IEA Doubts Nigeria’s Ability To Revive Refineries

How Nigeria Can End Fuel Subsidy -NECA
Nigeria's Refineries

The International Energy Agency, IEA, is doubting the ability of the Nigerian government to revive its moribund refineries.

According to a recent report by the agency promoting sustainable energy globally, Nigeria and other African refiners has missed out in the past decade’s oil demand growth.

The IEA said Africa, the world’s second-most populous continent, had become a major oil product import market, especially the sub-Saharan region.

The IEA said, “At the same time, the plans to repair and re-launch the country’s three existing refineries that have not been operating in the recent years, are unlikely to materialise.”

“The start-up of the 650 kb/d refinery in Lekki, Nigeria, expected in the next three years, will mark a turning point in the continent’s refining fortunes.

For decades, Nigeria’s four refineries have performed below optimal levels despite the huge resources earmarked for their rehabilitation.

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This has resulted in importation of petroleum products for domestic use for many years, with the nation recording loss of huge resources in the process.

The Port Harcourt Refining Company (PHRC) is made up of two refineries with a combined refining nameplate capacity of 210,000 barrels per day.

The Kaduna Refinery and Petrochemical Company (KRPC) has a nameplate refining capacity of 110, 000 bpd while the Warri Refinery and Petrochemical Company (WRPC) in Delta State has a capacity of 125,000 bpd.

The Federal Executive Council was able to approve $1.5 billion for the use of the Ministry of Petroleum Resources to rehabilitate the Port Harcourt Refinery on Wednesday. This approval has, however, been criticized by stakeholders in the country who also doubt the feasibility of the revamping project.

Nigeria currently relies solely on imports to meet its petroleum products needs as its refineries have remained in a state of disrepair for many years despite several reported repairs.

Dangote Industries Limited is building a 650,000-barrels-per-day refinery in Lagos which has been described as the world’s largest single-train refinery.

“With new capacity coming online in the Atlantic Basin, notably in Mexico and Nigeria, European refiners will find themselves in an increasingly competitive market,” the IEA said.

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According to the agency, smaller refineries might be better suited for Africa, where investors and operators are constrained in terms of cash flows and working capital.

It said, “In addition to this, per capita consumption remains at very low levels, and underdeveloped road and storage infrastructure complicates product distribution over a larger area.

“There has been a flurry of small African refining projects just as shutdown announcements of European and American refining assets started rolling in.”

The IEA said it had pushed back Uganda’s first refinery start-up date due to a setback in crude production plans.

“A 100,000 b/d new refinery is expected to come on line in Algeria, while Egypt is upgrading its secondary capacity. South Africa may see refinery shutdowns due to aging assets and worsening refinery economics,” it said.

The agency forecast that imports of petroleum products by Nigeria and other West African countries would drop by the year 2026.

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