Nigeria loses N23bn to faulty Kaduna refinery’s lube unit

The loss by Nigeria to the neglect of Kaduna refinery’s lube breaking unit has hit N23 billion. The neglect of the all-important section clocked 23 years at the weekend. The abandoned facility, New Telegraph gathered, has also worsened the prices of base oil importation into the country.
The Kaduna refinery is the only facility in Nigeria built with capacity to break base/lube oil-the major ingredient for the production of lubricants.
Checks by this newspaper showed that the base oil cracking unit of the refinery first showed signs of major mechanical faults in 1994, just two years after its inauguration, and has since been abandoned. This development has made Nigeria’s lubricant market to depend totally on importation of base oil from refineries abroad.
“The management of the refinery called the attention of the NNPC to this issue at that time,” a source at the Ministry of Petroleum Resources told New Telegraph, adding, “since then that unit has been left like that.”
With this development, Nigeria has lost over N23 billion to the abandonment of the facility. This is as a result of the over N1 billion annual loss to the importation of base oil, which is the major ingredient of lubricants manufacturing. Base oil, which forms 85 per cent of raw material for lubricants manufacturing, is one of the products of crude oil.
Nigeria, Africa’s biggest crude exporter, sells over one million barrels of crude daily to refineries abroad, swap about 445, 000 barrels daily for refined product and later buy and import base oil.
A document of the ministry of petroleum resources obtained by this newspaper at the weekend showed government’s decision to up attention for the base oil sub-sector but is silent on the abandoned lube cracking unit.
The importation of base is identified by the ministry as one of the challenges of the lube market, the document added. “Challenges facing lubricants market are unavailability of base oils locally and the resultant expensive import arising from skyrocketing exchange rates, high demurrage charges due to port delays and abandoned/ unlicensed lubricants blending plants nationwide,” the document read.
Many stakeholders in the lubricants subsector who are aware of this development have condemned the country’s dependence on importation of base oil. Executive Secretary, Lubricants Producers Association of Nigeria (LUPAN), Mr. Emeka Obidike, appealed to government to come to the aid of lubricants sub-sector.
Although Obidike turned down request to know the exact amount that the country is losing to importation of lube oil, he maintained that billions of naira could have been saved if the country was able to stop the importation. “It doesn’t make any sense for Nigeria to export crude and later buy lube oil, which is a product of the crude for shipment into the country’s lubricants market.
“Billions of naira could be saved if we develop capacity to address this act is,” he said. Principal Partner, Lubeservices Associates, Kayode Sote, an engineer, said the lubricants market had potential to promote Nigeria’s economic fortunes.
“Statistics confirmed that industrial lubes accounted for 63 per cent of the total world lube consumption, about 1532 million gallons valued at $7.6 billion (N167.2 billion) in 1993 with a profit margin of about 30 per cent shared by marketers,” he said.
Sote had earlier confirmed that the lube cracking unit of the Kaduna refinery- the only facility built with capacity to break lube oil, has been in comatose since 20 years ago. The ministry, however, stated that the government was working hard to advance the course of the lube market. “NNPC retailing business was conceived in 2001 by NNPC’s top management to establish its own outlet stations.
“The company’s operation began in August 2002 with only two stations in Lagos and Abuja to market petroleum products to the public. NNPC Retail Ltd is now one of Nigerian market leaders in the distribution of petroleum white products through a network of 37 mega stations, 12 floating stations and over 500 affiliate stations nationwide.
“NNPC Retail Ltd as one of the leaders in downstream petroleum marketing has decided to venture into the marketing of its own branded lubricants, in line with the NNPC business strategy. The initiative was to consolidate NNPC Retail position and also to complement the white products sold at its branded filling stations nationwide.
“In order to enter the market within the shortest possible time, NNPC Retail Ltd opted for a contract blending of its branded lubricants for the short-term. Under this arrangement, NNPC Retail will have ownership of its lubricant formulations and customised packaging materials.”
The ministry explained that the NNPC Retail would leverage on its already existing vast network of retail outlets and NNPC subsidiaries as channels for initial market penetration. NNPC Retail intends to adopt a high quality of all its grades of lubricants; the initial 28 entry grades of lubricants proposed are the fast moving grades in the Nigerian market.