Nigeria - Lukman's Intervention.

Powerful Petroleum Minister Rilwanu Lukman, a former OPEC chief and veteran of Nigeria's decision-making mechanism for this sector, in May 2009 announced a plan to overhaul and privatise the refineries and to gradually remove state subsidies of domestic fuel prices. He said the planned deregulation of the downstream sector was irreversible and pledged to transform the refining business's dismal operational performance.

Since then, however, the unions have been threatening to thwart Lukman's efforts. The Nigeria Labour Congress have warned of mass protests and civil disobedience if the government went ahead with Lukman's plans, including his Petroleum Industry Bill (PIB) designed to reform and restructure the entire petroleum sector. The unions want the government to break a "cabal" of fuel importers, which they blame for profiteering from the subsidy system.

Abuja pays importers the difference between the retail price and the cost of fuel imports. Gasoline, for example, sells at 65 naira ($0.43) per litre against a government assessed import price of 95 naira. The unions say the payment system is encouraging corruption. The Nupeng and Pengassan oil unions have urged Abuja to work out a long-term plan to reduce demand for fuels, particularly gasoline and diesel used in power generation, by increasing domestic gas supplies to the power sector.

The four refineries - Port Harcourt I and II, Warri, and Kaduna - have for many years faced a number of problems including sabotage, fire, poor management and a lack of regular maintenance. Apart from the four refineries, Abuja has been trying to privatise state entities by selling petrochemicals plants and the Pipelines and Products Marketing Co. (PPMC), a unit of NNPC in charge of the fuels market.

For years Oando has been promoting a 180,000 b/d refinery in Lagos, on condition that the sector is deregulated. DPL Energy, another local retailer, has planned to have a 55,000 b/d refinery built in 2010 at the cost of $1bn. DPL, owned by the local Deanshanger and CityView of Australia, has pledged to double the plant's capacity in 2011, provided that the fuels market has been deregulated. Other private firms have promoted similar plants - all awaiting deregulation.

Port Harcourt, the capital city of Rivers State, should be a boom town. Instead, it has turned out to be one of the most volatile cities in West Africa. Set in lush swamps with palm trees on every street corner, the southern Nigerian port town was once known as the Garden City. But security has sharply deteriorated in recent years amid escalating militant attacks on oil installations, kidnappings and general lawlessness. Port Harcourt remains the operational base for most IOCs. But the dismal security situation has greatly reduced its appeal.

The Refineries: Because of continued maintenance delays, various units at the four refineries are prone to sudden breakdowns. Frequent closures occur as a result of labour unrest. Fires break out frequently, either by accident or as a result of arson or theft. Matters are complicated further by red tape, political interference and incompetence at PPMC.

The four refineries are linked by a 1,500 km pipeline, completed in 1995. The pipeline was built by Spies Capag of France, Techint of Argentina and the British-Lebanese venture Zakhem under a contract awarded in 1991.

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