The Clean Fuels Challenge Creating a Lasting Legacy. Dr. Maikanti Kacalla Baru (FNSE) Group Managing Director, Nigerian National Petroleum Corporation

Transcription

1 The Clean Fuels Challenge Creating a Lasting Legacy By Dr. Maikanti Kacalla Baru (FNSE) Group Managing Director, Nigerian National Petroleum Corporation At The 2017 African Refiners Association (ARA) Week in Cape Town, South Africa 14 th March,

2 PROTOCOLS Introduction/Background Distinguished Ladies and Gentlemen, it is indeed a great pleasure and honour to be invited to give the industry address at this important conference with the theme Achieving Clean Fuels in Africa. Let me use this opportunity to congratulate the Executive Council of the African Refiners Association (ARA) for organizing yet another world-class International Conference and Exhibition; and for building on last year s theme of Developing an Energy Roadmap for the Continent by turning the focus to the increasingly topical issue of Deployment of Clean Fuels into the African Market especially as the continent remains a net importer of petroleum products at the moment. The Nigerian National Petroleum Corporation (NNPC), the organization that I lead, is a founding member of ARA, a permanent member of ARA s Executive Committee and a major supporter of ARA s objectives especially the AFRI-5 initiatives for improving fuels quality between now and Ladies and Gentlemen, we must ask ourselves: What do we want our legacy to be? It is important to note at this point that the future of our continent does not just lie in our ability to unlock value from our vast natural resources or powering an industrial and economic revolution, but also in our ability to implement proven refining solutions that consider the broader public health implications of our business decisions. Given the potentially devastating air quality problems and the associated illnesses that will arise in the absence of a conscious effort to address the inter-related issues of refinery outputs and vehicle emissions, the time has come to critically examine the supply chains of our respective refineries and implement sustainable, coordinated pan-african solutions that will meet the target fuel specifications and thus save our countries and indeed the health of our citizenry from the negative impact of substandard fuels. African Clean Fuels Standards have become imperative to avert Africa becoming a dumping ground for low quality petroleum products. 2

3 My presentation today will cover three main areas: Public health challenge (WHY The Case for Action), Nigeria s current situation and the role of NNPC in ensuring that ARA s fuel specifications are implemented in Nigeria (HOW Nigeria is responding to the challenge) Need to harmonize the quality of various fuels utilized continent-wide to ensure that our businesses operate in an environmentally sound manner (WHEN The need for continent-wide harmonization over the next decade). Understanding the present challenges and implementing harmonized solutions within a reasonable timeframe will undoubtedly ensure that ARA leaves a lasting legacy for future generations. The Public Health Challenge Why Africa must Act Now! Ladies and gentlemen, make no mistake, the quality and quantum of petroleum products that are imported into Africa today have resulted in a serious degradation of our continent s air quality. Collectively, ARA has developed excellent AFRI Fuel Specifications that align well with the European EURO Standards to mitigate the degradation of air quality. The challenge has been the implementation and enforcement of those standards to reap the attendant benefits. In 2009, a World Bank/ARA Sub-Saharan Africa (SSA) Refinery & Health Study concluded that an investment of about US$5 billion to improve the existing refineries to produce fuel to meet AFRI-4 standards would lead to over US$32 billion savings in avoidable health costs over ten years. In addition, the WHO has estimated that nearly 800,000 people die globally every year due to urban air pollution; vehicle exhaust emissions are among the major factors contributing to poor air quality in urban areas in our various large cities. In order to address this issue, three key steps must be taken. First, given that a significant number of refineries on the continent have significant state-owned shareholdings, our governments should mandate all refineries in Africa to adopt the AFRI standards of AFRI-4 by 2020 and AFRI-5 by 2030 to ensure that all fuels 3

4 produced on the continent meet the low-sulphur content objectives. Second, as the continent will remain a net importer of petroleum products for the near future, the same AFRI fuel specifications must be imposed on all fuels imported into the continent. The regulators in the various African countries should come together to strictly enforce these AFRI regulations such that the continent does not remain a dumping ground for sub-standard fuels which have downgraded the air quality of our regions with attendant negative health impact on the citizenry. Finally, cross-functional, multi-agency teams must be set up comprising the various stakeholders in the low-sulphur fuels initiative in the various countries to ensure that roadmaps for the adoption of AFRI-4 and AFRI-5 specifications are developed, implemented and enforced, particularly on refineries and vehicle emissions. ARA is working with the ECOWAS Directorate of Energy to secure Heads of State protocols for compliance with AFRI-5 standards by 2030 at the latest. How African Clean Fuel Standards Roadmap is being Deployed in Nigeria The 2016 OPEC World Oil Report indicated that Africa will add about 2.5 million barrels per day of new refining capacity by As a result, ARA is well placed to ensure that these new investments are geared towards generating petroleum products that meet the ARA AFRI-5 specifications of 50 ppm of sulphur in gasoline and diesel by 2020 and 2030 respectively. Implementing these regulations will go a long way towards ensuring that the next generation of African leaders will be provided the requisite environment devoid of air pollutants to deliver on the aspirations and potential of the continent. Presently, Africa remains a net importer of petroleum products and efforts must be increased to ensure that all fuels produced on and imported into our continent at least meet the AFRI-4 low sulphur specifications of 50 ppm for diesel and 150 ppm for gasoline by

