000 kilometre pipeline from Agadem, in Niger Republic, it is strongly believed they are also thinking of similar pipelines to Cameroun, Equatorial Guinea, Gabon or Angola to feed the Warri and Port Harcourt refineries as part of the overall efforts to address availability of crude and get the two refineries in Warri and Port Harcourt to function optimally. Or are those two plants no longer NNPC refineries? You see the smallness in the thinking of our leaders?

“What is unfolding may be part of the initial plan by those that built the Kaduna refinery to run on imported crude oil grades for its processes. Those who know would confirm that in the first instance and for whatever reasons, the Kaduna Refinery was not even designed to process crude oil from the Niger Delta.

“If pipelines supplying crude oil to our refineries- Kaduna, Warri and Port Harcourt are being breached incessantly, whose responsibility is it to check the problem by addressing the issues thereof? This is a defeatist mindset. If you have a problem in your family, would running away to sleep in another man’s house address the problem in your own house?

Another stakeholder, who spoke on condition of anonymity said that the same problems the country is running away from in the Niger Delta, exist in the Toubou tribal lands of Niger Republic, and the Toubou, have largely come to the same conclusion as the Niger Delta, that militancy is the way forward.

“Almost as importantly, the crude oil production of Niger Republic currently stands at 20,000 barrels per day. Niger has a refinery at Zinder, half the distance to Kaduna, which has a refining capacity of 20,000 barrels of oil per day, and if Le Sahel, the press office of the Nigerien government is to be believed, all of the country’s crude oil goes to the Zinder facility, and then, the equivalent of 6,000 barrels per day is used in-country, while the rest is exported to Benin, Burkina Faso, Mali, and outside the continent, via Cameroon”.