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

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Given the scale of demand for petroleum merchandise in each Nigeria and the broader ECOWAS region, the nation stands to achieve vital export revenues if it will increase downstream manufacturing. Nigeria’s four refineries, although they raised their capability utilisation price considerably in 2014, stay low at across the 30% mark general, despite being allotted their full capacity of 445,000 barrels per day (bpd) in crude. “The Nigerian Nationwide Petroleum Company (NNPC) allocations of crude to the refineries are primarily based on installed capability, not operational throughput,Idris Yusuf, head of refineries on the NNPC, instructed OBG. Have been they to run at eighty% of installed capability, the output would be enough to fulfill home demand, based on investment firm BGL. But the country still depends on imports for some 86% of its aggregate consumption of over 50m litres a day.

Low Efficiency

Of the 4 present refineries, the 2 in Port Harcourt operate at the lowest efficiency. With respective capacities of 60,000 bpd and 150,000 bpd, both refine crude from the Bonny terminal into premium motor spirit (PMS), liquefied petroleum gasoline (LPG), dual-goal kerosene (DPK), and automotive gas and oil (In the past). Their mixed capability utilisation of two.07% within the fourth quarter of 2013 improved only barely to 4.48% in December, in accordance with BGL research, as they gradually recovered from shut-ins caused by vandalism. “The main cause 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 increased output in 2014./p>

The other two performed comparatively better. The 125,000-bpd refinery in Warri, which produces PMS alongside polypropylene and carbon black petrochemicals, provided by Chevron’s Escravos terminal and to a lesser extent (some 20,000 bpd) from Shell Petroleum Growth Company’s Ughelli subject, operated at 28.03% of installed capacity within the fourth quarter of 2013, rising to 40.41% by December of that year. The one refinery in the north, in Kaduna, in the meantime, operated at 29.59% of capability in the fourth quarter of 2013, rising to 32.96% by December. The Kaduna unit, with a 110,000-bpd capacity and supplied by way of a 600-km pipeline from the south, is designed to handle imported heavy crudes. In total, Nigeria’s refineries acquired 24% of their installed capacity in crude in 2013, in line with BGL. But 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 amounts 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 tasks currently on the table, although they could not much reduce the country’s import invoice for refined gas, will nonetheless help to increase Nigeria’s export revenues. In late 2013 Dangote closed the financing on a $9bn refinery mission with planned capacity of four hundred,000 bpd. chlorinated toluene tower The complicated refinery would also produce 2.75m tonnes of urea and ammonia fertiliser, as properly 60,000 tonnes of polypropylene a year beneath an affiliated undertaking estimated at $1.9bn and part of the overall $9bn project price. Initially planned for the Olokola Free Trade Zone, which Dangote bought for the challenge, the refinery was relocated to the Lekki Free Commerce Zone in 2013. In September 2013 Dangote closed a $three.3bn syndicated loan deal with First Bank of Nigeria, United Bank for Africa, Guaranty Belief Financial institution, Commonplace Chartered, Stanbic IBTC, Zenith Bank, Entry Bank, Ecobank, Fidelity Bank and Rand Merchant Financial institution, with plans to finance the remaining by fairness. The company contracted Engineers India to provide engineering, procurement and contracting providers. As soon as accomplished in 2016, the refinery may have annual manufacturing capability of 7.68m tonnes of PMS, 5.3m tonnes of diesel, three.74m tonnes of jet fuel 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 other pollutants, is of a far increased quality than the Euro III gasoline currently bought on the Nigerian market. The refined product will possible be bought on international markets, since promoting higher-grade petrol on the local market would require a a lot higher subsidy to be aggressive with present provides. The NNPC itself is specializing in rehabilitating its current refineries quite than upgrading their output. “We are taking a look at improving the quality of refined output in the long term, but the rapid challenge is to get the refineries operating again, and more efficiently,Yusuf instructed OBG.

The identical is true of the Escravos gasoline-to-liquids challenge developed by Chevron, the NNPC and South Africa’s Sasol. Commercialised in June 2014 after several delays, the 33,000-bpd facility uses 320m commonplace cu feet of pure gas per day to supply high-quality diesel, kerosene, naphtha and LPG. With zero% sulphur content material, these refined merchandise are Euro V compliant and all destined for export, mostly to Europe, even when the power is ultimately expanded to 120,000 bpd in the long term.

Import Substitution

These export-oriented refineries will not be the one ones on the table. Several smaller greenfield tasks may help make a dent in Nigeria’s massive gas imports, which carried an related subsidy of over $6bn in 2013, in keeping with the Petroleum Product Pricing Regulatory Company. In November 2012 the NRSTF discovered some 19 refinery licences accepted by the Department of Petroleum Resources (DPR), of which seven were deemed possible. In the first quarter of 2014 two more refinery projects, each with a planned capacity of a hundred,000 bpd and both in Lagos State, had been given licences by the DPR. The first, backed by the Mid Oil Refining and Petrochemical Company, can be primarily based at Ejinrin in Ikorodu and the second, by South Atlantic Petroleum, can be at Badagry. The environmental affect assessments for both are ongoing.

Both projects, in addition to any others focusing on the domestic 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 Bill additionally pending. The act would establish a legal foundation for personal traders to construct refineries, in keeping with BGL, thereby breaking the NNPC’s monopoly on domestic refining. It would come with new native content material requirements, such at the very least seventy five% Nigerian refinery workers. Though progress in rehabilitating Nigeria’s present refineries has been uneven, Dangote’s high-profile initiative to establish a greenfield refinery could provide the a lot-wanted impetus for change, opening the doorways to smaller non-public refineries that could bridge the home refining hole. It may even set up Nigeria as a regional refining centre, with robust affect on the country’s balance of funds.

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