• Wednesday, July 24, 2024
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Nigeria says near deal with Saudi Arabia on Oil and Gas investments

Oil-rig

Nigeria and Saudi Arabia plan to draft a memorandum of understanding on an oil and gas partnership that could lead to the construction of a new refinery and investments in liquefied natural gas, Nigeria’s petroleum ministry said on Friday.

Nigeria imports the bulk of its petrol, despite being Africa’s biggest crude oil producer, due to its dilapidated refineries. Last month, Nigeria’s state oil company said it was in talks with different consortiums to overhaul its refineries and save billions of dollars on fuel imports.

Nigeria’s petroleum ministry, in a statement issued days after oil minister Emmanuel Kachikwu held talks with Saudi energy officials, said an early draft of a memorandum of understanding would be ready in the first week of May.

“Areas of interest will cover the existing refinery revamp, building of a brand new refinery, LNG investments and product supply trading in crude and refined products,” the ministry said in the statement.

It added that Saudi energy minister Khalid Al-Falih had reiterated the possibility of establishing an independent refinery in Nigeria, considering it the best hub from which to reach other African countries.

Saudi Aramco is expanding its downstream operations such as refining and petrochemicals production as part of its drive to become the world’s largest integrated energy firm.

Nigeria plans to almost double oil production and triple its refining capacity within six years, reviving previous pledges that turned out to be too ambitious.

The OPEC member is looking to pump 4 million barrels a day by 2025 and increase refining capacity to 1.5 million barrels daily, Maikanti Baru, managing director of state-owned Nigerian National Petroleum Corp., said at a conference Thursday in the capital, Abuja. “Nigeria needs to unlock new barrels as quickly as possible,” he said.

Africa’s biggest oil producer pumps 2.2 million barrels a day and previously set a 4-million target for 2010, before successively delaying it. The country, where output peaked near 2.5 million barrels a day in the middle of the last decade, has grappled with militant attacks, leakages and theft at its oil installations.

“Targets such as these are not new to NNPC,” said Cheta Nwanze, an analyst at Lagos-based SBM Intelligence. “Nigeria has not met a single production target for at least a decade now, in many cases because of security concerns.”

Nigeria also wants to be self-reliant in meeting its fuel demand and cut imports that put a strain on foreign reserves. Kachikwu told the BBC in 2017 that he’d step down if the country doesn’t achieve that goal by the end of this year.

The target is likely to be missed as the four state-owned refineries struggle to fully utilize their combined 445,000 barrel-a-day capacity following years of neglect and mismanagement.

Baru said part of the additional refining would come from a 650,000 barrel-a-day complex being built near Lagos by Aliko Dangote, Africa’s richest person. NNPC is working with private investors for the remainder, Baru said.

“The desperate need for an improvement in local refining capacity has been obvious for decades,” Nwanze said. The 2025 plan is “extremely optimistic.”

NNPC, which pumps crude from the country’s fields in partnership with international companies like Royal Dutch Shell Plc and Exxon Mobil Corp., returned to profit in 2018 after reporting losses in at least the three previous years, according to statements on its website. That was mainly due to the strong performance of its oil and gas production unit. Its refineries had a $365 million operating loss.