‘4IR’: Energy Sector ‘Refinery’ Revolution – Richard Odusanya

The Fourth Industrial Revolution (4IR) – the coming together of physical, digital and biological spheres – promises to revolutionise fields such as manufacturing and engineering. Still, one sector of the economy has some catching up to do with the adoption of new technologies. For the records, this contribution focuses on the Oil and Gas Downstream Sector, particularly the Refineries.

Importantly, it identifies key drivers that will spur the growth of the refining sector in Nigeria. The article also highlights refining asset economics and structural commercial considerations for investors and identifies the modular refinery, an off-the-shelf solution, as the cost-effective supply option for investors especially when diesel is the lightest yield.

For example, Premium Motor Spirit (PMS): Nigeria consumes over 17 billion litres of PMS annually. Transportation and power are the major drivers of demand for PMS in the country. Imports currently account for over 90% of PMS supplied in the country, which is likely to continue.

Furthermore, Nigeria’s downstream sector has grown considerably since the country opened its first 38,000-bpd refining plant in 1965. The country has become the fourth-largest refiner in Africa. However, issues with poor governance, operational failures and inconsistent supply of feedstock have the country’s refineries working at utilisation rates below 20% with a heavy reliance on imports. To get Africa’s largest oil producer back on track, the country is racing to revamp and expand the humbled sector.

For the purposes of clarity, as a game-changer projects from paper sketches to bricks and mortars. Lagos/Ogun States has evinced enough zeal and panache, in reeling in the needed private sector capital and expertise to build yet another seaport —a Lagos Lekki Sea Port opened shop just last year —in the far-flung eastern flank of the state. Bringing the number to 4 seaports in the state, namely; Apapa, Tincan, Lekki Deep seaport —the deepest in West Africa —and now Badagry Seaport, shovels and boots billed to touch ground early next year, 2024. It signposts, indeed confirms, the beginning of the private sector era particularly the refinery projects.

It may interest one to know that the experience of the Nigerian project, particularly as the country is presently configured, has proven ever so clearly to every discerning mind that Governments at any of the levels can’t possibly be efficient handlers of anything which has to do with the management of profit-oriented businesses.

It just wouldn’t ever work and several examples abound of the various attempts of the Government to dabble into businesses; Nigerian National Shipping Line, Aluminum Smelting Plants, Ajaokuta Steel Rolling Mills, Nigeria Airways, NITEL, NNPC Refineries and even NEPA just to mention a few.

These are all testimonies of grand failures of the Federal Government in business.

The prime responsibility of the Government shouldn’t be in the time-wasting effort of managing business but in providing adequate infrastructure and a suitable climate for privately-owned businesses to strive.

Nowhere is the failure of the Government better displayed than in the Oil sectors of our economy which happens to be the life wire to which our collective existence as a country is tie

By all reasonable balance of probability, the Refineries of Nigeria collapsed under the weight of management inefficiency occasioned by cancerous corruption and bureaucracies commonly found in uncontrollable proportions in Government structures.

We can’t afford to treat such a critical sector like Energy and its uses in the manner we carry on in Nigeria.

This approach is exemplified by Dangote Refinery an oil refinery owned by Dangote Group that was inaugurated on the 22nd of May 2023, in Lekki, Nigeria. When in full operation, it is expected to have the capacity to process about 650,000 barrels per day of crude oil, making it the largest single-train refinery in the world.

Apart from the Dangote Refinery, another example of Nigeria’s modular revolution is an upcoming refinery and Petrol-Chemical plant is Gasoline Associates International Limited in Ipokia Ogun State with the capacity to produce 100,000 bpd and later up to 450,000 bpd when fully optimized, will accelerate healthy competition in Nigeria’s oil sector, diversifying the economy by adding value to raw materials domestically and reducing the country’s vulnerability to external shocks.

Energy use and economic development are inseparable. Where there is energy poverty, there is poverty. And where energy availability rises, living standards rise as well. The human brain has a natural tendency to give weight to negative experiences or interactions more than positive ones. Psychologists refer to this as negativity bias, and it causes people to focus on one bad thing in a mountain of good things – such is prevalent in a country that gravitates towards the negative side underpinning the essence of self-worth.

Put differently, in view of the rapid evolution of urbanization and industrialization, economic growth is increasingly dependent on the energy consumption, the development of the two is difficult to coordinate, and the internal contradictions are becoming increasingly serious, which hinders the sustainable development of economic growth. Incidentally, only Nigerians can save Nigeria and we have to be brutally honest to achieve it. Therefore, the need to key into the Fourth Industrial Revolution (4IR) has become imperative.

Richard Odusanya
odusanyagold@gmail.com

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