Nigeria’s quest to one day eliminate the import of refined oil products will come under scrutiny in coming weeks over debate concerning strict competition facing upcoming modular refineries ahead of the much-awaited Dangote Refinery and Bua Refinery.
Africa’s biggest oil-producing country is expecting three modular refineries to come on stream before the end of this year, providing a capacity to refine over 20,000 barrels per day of crude oil. However, most experts have questioned their existential risk because of the impending Dangote Refinery owned by billionaire businessman, Aliko Dangote.
The 650,000bpd Dangote Refinery is expected to begin production in 2021; it will be the world’s largest single-train 650,000bpd refinery. Also, France’s Axens signed a deal in early September on providing technology for a new 200,000bpd refinery in Akwa Ibom, under an agreement with Bua Group.
Still, many have raised concerns about the market fate of the above development for other smaller modular refineries who might struggle to sell their refined products as a result of massive refinery projects by Dangote and Bua Group.
Experts’ opinions
Layi Fatona, immediate past managing director of Niger Delta Exploration and Production plc, owner of Ogbele Refinery, says the upcoming Dangote Refinery does not pose a threat to modular refineries because of the huge market demand.
“Our products don’t come to Lagos. Roughly about 20 to 24 million litres of our products disappear into the local economy of south-eastern states legitimately,” Fatona tells BusinessDay.
Fatona notes that Ogbele Refinery is certainly not in any competition with Dangote Refinery because the market is too large for Dangote alone to operate in.
“So, we are not under any threat or in any competition at all,” Fatona said.
Also, CEO of Crown Refinery and Petrochemical Limited, Kassim Adeleke, says there are lots of uncovered vacuum in the petroleum downstream sector while also adding that upcoming refineries can fill lots of uncovered vacuum in the downstream sector.
“The market is deep enough. For us, it is more of contributing to an industry output that will meet the demand,” Adeleke states when asked how his company would compete successfully in this market, considering the number of like modular refineries springing up in the country.
Multinational professional services network with headquarters in London, PricewaterhouseCoopers (PwC) says the West African market holds significant potential as refineries such as Ivory Coast, Gabon and Senegal cannot meet current demand for refined products in the region, estimated at 39 billion litres.
“There is an opportunity for potential uptake by neighbouring countries if the market has Nigeria’s refined products readily available,” PwC notes in a report titled ‘Nigeria Refining Revolution.’
PwC notes that this shift will see Nigeria become a net exporter of refined products and the refining hub of West Africa by the start of the next decade.
What are modular refineries?
Modular refineries are basically mini refineries with reduced specified output level compared to full blown refineries with the capacity to produce diverse finished petroleum products with an increased output quantity.
The main features of these mini refineries are their portability specified output and the reduce cost of setting them up.
Waltersmith Refining and Petrochemicals Modular Refinery, with a capacity to refine 5000bpd, which secured a key equity investment from the Nigerian Content Development and Monitoring Board (NCDMB) alongside two other refineries, is a good example of a modular refinery.
Modular refineries are usually available in capacities ranging from 1,000 to 10,000bpd. They provide flexibility and can be constructed in a phased manner, also the relatively low capital cost and flexibility for upgrades can make it a cost-effective supply option for investors, especially if diesel is planned to be the lightest yield.
The model has proved attractive, with Equatorial Guinea expressing interest in a similar shift.
Nigeria is the second-largest oil producer in Africa, producing over 1.6 million bpd as at September 2020, while proven crude oil reserve is also estimated at about 37 billion barrels as at 2015, and Nigeria boasts of about 29 percent of the continent’s crude reserves.
