Modular refineries in Nigeria are currently facing a significant challenge as they struggle to access foreign exchange for the purchase of crude oil, a commodity traded in United States dollars.
Nigeria boasts 25 licensed modular refineries with a combined capacity to produce 200,000 barrels of crude oil daily. While not all of these facilities are operational, those in use are encountering increasing difficulty in procuring crude oil due to the deepening foreign exchange crisis in the country.
Brent, the global benchmark for crude oil, has been trading at approximately $80 per barrel, remaining relatively stable in recent months.
The estimated capacity of 200,000 barrels per day among modular refineries translates to about $16 million or approximately N25.14 billion per day based on Thursday’s official exchange rate of N1,571 per dollar.
However, the inability to access dollars has made it challenging for operators to purchase crude oil, hampering their ability to refine and distribute petroleum products like diesel, kerosene, naphtha, and black oil.
The Crude Oil Refinery Owners Association of Nigeria (CORAN), representing modular refinery operators, expressed concerns over the situation, stating that the plants might be forced to shut down if the issue persists.
Eche Idoko, the Publicity Secretary of CORAN, emphasized the need for crude oil to be sold in naira to ease the pressure on operators who buy crude in dollars but sell refined products in the local currency.
Despite the Petroleum Industry Act’s provision for the government to provide 60% of the crude required by modular refineries, many facilities are operating below capacity due to insufficient feedstock.
Idoko highlighted the performance of some modular refineries, with capacities ranging from 500 to 4,000 barrels per day, while expressing optimism about the potential if all licensed facilities become operational.
While there have been discussions at the highest levels of government regarding the possibility of selling crude to modular refineries in naira, no concrete action has been taken yet.
The Minister of State for Petroleum Resources, Heineken Lokpobiri, acknowledged the lack of crude for domestic refiners, attributing it to Nigeria’s failure to meet its OPEC-approved production quota. However, efforts are underway to address this issue in compliance with the Petroleum Industry Act.
Despite the challenges, modular refinery operators remain hopeful for a resolution that would enable them to sustain operations and contribute to the country’s energy needs while also bolstering the local economy.
