Financeflsahnews – Nigeria is incurring a significant loss of $1,000 on every barrel of crude oil it exports, according to energy policy expert Henry Adigun. This substantial shortfall is attributed to the country’s lack of refining capabilities, which prevents it from capturing the added value associated with converting crude oil into refined products.
Adigun emphasized the unsustainable nature of this situation, highlighting the urgent need for Nigeria to address its refining capacity. While the federal government is supporting local refineries, regulatory limitations hinder the development of a monopoly in fuel supply and distribution.
To mitigate this issue, Nigeria is actively pursuing both increased crude oil production and domestic refining. The recent startup of the Dangote refinery, Africa’s largest, marks a significant step towards self-sufficiency in refined petroleum products. This facility has the capacity to process 650,000 barrels of crude oil per day, which is expected to meet 100% of Nigeria’s domestic demand and generate surplus for export.
In parallel, the Nigerian National Petroleum Company (NNPC) has declared a state of emergency in the oil and gas industry to address the persistent challenges hindering production. The company aims to boost output by addressing infrastructure issues, collaborating with partners, and improving operational efficiency.
Nigeria’s oil production has been significantly impacted by pipeline vandalism, oil theft, and underinvestment. As a result, the country has fallen behind in meeting its OPEC+ production quota. Despite these challenges, an internal analysis suggests that Nigeria possesses the potential to double its oil production to 2 million barrels per day without the need for additional drilling rigs.
Currently, Nigeria produces approximately 1.5 million barrels of crude oil per day. This represents a substantial shortfall from the country’s production capacity, resulting in significant economic losses. The $1,000 loss per barrel is a stark reminder of the revenue Nigeria is foregoing due to its heavy reliance on crude oil exports without adequate domestic refining.
Key figures:
- Loss per barrel: $1,000
- Dangote refinery capacity: 650,000 barrels per day
- Nigeria’s current production: 1.5 million barrels per day
- Potential production: 2 million barrels per day
Sources: Kennedy, C. (2024, August 5). Nigeria Loses $1,000 per Barrel of Crude Oil It Exports.
