Nigeria: An air of refinement

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With local refineries unable to meet domestic demand, Nigeria – Africa’s largest exporter of crude oil – currently imports more than 70% of its petroleum needs. However, this could change if plans to build three new refineries are realised.

The China State Engineering and Construction Company (CECC) has begun preliminary designs for three new refineries to be built in Lagos, Kogi and Bayelsa states. Diezani Alison-Madueke, the minister of petroleum resources, told local media in late August that the CECC would begin operations upon completion of a feasibility study.

The Chinese deal has been in the works since May 2010, when the CECC and Nigeria signed a memorandum of understanding for the firm to build three oil refineries at a cost of $23bn. Under this joint venture, the CECC would provide 80% of the capital, with the Nigerian National Petroleum Corporation (NNPC) putting up 20%. The state government of Lagos, a third partner, would make an in-kind contribution of land and infrastructure to the project in its state.

The new facilities would add 885,000 barrels per day (bpd) in capacity, nearly tripling current capacity, which stands at 445,000 bpd. Nigeria currently has four refineries, which are owned by the state and operated by the NNPC: two at Port Harcourt (with a combined capacity of 210,000 bpd), one at Warri (125,000 bpd) and another at Kaduna (110,000 bpd). The country produces around 2.4m bpd of crude oil, the government said in August.

According to Kombo Mason Braide, a former manager in the NNPC’s research and development division, around 530,000 bpd are necessary to meet current domestic demand. This includes about 30m litres of petrol, 12m litres of kerosene, 18m litres of diesel oil and 1.4m litres of cooking gas. Adding three new oil refineries, therefore, would go a long way to satisfying domestic demand.

However, the existing refineries typically operate far below capacity. Supply disruption is one contributing factor. In December a series of attacks to supply pipelines forced the NNPC to temporarily close all refinery operations, but military protection has since been stepped up. In early August, an NNPC spokesman, Levi Ajuonuma, told local media that the Warri facility is operating at 75% capacity, while the other facilities are running at 60-70%.

“In another couple of weeks we will be ramping up production. The key is pipeline security,” he said, adding that security has been increased at the facilities.

Besides safety, another factor that has reduced operating efficiency is a history of poor maintenance. However, this may also change, with a turn-around maintenance (TAM) programme set to begin soon, President Goodluck Jonathan indicated during the 35th Nigeria Annual International Conference and Exhibition of the Society of Petroleum Engineers, held July 30-August 3 in Abuja.

“The nation’s refining capacity would receive a significant boost in the next three years, with the coming up three new refineries and the TAM of the traditional refineries, which is now being handled by the companies that first built them, to ensure that this time, the facilities will actually give us the result that we desire in this country and take us to 95% capacity utilisation in all our traditional refineries,” he said.

According to Austen Oniwon, the group managing director of the NNPC, the TAM programme will begin next year, starting with the Port Harcourt refineries. “We have given ourselves 24 months to raise the three refineries. We are starting with Port Harcourt, and we have engaged JDP of Japan, which is partnering with Tecnimont of Italy. They are presently in talks, with the hope that by the third quarter of next year, they will move into Port Harcourt refinery and commence rehabilitation. It is not just the TAM; it is the full rehabilitation of the refineries,” he told local media.

The newer of the two Port Harcourt refineries is 15 years old, while the other has been in operation for 38 years. Warri’s facility, which is subject to frequent shutdowns, is more than 23 years old, and the refinery at Kaduna, located more than 600 km from its feedstock supply, is 21 years old.

President Jonathan has set an ambitious goal of a 1m-bpd refining capacity by 2014. If the government’s maintenance plan is implemented and disruption remains limited, the four existing sites will go some way to meeting this aim, but the Chinese-built facilities, if realised, would allow the country to far surpass the president’s target.

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