The Organization of Petroleum Exporting Countries (OPEC) has said that Nigeria is set to witness the set-up of small modular refineries with a capacity of 20,000 barrels per day each in the medium term.
The Group stated this in its World Oil Outlook which was recently launched in Saudi Arabia. According to the Outlook, estimates suggest that Africa will experience medium-term distillation capacity additions of 1.2 million barrels per day (mb/d).
A significant portion of this increase is attributed to Nigeria’s Dangote refinery, which accounts for 650 thousand barrels per day (tb/d) of much-needed capacity expansion in the country. The refinery was officially inaugurated in May 2023 with commercial operation slated to start this month (diesel and aviation fuel) and in November 2023 (petrol refining).
The Outlook stated further: “Moreover, Nigeria is set to witness several small modular refineries established in the medium term, with capacities of up to 20 thousand barrels per day (tb/d) each.” Although this is a positive projection, one of the major obstacles Nigeria currently face stems from funding challenges for modular refineries and the increasing incidents of sabotage attacks on oil pipelines, as well as oil theft. These hindrances significantly impede smooth operations and progress.
In July 2023, Momoh Oyarekhua, Chairman of the Crude Oil Refineries Association of Nigeria (CORAN), highlighted a potential solution during an Arise News interview: support for modular refineries. He stressed that backing these refineries would lead to more affordable fuel for Nigerians by eradicating several associated costs.
Specifically, he pointed out the expenses linked to sending crude oil abroad for refining and then importing the refined products. This process involves costs related to clearing refined petroleum products at the terminal, port charges, and the involvement of middlemen in transporting products to Lome, from where they are then shipped into Nigeria.
Note that as of last week, the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari said that the company is now back to being the sole importer of fuel into the country, after a few months of encouraging private marketers to import. The reason he gave for the turnaround in policy implementation is the current foreign exchange unavailability in the country which has crippled the ability of private marketers to import fuel despite having the license for it.
In the Arise News interview earlier highlighted, CORAN Chairman, Oyarekhua also emphasized the need for modular refineries to purchase crude oil in Naira, aligning with their income being generated in Naira from selling products in the Nigerian domestic market. This approach aims to reduce the burden on the Forex market.
To illustrate further, he presented a scenario where 40 modular refineries, each with a capacity of 10,000 barrels per day, would need to purchase crude oil in USD, amounting to a substantial monthly expenditure. This emphasizes the necessity for a streamlined approach, ensuring that feedstock procurement aligns with the country’s economic interests and stability.
Source: Nairametrics
