Partial Proof of Progress

Refineries play a vital role in the growth and sustenance of our modern economy. We told you in the introductory part of this unit that crude oil, black gold though, is utterly valueless, until it is refined and broken down into products that can be marketed and distributed to the citizens for their energy needs.

Think of a situation where there are no refineries to bring out products like petrol, kerosine and diesel. These are products commonly used in our daily activities.

Vehicles are driven by petrol and diesel. Other forms of transportation also rely on hydrocarbon oils products to function. Cooking in most homes is carried out by the use of kerosene. When these products are in short supply, economic activities suffer. If that is the case, what will the situation be like if they are not available at all. That can only spell doom not only for the economy, but life in general.

It must be pointed out that the shortage or scarcity of hydrocarbon oils products in the local market (petrol stations and other outlets) is often attributed to the low capacity output of refineries in Nigeria. Of the four refineries in the country, none appears to be working to full capacity. That is why Nigeria, today inspite of being a major producer of oil and gas, imports more refined products of petrol, kerosene, diesel and others. This would not have been the position if the four government owned refineries are in operating in full capacity. Lately, the government has granted refiner’s licence to private entrepreneurs and investors to establish refineries in the country. That tells us how the government sees the role and strategic importance of

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refineries in our economic life. This strategic importance of refineries is not limited to Nigeria, but is true of other countries.

Nigerians will never forget the acute shortage of refined products in 1993, following a politically motivated strike by oil workers, which also affected the operations of the refineries.

5. CONCLUSION

It can be seen from our discussions in this unit that refineries play a central and crucial role in the transformation of a valueless crude to products or derivatives of immense value and importance. Man’s energy demands, sourced from crude oil according to the latest statistics from OPEC, increased in 2010. With this, it becomes obvious that more refined products entered the market world wide last year. Without refineries, such could not have been possible. Little wonder why national oil companies are charged with the responsibility of refining crude oil.

We also saw that the process of refining cannot be undertaken without government licence. To do so, and indeed to engage in certain acts prohibited by the Act, renders one guilty of an offence. It is to ensure that standards are maintained that one needs a refiner’s licence to establish and operate an oil refinery.

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6. SUMMARY

This concluding unit of Module 3 has been devoted to the topic of refining of hydrocarbon oils and the establishment, operation and maintenance of a refinery under Nigerian law.

7. TUTOR MARKED ASSIGNMENT QUESTIONS

2. How does one go about establishing a refinery in Nigeria?

3. Explain the importance of refineries in our modern world.

4. What are the prohibited acts which if performed, would amount to an offence under the Hydrocarbon Oils Refineries Act?

8. REFERENCE/FURTHER READING

8. Oil and Gas Law in Nigeria – by Yinka Omorogbe.

9. Nigerian Petroleum Law – by G. Etikerentse.

10. Quarterly Magazine of NNPC – Volume 6 No 2 2009.

11. Hydrocarbon Oils Refineries Act Cap H5 LFN 2004.

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MODULE 4

Table of Contents

1. Introduction

2. Course Objectives

3. Main Content

4. Conclusion

5. Summary

6. Tutor Marked Assignment Questions

7. Reference/Further Reading

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REASONS FOR THE ESTABLISHMENT OF NATIONAL OIL COMPANIES

1. INTRODUCTION

The existence of national oil companies is now a common feature in most countries, whether developed or developing, oil exporting or oil importing. The realities of our times are such that with the dominant role of oil in our economic lives, no nation can afford to be sloppy on issues of petroleum and energy. The consequences for any failure or operational breakdown in the oil and gas sector of any nation could spell economic doom and disaster, as Nigeria found out in the 1990s.

In the developing world, where Nigeria belongs, the establishment of a national oil company has equally been taken seriously, particularly with the oil exporting countries amongst them joining OPEC. Under the OPEC resolutions, any nation desiring to join its fold, must first of all incorporate a State oil company. In Nigeria NNPC is currently the State oil company. It was established in 1977 by Decree No 33 of that year. That Decree is now known and referred to as Nigerian National Petroleum Corporation Act Cap 320 Laws of the Federation of Nigeria 1990, now cited as Cap N123 LFN 2004. In establishing the NNPC, the Decree merged the then national oil company, NNOC, with the Ministry of Petroleum Resources. In other countries, particularly OPEC member nations, there are state oil companies. In Algeria, the State oil company is known as SONATRACH, while in Indonesia its national oil company is PERTAMINA. These nations are all members of OPEC. Even in non OPEC countries or others not endowed with petroleum resources, the need for the establishment of a national oil company has not only been felt, but also put into practice.

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