A purchase of 100 million liters of gasoline by Nigerian authorities from the spot market on a daily basis will end a two-month fuel shortage in the African country, according to a new report by Bloomberg.
The "dire" shortage, which has reached "force majeure" proportions, requires 625,000 barrels per day of gasoline imports daily to be quelled, Ndu Ughamadu, a spokesman for the Nigeria National Petroleum Corp., said. The state-run company is taking action to "increase supply and replenish strategic reserves," by offering more favorable terms for existing fuel swap arrangements.
A 100 million-liter order is equal to roughly 629,000 barrels.
The NNPC is the nation's only gasoline importer and its Direct Sale-Direct Purchase program is failing to bring in adequate fuel supplies. The program, which currently trades out 800,000 barrels per day of crude in return for refined products, is due to be renewed in April, but its future may now be in jeopardy.
Despite being Africa's largest crude oil producer, Nigerian refining capacity is low, which has forced the government to spend foreign currency reserves on purchases of refined oil goods. Building new refineries within the country's borders would allow Lagos to revitalize aging oil facilities while preserving foreign currency resources.
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Last September, the NNPC announced plans to shutter the three facilities to allow for needed repairs that would allow existing refineries to return to full capacity, but it is unclear if that production pause actually happened.
Oil Minister Emmanuel Kachikwu hinted in December that a technical committee would submit a special report on refinery matters for presidential approval. The document would detail "work aimed at bringing the four refineries operated by NNPC in Kaduna, Warri, and Port Harcourt back to their nameplate production capacities…which would eventually start in January 2018."
"Our intention is to shut down the refineries when we are ready, and then fully bring them back to what they should be as new refineries," NNPC Managing Director Maikanti Baru said during the Nigerian Pipeline Security Conference in Abuja last year.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More