Shell stops downstream investment plan in Nigeria

ACCRA-AFTER series of appeals to oil majors and other stakeholders in the oil sector by the Nigerian government,  including policy incentives to encourage the rebuilding of the nation’s domestic refining capacity, Shell Petroleum Development Company (SPDC) has announced that it does not have any such investment plans for the country.

According to the company low returns on downstream investments and peculiar situation in some African countries where government regulates prices of petroleum products are parts of the constraints which have necessitated the company’s decision.

The hint was dropped by Mr. Mike Mullier, Shell’s Global Leader, Crude Trading, during a chat with newsmen on the sidelines of the ongoing Africa Energy Week in Accra, Ghana after delivering the company’s presentation.

He opined that Shell no longer considers downstream crude processing a growth area, adding that the company has already saturated its downstream portfolio.

Some of the fears, he said, had made Shell shut down its downstream operations long ago. He said the company has no intention of expanding it downstream portfolio in Africa where, he said, Shell still retained some refining businesses in few countries.

According to him, the company’s investment direction is currently focused in high profit areas that offer growth opportunities and make adequate returns on investors’ funds.

The statement by Mr. Mullier may have sealed off hopes of visible private investment in domestic refining, given that Shell is Nigeria’s biggest petroleum industry operator and produces nearly half of the country’s 2.5 million barrels per day.

Shell also operates Nigeria’s biggest petroleum assets under joint venture and production sharing agreements with the Nigerian National Petroleum Corporation (NNPC).

The company is always seen as the strategic factor in realizing government’s objectives and its performance spell either failure or success of official policy programmes in the industry given the size and spread of its operations.

The statement also came a week after Akwa Ibom State government declared withdrawal from the highly advertised Amakpe Refinery sited in the state which has been highly rated ahead of over 18 refinery licencees who have not scratched the ground since securing their project approvals.

The chain of investment failures and apathy in the downstream petroleum industry came despite a presidential directive on producers in the country to refine 50 percent of their output in-country.

It has been said that part of the ongoing reforms in the industry and the consequent formulation of the controversial Petroleum Industry Bill (PIB) is to liberalize the downstream sector of the industry to encourage private investment in local refining.

The law is expected to facilitate deregulation of the downstream sector to dismantle state sponsored subsidy and guarantee commercial viability of investments in refining of crude oil.

 

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