The Modular Petroleum Refinery Alternative as an Energy Security and Environmental Sustainability Strategy in Nigeria: A Technology Policy Assessment

Abstract

Attaining the Millennium Development Goals (MDGs) in Nigeria requires significant consumption of energy, especially petroleum products. This petroleum energy requirement has not been determined, thus limiting policy formulation and development in the various sectors of the national economy. This paper examined the petroleum requirement to achieve the MDGs, and the viability of modular petroleum refineries to meet national petroleum product demand. Data on national energy intensity and the Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) were obtained from the Ministry of Finance, similarly petroleum consumption data were obtained from the Ministry of Petroleum Resources. The energy forecasting and planning analysis technique as well as strategic assessment methodology was used in the study. A realistic 10% economic growth rate was adopted for the paper and appropriate timeframe of 2014-2020. The results showed that total petroleum energy demand estimates are almost 1.70 billion barrels of oil, costing approximately US$146.2 billion (N 23.39 trillion) at the current price of US$86 per barrel. The estimated petrol and diesel demands over the time frame are 171.71 billion litres and 51.65 billion litres respectively, costing N 16.66 trillion for petrol (at N97 per litre) and N 7.75 trillion for diesel (at N150 per litre). Total petrol and diesel production requirements are 126.67 billion litres and 61.97 billion litres respectively, costing N 12.29 trillion for petrol and N 9.3 trillion for diesel. Nigeria lacks the domestic capacity to refine this petroleum requirement – total petroleum refining capacity is only 445,000 barrels per day and capacity utilisation is less than 23% of installed refining capacity. Thus, the petroleum product demand will have to be met by importation leading to capital flight, employment restrictions and socio-economic development constraints. Total petrol demand by the economy would exceed total refined petrol production by 45.04 billion litres at a cost of N 4.37 trillion. Similarly, total diesel demand would be lower than total refined diesel production by 10.32 billion litres at a cost of N 1.55 trillion. Thirty Modular Refinery Plants (MRPs) each with a capacity of 30,000 bpd would be needed to meet the required petroleum energy demand, and national capability for sustainable petroleum refining was rated to be low (4.3 out of 10). Likewise, the adequacy of domestic engineers and applied scientists to meet the demands of the national petroleum refining industry were rated to be low (3.9 out of 10). The modular petroleum refining alternative could lead to the creation of up to 1.5 million jobs over the time frame of the study and estimated revenues accruable from petroleum products sales are N 5.67 Trillion, leading to an estimated NPV of N 21.52 Trillion and a break-even period of one year. In conclusion, the study determined that the modular petroleum refining alternative was techno-economically viable and could lead to poverty reduction through the substantial creation of job opportunities in the country.