Photograph — theworldnews

Nigeria is Africa’s largest oil producer but spends up to 35 percent of scarce foreign exchange to import 90 percent of its petroleum products due to a lack of domestic refining capacity in the country. However, this could change over the next few years based on a number of recent developments, which could usher in a “new era” in the petroleum industry of the region’s biggest economy.

Perhaps the biggest and most significant of these is the integrated refinery and petrochemical project under development by the Dangote Group set to come on stream early 2021. The facility, regarded as the largest industrial complex in Africa, will be able to process 650,000 barrels of crude oil per day into refined petroleum.

The landmark facility, sited on 6,180 acres (2,500 hectares) of land, is Africa’s biggest oil refinery and the world’s biggest single-train petroleum facility but will eventually operate in direct competition with another large-scale petrochemical refining project.

BUA Group, Abuja’s other industrial behemoth and long-time rival of Dangote in several major sectors, last week said it plans to set up its own integrated refinery and petrochemical plant that will serve the domestic and regional markets, after signing a deal with France’s Axens for the supply of key refinery process technologies.

Without disclosing when construction will commence, BUA said the new facility is expected to be operational in 2024. It will have a capacity to produce 200,000 barrels of refined petroleum on a daily basis and 10 million tonnes per annum. 

Upon completion, the combined 800,000+ bpd facilities (Dangote and BUA together) should go a long way in serving local fuel consumption, which currently stands at some 500,000 to 550,000 bpd. That would reduce the reliance on importation, saving the government billions of dollars it spends on petroleum products yearly.

With the country’s refineries in a moribund state, Nigeria spent $264.57 billion on petroleum imports within a five-year period (from 2015 to 2019) while its exports during the same period was valued at $206.07 billion, according to figures from the Organization of Petroleum Exporting Countries. Between January and September last year, a whopping ₦1.13 trillion was expended on petrol importation, data from the National Bureau of Statistics revealed. 

Both companies are also targeting regional markets, potentially boosting the government’s foreign exchange earnings, and their facilities are well located for that purpose. The Dangote refinery’s location at Lekki Free Trade Zone along the coast of the Atlantic Ocean will allow for the smooth transshipment of refined petroleum products to international markets while BUA’s on the waterfront in Akwa Ibom should make exportation painless. “We will have the marine infrastructure for easy export,” said Abdulsamad Rabiu.

In addition to private sector-led efforts to help Nigeria become an oil refining country, the government is in talks with “some investors” for the sale of majority stakes in state-owned refineries, Group Managing Director of the government-run energy firm, Mele Kyari, said Wednesday. The plan is to implement an operating model where the Nigerian National Petroleum Corporation would be a minority shareholder in the assets while private investors operate and manage the refineries, similar to the LNG model for the refineries.

There are also plans to rehabilitate the four major national refineries – two in Port Harcourt, one each in Kaduna and Warri with a combined installed capacity of 445,000 barrels per day – to start producing at maximum capacity, Kyari said, which should place Nigeria as one of the world’s biggest exporter of petroleum products within the next three years, and transform the economy.

How far the country goes in achieving that goal largely depends on whether the government gets it right with the rehabilitation of the refineries this time, having spent billions of dollars on several maintenance and rehabilitation projects of the state refineries under successive governments, with little to show for it.

Elsewhere on Ventures

Triangle arrow