• Sunday, February 25, 2024
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Can Nigeria champion Africa’s refinery renaissance in 2023?

First Abia modular refinery begins production next year

For the umpteenth time, Africa’s biggest oil producer is trying yet again in 2023 to get its refineries working in an attempt to wean itself off imported fuel, costing the nation dear in terms of lost revenue.

Nigeria, alongside other African countries, is dependent on imported petrol due to a shortage of oil refineries across sub-Saharan Africa, coupled with the economic effects of Russia-Ukraine war that has left countries dangerously short of fuel supplies, disrupting airlines and causing queues at filling stations.

After missing multiple deadlines, Nigeria is giving it another shot that, if successful, could end the nation’s reliance on fuel imports and give it a golden opportunity to play regional dominance in the West African refinery market.

Experts believe the Dangote refinery and the state-owned refineries might be game changers for Africa, given that big Western oil companies have been withdrawing from refinery projects in Africa in recent years and local investors and governments have largely failed to plug the gap, leading to a chronic lack of investment in modernising facilities.

Jide Pratt, country manager at Trade Grid, predicts that the Dangote refinery will come on stream before the fourth quarter of 2023, although he raises concerns about funding and debt bottlenecks.

“A few modular refineries too may come up but do note they will only produce automotive gas oil or marine gasoil, not premium motor spirit,” Pratt said.

Etulan Adu, an oil and gas production engineer, said the Dangote refinery will be a plus to the supply of petroleum products to Nigeria and other African countries.

Two weeks ago, BusinessDay reported that the Dangote Petroleum Refinery and Petrochemicals plant, an integrated crude oil refinery and petrochemical plant that will convert crude oil into numerous value-added fuels and other products, was nearing completion as pre-commissioning tests reached concluding stages, making a launch date in the first quarter of 2023 feasible.

Read also: Nigeria not ready for local crude refining – Modular refinery promoters

Adu said challenges from delays in crude oil supplies and challenges in the completion stages of the project alongside pre-election uncertainties may delay the commissioning of the facility in 2023.

Niyi Fagbemle, senior project manager, Sofidam Capital, expressed doubt about Nigeria’s state-owned refineries working in 2023, but said the private sector offers hopes of domestic refining.

“It’s difficult to trust government officials about the start date for refineries due to past antecedents,” Awodeji said.

The Nigerian government last September gave its word that the country’s biggest crude refinery in Port Harcourt will restart operation in December 2022, after it would have completed a revamp that began over a year ago.

“As we said earlier, the Port Harcourt refinery will be functional by December 2022,” Nigeria’s junior oil minister, Timipre Sylva, said after the Federal Executive Council meeting in September.

The Port Harcourt refinery comprises two units, with the old plant having a refining capacity of 60,000 barrels per day (bpd) and the new plant 150,000 bpd.

The refinery shut down in March 2019 for the first phase of repair works after the government secured the service of Italy’s Maire Tecnimont to handle the scoping of the refinery complex, with oil major Eni appointed technical adviser.

“The ongoing rehabilitation of the Port Harcourt refinery will be completed by March 2023,” Mele Kyari, group managing director of the Nigerian National Petroleum Company, told the House of Representatives last June.

Apart from the Port Harcourt refinery, Nigeria is also expecting the Warri refinery to deliver fuel production in 2023.

“The Kaduna refinery will commence full operations in December 2023,” Desmond Inyamah, acting managing director of Warri Refining and Petrochemical Company, said on October 17.

West Africa’s market

Experts say Nigeria stands a very good chance of playing regional dominance if managers of its economy, especially those in the oil and gas sector, take a holistic view and see opportunities in the West Africa market.

Refineries across sub-Saharan Africa combined can process 1.36 million bpd in theory, but with many out of action, only 30 percent of that capacity was used last year, according to independent consultancy CITAC.

“Refineries in Cameroon, Ghana and Senegal are shut, as are four in South Africa. Africa’s biggest oil producer, Nigeria, pumps over 1.3 million barrels a day, but the two privately owned plants still running there can only process 1 percent of that,” it said.

Ghana’s 45,000bpd Tema refinery, for example, has been out of action since an explosion in January 2017. Ghana’s President Nana Akufo-Addo said “intense efforts” were now being made to rehabilitate the refinery to help address soaring fuel prices.

However, getting the refinery online would require $40 million in new investment, industry sources said, which Ghana can ill afford as it contends with a growing mountain of debt and a double-digit fiscal deficit.

It’s a similar story in Cameroon.

The 42,000bpd Limbe refinery has been shut since 2019 after a fire incident, but a directive from the president’s office seen by Reuters asked the finance minister on April 22 to put plans in place quickly to revamp the heavily indebted plant.

“There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available,” PwC, a multinational professional services network with headquarters in London, said in a report titled ‘Nigeria refining revolution’.