Several modular refiners are still awaiting their first crude oil supplies despite the Nigerian National Petroleum Company Limited (NNPCL)’s pledge to support them as part of the federal government’s efforts to boost local refining capacity and reduce dependence on imported petroleum products.
The modular refineries, which are smaller-scale, flexible refining units, have been touted as a crucial step towards achieving energy self-sufficiency.
However, their operations remain hampered by the lack of readily available crude.
The delay has left many modular refineries operating below capacity or relying on alternative, often more expensive, sources of feedstock. Some operators have resorted to purchasing crude oil from third-party suppliers, while others have been forced to suspend operations.
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One such operator, who spoke on condition of anonymity, expressed frustration over the situation.
“We have invested millions of dollars in building our refinery, and everything is ready to go. But without crude oil, we cannot start operations. The NNPC has been promising to supply us for months, but nothing has materialised,” the operator said.
Eche Idoko, national publicity secretary of Crude Oil Refinery-owners Association of Nigeria (CORAN), told BusinessDay that modular refineries are yet to receive a single drop crude oil or feedstock from NNPC since the naira-for- crude scheme kicked off in October 2024.
“Most of the modular refineries are producing at low capacity. They’ve had to source feedstock alternatives from third parties, which is usually very expensive,” Idoko said.
The CORAN official noted that most of the modular refineries in Nigeria are operating at about 20 percent capacity.
Nigeria currently has 30 licensed modular refineries. Five of them are operating and producing diesel, kerosene, black oil and naphtha. About 10 are under various stages of completion, while others have received licenses to establish.
The five of them which are working include: Waltersmith refinery (5,000 bpd); Aradel refinery (11,000 bpd); OPAC Refinery (10,000 bpd); Duport refinery (2,500 bpd) and Edo refinery (6,000 bpd)
Idoko added, “Edo refinery has had to resort to third parties and then they truck, which makes their landing cost four times what it’s supposed to be. Walter Smith and Aradel refineries are producing because they are sourcing directly from their marginal fields.
“Even for those refineries, what they source from their marginal refineries cannot satisfy the needs of their plants.”
Industry insiders suggest that the NNPC’s focus has been skewed towards larger refineries, particularly Dangote Petroleum Refinery.
On March 11, the NNPC said it had begun discussions with Dangote Refinery to extend its contract for supplying crude oil in the naira currency, the company said.
The original six-month agreement, which ends later this month, was implemented in October 2024 after local refineries, including the Dangote facility, reported difficulties securing crude supplies.
The initiative aimed to alleviate those supply issues by allowing refineries to purchase crude in naira through NNPC Ltd. Under the existing arrangement, NNPC Ltd says it has supplied 48 million barrels of oil to Dangote Oil Refinery.
While the initial plan included supplying seven other smaller refineries, only the Dangote refinery ultimately benefited from the agreement. Even Dangote did not receive the initially agreed-upon volumes.
NNPC Ltd said that “discussions are ongoing towards” a new contract. The details of the potential new contract, including volume, pricing, and duration, are yet to be disclosed.
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BusinessDay findings show that the Technical Sub-Committee on the Naira-for-Crude Policy has held a meeting for the review of the policy.
The meeting had in attendance Wale Edun, minister of finance and coordinating minister of the economy (who joined virtually); Zacch Adedeji, executive chairman of the Federal Inland Revenue Service (FIRS), as well as representatives from the Nigerian Upstream Petroleum Regulatory Commission, the Central Bank of Nigeria, Dangote Petroleum Refinery, and NNPC Trading Ltd.
Sources at the meeting said the committee discussed ways of sustaining the policy, among other things, with the various stakeholders making presentations.
One source said that while the NNPC presented a crude delivery report detailing the volume of crude oil allocated for domestic refining under the policy, the NMDPRA provided a domestic production report covering the Dangote Petroleum Refinery and Petrochemicals, NNPC Warri Refinery, and Port Harcourt Refinery, with the NUPRC giving an update on crude availability for local refining to ensure a steady supply for domestic refiners.
Representatives from Dangote and NNPC refineries also provided updates on local refineries.
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