Private Refineries to the Rescue
Dilapidated, Comatose Unsus-tainable…these are some of the adjectives that have been used to describe Nigeria’s ailing
refineries. Many have called them white elephant projects.
Despite millions of dollars poured into their turnaround maintenance and repairs, they run far below capacity. Current utilisation is around 5.55% of the combined nameplate capacity of 445,000 barrels per day (bpd). Babajide Soyode, an engineer and technical consultant to the President/Chief Executive of Dangote Refinery, says the refineries have outdated and inefficient processing configurations which render them unprofitable at present crude-oil prices.
For a country whose crude oil reserves currently stands at about 37 billion barrels with a production output of about 2.1million bpd, it continues to import refined petroleum products. In the first quarter of 2019 alone, 6.84billion litres of petroleum products were imported. Much of the revenue earned from petroleum crude oil sales is expended in importation of petroleum products.
Between 2017 and 2018, the four refineries made a loss of about $745 million, the national oil company, Nigerian National Petroleum Corporation (NNPC), stated in its official publication.
“For a country whose crude oil reserves currently stands at about 37 billion barrels with a production output of about 2.1million bpd, it continues to import refined petroleum products.”
Incompetent companies got turnaround maintenance contracts under questionable arrangements. “You cannot run a business like a refinery based on sentiment and patronage,” says Wumi Iledare, a Nigerian professor at the Institute for Oil & Gas Studies, University of Cape Coast.
The bet is now on private refineries. The Niger Delta Exploration & Production mini-refinery in Ogbele, has produced 1,000bpd for over 8 years. It is upgrading to 11,000bpd capacity. WalterSmith’s 5,000bpd mini-refinery in Ibigwe will start production by Q2-2020. Azikel 12,000bpd mini-refinery in Obunagha will begin operations in 2021. And Dangote’s 650,000bpd mega-refinery will kick-start production in 2022.
These projects can spur a renaissance not just in Nigeria, but in West Africa where refineries have an awful reputation. Senegal’s Societe Africaine de Raffinage halted production in May 2019 due to a lack of crude feedstock. Ghana’s Tema Oil Refinery is battling recurrent outages at its fluid catalytic cracking and crude distillation units. And Cote D’Ivoire Société Ivoirienne de Raffinage is struggling with legacy debts on crude supply, though, it has secured $657million debt-financing deal from the African Finance Corporation.
Ordinarily, these hiccups should inspire a petroleum hub for the sub-region in Nigeria.
But Mele Kyari, the NNPC group managing director, says his focus is to wean Nigeria from fuel importation by fixing the government-owned refineries before May 2023. Based on hindsight of similar promises, this may sound optimistic but who knows?