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New Legislation for Major Oil Firms in Nigeria

24th April '08

Nigeria is planning legislation to oblige international oil companies to refine a proportion of their crude in the country, a Nigerian state oil official said on Wednesday. "Everybody producing in the country will be mandated to refine a percentage in Nigeria," said Sola Alabi, Group General Manager for refinery projects at the Nigerian National Petroleum Corp. (NNPC). Alabi said the legislation had been under discussion for two years and was due for approval soon.

Nigeria is proposing the move as a way to reduce its dependence on imported fuel. The country's four state-owned refineries have frequent production problems and proposals to award investors oil blocks if they build refineries have failed to lead to the construction of new plants. Speaking at a refinery conference in Barcelona, Alabi said there would be no direct requirement for oil majors to take a stake in the new refineries as a condition for upstream activity.

NNPC hopes to build two new refineries, each with a capacity of 200,000-300,000 barrels per day (bpd) to narrow a gap between output and demand for products, which is expected to widen with projected annual economic growth of 5-10 percent a year through 2020. The corporation plans to take a stake of 30-49 percent in each refinery, and hopes oil majors will take 21-30 percent. One of the fiscal incentives to be offered will be pricing crude at international market levels, Alabi said. Alabi said Nigeria can only produce 445,000 bpd of crude equivalent in products while demand is currently 600,000.

In Nigeria, the world's eight-biggest crude oil exporter, the government of former President Olusegun Obasanjo, issued 18 licenses to private investors in 2003 to build refineries but many have since been revoked as they have not been built. Investors agreed to build the refineries in return for oil licences but refining is loss-making in Nigeria due to price controls on fuels, so most projects were abandoned.

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May we be strengthened with the ability, willingness and capabilities to be good ambassadors of Nigeria contributing to its uplifting, rather than its detriment. - Cxsm