Updated: Nigeria seen becoming West Africa’s refining hub by 2030

Global professional service firm PricewaterhouseCoopers (PwC), forecasts that Nigeria could become a net exporter of refined products and the refining hub of West Africa by the start of the next decade.

In a study titled, ‘Nigeria’s Refining Revolution,’ PwC is betting on the country’s position as one of Africa’s largest crude oil producers, proven crude oil reserve estimated at 37 billion barrels and annual consumption of 22 billion litres of PMS, 11 billion litres of AGO and 1 billion litres of Aviation fuel on the sub continent.

Key drivers of the forecasts are also that current reforms in regulatory frameworks are sustained, disruption from militancy is contained, increased use of Public-Private Partnership (PPP) to bridge Nigeria’s infrastructure gap and assurance of constant access to feedstock required to keep refining output at optimal levels.

PwC sees Nigeria’s petroleum products market where 17 billion litres of PMS is consumed in transportation and power sectors, 3 billion litres of AGO and 400 million litres of aviation fuel are consumed of which between 60 and 90 percent are imported, being strong factors that will induce a refining revolution.

“With oil prices expected to remain low in the medium to long term, the focus on ramping up domestic refining capacity should become imperative. Lower oil prices would mean cheaper crude feedstock and higher refining margins for refiners. A shift from crude production to crude value realisation will see Nigeria becoming a net exporter of refined products by start of the next decade,” says the report.

Three scenarios were created by PwC to justify its projections. The first scenario sees Dangote refinery (650,000 barrels per day) started by mid-2019, operating at 50% utilisation, existing refineries (445,000 bpd) are operating at 15% utilization and modular refineries (combined capacity of 100,000 bpd) also coming onstream early 2019, operating at 90% utilisation.

The consequence is that Nigeria’s exports are estimated to exceed 37,000 bpd (approximately 6 million litres daily). The modular refineries bridge a supply gap of 53,000 bpd (approximately 8.5 million litres daily) in Nigeria. By 2026, Nigeria’s exports to the region exceed 130,000 bpd (approximately 21 million litres daily), reducing the West Africa’s imports from US and Europe by approximately 80%.

In the second scenario, by mid 2019, Dangote refinery operating at 50% utilisation, existing refineries (445,000 bpd) are operating at 20% utilization and modular refineries (combined capacity of 200,000 bpd) also come onstream early 2019, operating at 90% utilization. They ramp up to 90%, 30% and 90% respectively by 2030.

The net effect is production figures exceed 590,000 bpd (approximately 94 million litres daily), Nigeria becomes the largest producer of refined products by 2019. Its exports are estimated to exceed 150,000 bpd (approximately 24 million litres daily) by 2019. The modular refineries bridge a supply gap of 30,000 bpd (approximately 5 million litres daily) in Nigeria. By 2023, West Africa becomes self-sufficient with over 70,000 bpd (approximately 11 million litres daily) being traded to other regions.

The third assumption sees Dangote refinery by mid-2019, operating at 60% utilization, existing refineries (445,000 bpd) are operating at 20% utilization and modular refineries (combined capacity of 300,000 bpd) also come onstream early 2019, operating at 90% utilization. These ramp up to 90%, 70% and 90% respectively by 2030.

The net effect is that by the turn of the decade, Nigeria assumes the status of the largest producer of refined petroleum products in Africa. Its exports exceed 300,000 bpd (approximately 48 million litres daily) by 2019. West Africa also becomes self-sufficient, eliminating the need to source for refined products from US and Europe. Nigeria becomes an international trading hub similar to Asia Pacific, North West Europe and US Gulf Coast (USGC).

This forecasts syncs with current plans by the Federal Government to ramp refinery capacity by 60 percent in 2019. The government has also issued 25 refining licenses (conventional and modular) to indigenous companies with a 1.6 million bpd capacity.

Three (3) of the licensed companies are billed to construct conventional stick-build plants with capacity estimated at over 850,000 bpd, while 22 licenses are to construct modular units estimated at about 700,000 bpd in combined capacity.

“The modular refinery model is now emerging as a credible solution to the dismal share of domestic refineries. The model is gaining credence due to its comparatively lower establishment and running costs,” says the Department of Petroleum Resources (DPR).