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Demand For Refined Petroleum Merchandise Pushes Capacity Growth In Nigeria’s Vitality Sector

Given the scale of demand for petroleum merchandise in both Nigeria and the broader ECOWAS area, the nation stands to gain important export revenues if it increases downstream production. Nigeria’s four refineries, though they raised their capability utilisation rate considerably in 2014, remain low at around the 30% mark overall, despite being allocated their full capability of 445,000 barrels per day (bpd) in crude. “The Nigerian National Petroleum Company (NNPC) allocations of crude to the refineries are primarily based on installed capacity, not operational throughput,” Idris Yusuf, head of refineries on the NNPC, advised OBG. Had been they to run at eighty% of put in capability, the output could be sufficient to fulfill home demand, according to funding agency BGL. But the country nonetheless relies on imports for some 86% of its aggregate consumption of over 50m litres a day.

Low Effectivity
Hydrorefining Process EquipmentOf the 4 current refineries, the two in Port Harcourt function at the lowest effectivity. With respective capacities of 60,000 bpd and one hundred fifty,000 bpd, both refine crude from the Bonny terminal into premium motor spirit (PMS), liquefied petroleum gasoline (LPG), twin-goal kerosene (DPK), and automotive fuel and oil (Ago). Their mixed capacity utilisation of two.07% in the fourth quarter of 2013 improved solely barely to four.48% in December, in line with BGL research, as they gradually recovered from shut-ins attributable to vandalism. “The main trigger of decrease output in 2013 was problems in sourcing crude to the Port Harcourt refinery,” Yusuf advised OBG. “This has now been resolved and we expect higher output in 2014.”

The opposite two carried out comparatively higher. The 125,000-bpd refinery in Warri, which produces PMS alongside polypropylene and carbon black petrochemicals, equipped by Chevron’s Escravos terminal and to a lesser extent (some 20,000 bpd) from Shell Petroleum Improvement Company’s Ughelli field, operated at 28.03% of installed capacity within the fourth quarter of 2013, rising to forty.Forty one% by December of that year. The only refinery within the north, in Kaduna, in the meantime, operated at 29.Fifty nine% of capability in the fourth quarter of 2013, rising to 32.96% by December. The Kaduna unit, with a 110,000-bpd capacity and equipped by a 600-km pipeline from the south, is designed to handle imported heavy crudes. In total, Nigeria’s refineries acquired 24% of their put in capability in crude in 2013, in response Petroleum Refining Process to BGL. Yet out of the country’s 2013 day by day consumption of 32m litres of PMS, 10m litres of Ago and 8m litres of DPK (alongside lesser quantities of LPG and other fuels), combined output from the four refineries equalled only 9% of the PMS, 24% of the DPK and 28% of the Ago, based on the NNPC.

Refining for Export
The spate of greenfield refinery initiatives at present on the table, although they could not much cut back the country’s import bill for refined fuel, will nonetheless help to extend Nigeria’s export revenues. In late 2013 Dangote closed the financing on a $9bn refinery project with planned capability of 400,000 bpd. The complicated refinery would additionally produce 2.75m tonnes of urea and ammonia fertiliser, as properly 60,000 tonnes of polypropylene a 12 months underneath an affiliated mission estimated at $1.9bn and a part of the entire $9bn project value. Originally planned for the Olokola Free Trade Zone, which Dangote purchased for the project, the refinery was relocated to the Lekki Free Commerce Zone in 2013. In September 2013 Dangote closed a $3.3bn syndicated mortgage deal with First Bank of Nigeria, United Bank for Africa, Guaranty Trust Bank, Customary Chartered, Stanbic IBTC, Zenith Bank, Access Bank, Ecobank, Fidelity Financial institution and Rand Merchant Bank, with plans to finance the rest via fairness. The corporate contracted Engineers India to supply engineering, procurement and contracting companies. As soon as accomplished in 2016, the refinery may have annual manufacturing capacity of 7.68m tonnes of PMS, 5.3m tonnes of diesel, 3.74m tonnes of jet gasoline and kerosene, 210,000 tonnes of LPG and 630,000 tonnes of slurry oil.

The Euro V quality of petrol produced, with lower nitrogen oxides and different pollutants, is of a far larger quality than the Euro III gasoline at present offered on the Nigerian market. The refined product will doubtless be sold on foreign markets, since selling increased-grade petrol on the local market would require a a lot increased subsidy to be aggressive with current provides. The NNPC itself is specializing in rehabilitating its existing refineries fairly than upgrading their output. “We are looking at bettering the standard of refined output in the long term, but the quick problem is to get the refineries running once more, and extra effectively,” problems with crude oil Yusuf instructed OBG.

The identical is true of the Escravos fuel-to-liquids project developed by Chevron, the NNPC and South Africa’s Sasol. Commercialised in June 2014 after several delays, the 33,000-bpd facility uses 320m standard cu toes of natural fuel per day to supply high-quality diesel, kerosene, naphtha and LPG. With 0% sulphur content, these refined merchandise are Euro V compliant and all destined for export, largely to Europe, even when the facility is eventually expanded to a hundred and twenty,000 bpd in the long run.

Import Substitution
These export-oriented refineries aren’t the one ones on the desk. A number of smaller greenfield initiatives could assist make a dent in Nigeria’s giant gasoline imports, which carried an related subsidy of over $6bn in 2013, based on the Petroleum Product Pricing Regulatory Agency. In November 2012 the NRSTF discovered some 19 refinery licences accredited by the Department of Petroleum Resources (DPR), of which seven had been deemed feasible. In the primary quarter of 2014 two extra refinery projects, every problems with crude oil with a deliberate capacity of one hundred,000 bpd and both in Lagos State, had been given licences by the DPR. The primary, backed by the Mid Oil Refining and Petrochemical Firm, would be based at Ejinrin in Ikorodu and the second, by South Atlantic Petroleum, could be at Badagry. The environmental impact assessments for both are ongoing.

Each initiatives, in addition to any others concentrating on the home market, would require enactment of the Petroleum Refineries Act, which has been below National Meeting consideration since 2012 and is detached from the broader Petroleum Industry Invoice additionally pending. The act would set up a authorized foundation for personal investors to construct refineries, based on BGL, thereby breaking the NNPC’s monopoly on domestic refining. It would include new local content requirements, such at least 75% Nigerian refinery employees. Though progress in rehabilitating Nigeria’s current refineries has been uneven, Dangote’s excessive-profile initiative to determine a greenfield refinery might present the a lot-needed impetus for change, opening the doors to smaller non-public refineries that could bridge the domestic refining gap. It may even establish Nigeria as a regional refining centre, with strong impact on the country’s steadiness of payments.

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