5 As the leading importer of petroleum products in Africa, Nigeria is well positioned to drive the ARA low-sulphur fuel objectives. NNPC is pursuing the Clean Fuels initiatives on three main fronts. First, NNPC is utilizing the opportunity of the ongoing rehabilitation of its existing refineries to meet the AFRI-4 and AFRI-5 fuels standards. The rehabilitation exercise involves NNPC working with selected investors to deploy funding and technical expertise to revamp the existing Refineries to operate at world-class capacity utilization levels. This exercise, which is expected to be concluded over the next 24 months, will not involve transfer of assets to investors. Presently, the NNPC refineries produce fuels with sulphur content above 200 ppm. Although this is well below the current Nigerian Fuel Standards, NNPC will utilize the rehabilitation to execute upgrades and modifications geared toward production of ultra-low sulphur fuels in accordance with Euro 4 and AFRI 5 specifications for petroleum products. Modifications will involve technology and catalysis upgrades of FCC units of all three refineries (Port-Harcourt, Warri & Kaduna), including equipping them with post-treatment De-sulphurization Technology to drastically reduce sulphur content. Second, NNPC will ensure strict adherence to AFR-4 and AFRI-5 fuel specifications in the importation of any refined petroleum products into Nigeria. Given the negative health and environmental consequences of high-sulphur fuels, it is essential that the petroleum products marketers and traders ensure that low sulphur fuels are imported directly into Nigeria from Europe, Asia and the Americas rather than being blended with lower quality products to meet the current West Africa (WAF) grade specifications of about 1000 ppm. Third, NNPC s Renewable Energy Division (RED) will continue to pursue its mandate to provide alternative energy by profitably exploiting renewable energy resources and generating carbon credits through emissions reduction projects. Established in 2005, the NNPC RED is currently pursuing programs to develop local capacity for automotive bio-fuel production using sugarcane, cassava and oil palm as feedstocks. 5

6 NNPC is committed to the Nigerian Ministry of Environment s efforts to coordinate the deployment of the country s Clean Fuels Initiative. Specifically, NNPC is working with the Ministries of Environment, Petroleum Resources and Health, the Standards Organization of Nigeria (SON), the Directorate of Petroleum Resources (DPR), the Petroleum Products Pricing and Regulatory Agency (PPPRA) and the National Automotive Design and Development Council as well as ARA to implement a two-pronged low sulphur fuels strategy focused on fuels production/importation along with car fleet modernization and vehicle emissions controls. Led by the Federal Ministry of Environment and the Standards Organization of Nigeria (SON), Nigeria will be adopting new national fuel standards in line with ARA AFRI-4 specifications (50 ppm of sulphur in diesel and 150 ppm in petrol) this year. The new standards will apply to imported fuels once implemented, while local refineries will be given a 3 to 4 year waiver period to comply such that the rehabilitations can be completed. In addition, vehicle emissions standards must be brought in line with low sulphur fuel standards. The Nigerian government will also be adopting the policy whereby vehicle licenses can only be renewed upon successful completion of Ministry of Transportation (MOT) roadworthiness and exhaust emissions tests. Harmonization Continent-wide Adoption of AFRI Clean Fuel Specifications My distinguished colleagues, it is imperative for us to act now in a coordinated manner to implement African Clean Fuels Standards to avert Africa becoming a dumping ground for low quality petroleum products and to prevent our children from living with the serious attendant health and environmental issues. Presently, ARA & ECOWAS Directorate of Energy are developing Harmonized Regional Framework on Fuels specifications and Vehicle Emission Limits for member countries. 6

7 In June 2016, ECOWAS countries held a sub-regional workshop to define the path to achieving low-sulphur fuels in the member countries. Subsequently, the Ministers of Environment and Petroleum Resources in the West-Africa sub-region met in December 2016 to deliberate on the roadmap for execution of the African Clean Fuels Standards. I trust that similar sub-regional deliberations are progressing concurrently across various parts of our dear continent. Conclusion The World Health Organization (WHO) has estimated that close to 800,000 people die prematurely every year globally due to urban air pollution, and vehicular emissions are among the key factors contributing to poor air quality in urban areas. This year s ARA conference with its very pertinent title and well-chosen sessions ranging from refinery investment needs for clean fuels to market evolution of fuel quality and pricing provides the perfect platform to harmonize our collective ideas and push hard towards accomplishing the AFRI-4 and AFRI-5 fuel standards and introduction of parallel vehicular emissions limits and controls. The future of our beloved continent lies firmly in our hands. Our collective legacy will be in delivering on the African Clean Fuels Mandate in a resounding manner such that future generations deliver on the economic potential of this continent in a pollution-free environment that assures them of both longevity and prosperity. Distinguished Ladies and Gentlemen, implementing the African Clean Fuels mandate in the timeframe we have outlined will not be a walk in the park but with the collective efforts of all the stakeholders gathered here, I am confident that we can deliver on the mandate in a resounding manner. Thank you very much for your attention and I wish everyone successful deliberations during this conference. 7