Expert Analysis: Port Harcourt and Dangote Refineries Unlikely to Cause Significant Drop in Petrol Prices

In a recent interview with an oil and gas expert, it was suggested that the imminent operation of both the Port Harcourt and Dangote refineries might lead to a modest dip in petroleum product prices, rather than a substantial crash. The expert, speaking to the News Agency of Nigeria (NAN) in Abuja on Sunday, highlighted that ancillary expenses such as freight and port charges could see a marginal reduction.

The Port Harcourt Refining Company Limited (PHRC) achieved mechanical completion and flare start-up on December 21, with phase two scheduled for commencement in 2024. The PHRC, comprising two refining units with a total capacity of 210,000 barrels per day (bpd), marks a significant step in petroleum product production post-Christmas break.

Associate Professor Olanrewaju Aladeitan from the University of Abuja expressed optimism about a potential decrease in petrol prices, attributing it to the elimination of certain ancillary costs. However, he emphasized that the reduction might not be significant enough to qualify as a price crash.

Aladeitan clarified, “The price may not decrease significantly considering the fact that crude oil and condensates supplied for the domestic market under the Petroleum Industry Act will be based on willing seller-willing buyer negotiations.”

He pointed out that international market prices, denominated in dollars, would remain a crucial factor in determining the cost of the crude oil refined. Therefore, he cast doubt on a substantial crash in petroleum product prices.

On the contrary, economic expert Mr. Yushau Aliyu expressed optimism, viewing the mechanical test of the refinery as a positive signal for addressing the deficit in refined Premium Motor Spirit (PMS). He anticipated a short-term reduction in pump prices at NNPC Ltd.’s retail stations, citing the absence of landing costs.

However, an anonymous oil and gas expert remained skeptical, calling attention to potential sabotage in the sector. The expert adopted a wait-and-see stance, reserving judgment until the refineries in Port Harcourt, Warri, and Kaduna became fully operational.

It’s noteworthy that the pump price of PMS has surged to N660 per litre at various fuel stations, while NNPC Ltd.’s retail outlets sell at N617 since the removal of subsidies in May 2023. The subsidy removal, triggered by soaring crude costs and high foreign exchange rates, has led to significant challenges for Nigerians, including inflation and increased costs of goods and services.