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Quick Take: The current landscape of Nigeria’s oil refining sector

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Quick Take: The current landscape of Nigeria’s oil refining sector

Nigeria still does not have the oil refining capacity to meet the needs of its population despite having four refineries.

There are a few things to note from the chart above which uses data from the Nigerian National Petroleum Corporation (NNPC):

  • There is a huge gap between the current refining capacity and the capacity to meet the demands of the consumers presently and also the demands of the future as petroleum product demand is expected to grow from 13.2m metric tonnes (MT) in 2015 to 15.1m MT in 2020 and 17.3m MT by 2025.
  • The population growth corresponding to this demand is 182m in 2015, 207m in 2020 and 234m in 2025 respectively.

What this means: Nigeria still does not have the oil refining capacity to meet the needs of the general population despite having four major refineries, two in Port Harcourt, Rivers State, which combine to form the Port Harcourt Refining Company (PHRC) with a combined installed capacity of 210,000 barrels per stream day (bpsd); the Kaduna Refining and Petrochemical Company Limited (KRPC) with an installed capacity of 110,000 bpsd; and the Warri Refining and Petrochemical Company Limited (WRPC) with an installed capacity of 125,000 bpsd. All the refineries have a combined installed capacity of 445,000 barrels per day.

Despite the huge resources expended on Turn Around Maintenance (TAM), none of Nigeria’s four refineries worked up to 50 per cent of their capacity at any time during 2017, according to official figures from the state oil firm, NNPC.

That has been one of the major reasons why Nigeria spends over N3.24 trillion importing petroleum products from oil refineries and N1.8 trillion in subsidy payments by the end of the year.

The Dangote refinery would be commissioned early next year and that could prove a relief as it is projected to be able to supply 70% of PMS needs locally without the need for petroleum imports or subsidies.

But even with the Dangote refinery, Nigeria would still have a shortfall of 427,000 barrels per day (20 million liters of Premium Motor Spirit, PMS)

The NNPC says it plans to address this by increasing refining capacity through private sector driven co-location at its existing refineries in Port Harcourt (100,000 bpd) and Warri (115,000 bpd) respectively.

Additionally, NNPC through its new initiative of establishing Condensate Refineries with private sector participation is providing clusters for in-country refining capacity totaling about 250,000 bpd which closes the PMS supply-demand gap and creates positive margins to the investors

If all that truly happens, Nigeria could be set for a future where local oil refining capacity would equate to local demands and the inefficiencies associated with refining the product would give way.

Petroleum product prices would increase as the government would no longer provide subsidies for the sector and probably the Dangote refinery might have a controlling stake to set the benchmark price per litre of Premium motor spirit (Petrol).

Bottomline: In the long run, Nigeria might be heading for an oil refining boom but the boom might just be too late, as the world is slowly transitioning to alternative sources of energy, and with electric vehicles there is a gradual phasing out of internal combustion engine vehicles that run on petrol/diesel.

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