• Tuesday, March 05, 2024
businessday logo

BusinessDay

Refining outlook brightens as Dangote, PH plants near production

‘Nigeria should fabricate, not import modular refinery units’

The outlook for crude oil refining in Nigeria looks set to turn the corner with Dangote and Port Harcourt plants gearing up for production of fuel in the country.

For the umpteenth time, the country is trying to get its refineries working again in an attempt to wean itself off imported fuel.

Africa’s biggest oil exporter is dependent on imported refined petroleum products, despite several reported rehabilitation and turnaround maintenance.

Nigeria spent $23.3 billion last year on petroleum product imports and consumes around 33 million litres (8.7 million gallons) of petrol daily.

Dangote refinery, which has a capacity of 650,000 barrels per day (bpd), is nearing production.

Port Harcourt refinery owned by the federal government with a capacity 60,000 bpd, Edo Refinery and Petrochemical Company (ERPC), 6,000 bpd), and the Duport Midstream Company Limited facility (DMCL), 10,000 bpd, are also making headway.

Adeola Adenikinju, an energy scholar at the University of Ibadan, said there was a need for domestic refineries, both existing and new ones, to come into operation to enable the country to save foreign exchange on petrol imports and transit to exports.

“This will also allow for stability in fuel prices to some extent. However, we can only achieve this if we remain on course with the liberalisation of the sector. The government must ensure the completion of the existing refineries,” he said.

“However, the nation must reach a consensus as to who would run the refineries to give value to the country. We must also support new refineries, including Dangote to ensure early completion,” he added.

Segun Ajibola, former president of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of economics at Babcock University, said while the rehabilitation of the refineries has taken time, getting the facilities on track would lessen the plight of Nigerians.

“The challenge has been continued importation of refined products, which costs are annexed to the ruling foreign exchange rate. There is no short cut as solutions to the current disequilibrium in the local oil industry, which has compounded the inflationary pressure in the domestic economy,” he said.

Dangote refinery

The Dangote Petroleum Refinery is set to start producing Automotive Gas Oil, also known as diesel, and JetA1 or aviation fuel in January 2024, while the production of Premium Motor Spirit (PMS), popularly called petrol, would follow.

An official who pleaded anonymity said the facility required a minimum of six million barrels of crude to commence the full production of refined petroleum products.

“PMS, kerosene and other refined products would come as the company gets more crude cargoes,” he said.

The $19 billion Dangote oil refinery received 1 million barrels of oil from Shell International Trading and Shipping, its second crude cargo this month, as it steps up preparations to begin operations, a company spokesperson said last Wednesday.

The refinery is years behind schedule but its operations are expected to turn Africa’s largest oil producer into a net exporter of fuels, a long-sought goal for the OPEC member that almost totally relies on imports.

Port Harcourt refinery

The Nigerian government on Thursday announced the “mechanical completion” and the “flare start-off” of the country’s biggest crude refinery in Port Harcourt.

Heineken Lokpobiri, minister of state for Petroleum Resources (oil), made the announcement during a media tour of the Port Harcourt refinery.

“Just to announce to Nigerians the fulfilment of our pledge to bring on stream phase one of the Port Harcourt refinery by the end of 2023 and the subsequent streaming of phase two in 2024. We happily announced the mechanical completion and the flare start-off on the 20th of December 2023,” Lokpobiri said.

He said the first phase of the plant had been completed, as the facility would start refining 60,000 barrels of crude oil after the Christmas break.

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

Lokpobiri had in August said the Port Harcourt refinery would become functional by December while Warri and Kaduna would be ready by the end of next year.

Edo refineries

In a significant move bolstering Nigeria’s petroleum refining industry, two modular refineries in Edo State on Thursday received a combined total of 75,500 barrels of crude oil.

The oil was supplied by Decklar Resources Inc. and its co-venturer, Millenium Oil & Gas Company Limited, operators of the Oza oil field.

ERPC plays a fundamental role in the regional economy, with a refining capacity of 6,000 bpd. The refinery processes the crude into diesel, low pour fuel oil, and naptha, serving both domestic needs and export demands.

DMCL, on the other hand, is part of the Duport Energy Park. This expansive 10,000 bpd facility includes a modular refinery, data centre, gas processing facility, and power plant.

The contracts with Decklar Resources and Millenium Oil & Gas Company have been pivotal in addressing the initial crude supply challenges faced by the refineries.