Demand For Refined Petroleum Products Pushes Capability Expansion In Nigeria’s Power Sector

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Given the dimensions of demand for petroleum merchandise in both Nigeria and the broader ECOWAS area, the country stands to gain vital export revenues if it will increase downstream manufacturing. Nigeria’s four refineries, although they raised their capacity utilisation price somewhat in 2014, stay low at across the 30% mark overall, despite being allotted their full capability 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 at the NNPC, informed OBG. Had been they to run at 80% of put in capability, the output would be enough to meet home demand, according to funding firm BGL. Yet the country still depends on imports for some 86% of its aggregate consumption of over 50m litres a day.

Low Effectivity

Of the 4 current refineries, the two in Port Harcourt operate at the bottom effectivity. 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 gas (LPG), twin-purpose kerosene (DPK), and automotive gasoline and oil (In the past). Their mixed capability utilisation of two.07% within the fourth quarter of 2013 improved only slightly to four.Forty eight% in December, in accordance with BGL research, as they regularly recovered from shut-ins brought on by vandalism. “The foremost cause of decrease output in 2013 was issues in sourcing crude to the Port Harcourt refinery, Yusuf informed OBG. “This has now been resolved and we anticipate larger output in 2014. /p>

The other 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 Development Company’s Ughelli discipline, operated at 28.03% of installed capability within the fourth quarter of 2013, rising to forty.Forty one% by December of that 12 months. The only refinery within the north, in Kaduna, meanwhile, operated at 29.Fifty nine% of capacity in the fourth quarter of 2013, rising to 32.96% by December. The Kaduna unit, with a 110,000-bpd capacity and equipped through a 600-km pipeline from the south, is designed to handle imported heavy crudes. In total, Nigeria’s refineries received 24% of their installed capability in crude in 2013, in accordance with BGL. Yet out of the country’s 2013 every day consumption of 32m litres of PMS, 10m litres of In the past and 8m litres of DPK (alongside lesser quantities of LPG and different fuels), combined output from the four refineries equalled only 9% of the PMS, 24% of the DPK and 28% of the Ago, according to the NNPC.

Refining for Export

The spate of greenfield refinery projects presently on the desk, although they could not much cut back the country’s import invoice for refined gasoline, will nonetheless help to extend Nigeria’s export revenues. In late 2013 Dangote closed the financing on a $9bn refinery challenge with deliberate capability of four hundred,000 bpd. The complex refinery would additionally produce 2.75m tonnes of urea and ammonia fertiliser, as effectively 60,000 tonnes of polypropylene a 12 months underneath an affiliated challenge estimated at $1.9bn and part of the whole $9bn mission cost. Originally deliberate for the Olokola Free Trade Zone, which Dangote purchased for the undertaking, 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 Financial institution of Nigeria, United Financial institution for Africa, Guaranty Belief Bank, Normal Chartered, Stanbic IBTC, Zenith Financial institution, Entry Bank, Ecobank, Fidelity Bank and Rand Merchant Financial institution, with plans to finance the remainder through fairness. The corporate contracted Engineers India to provide engineering, procurement and contracting companies. Once completed in 2016, the refinery will have annual production capability of 7.68m tonnes of PMS, 5.3m tonnes of diesel, 3.74m tonnes of jet fuel and kerosene, 210,000 tonnes of LPG and 630,000 tonnes of slurry oil.

The Euro V high quality of petrol produced, with lower nitrogen oxides and other pollutants, is of a far greater quality than the Euro III gasoline at the moment offered on the Nigerian market. The refined product will likely be bought on foreign markets, since selling larger-grade petrol on the local market would require a a lot larger subsidy to be aggressive with present provides. The NNPC itself is focusing on rehabilitating its existing refineries quite than upgrading their output. “We are taking a look at improving the standard of refined output in the long run, however the quick challenge is to get the refineries working again, and more effectively, Yusuf advised OBG.

The same is true of the Escravos gasoline-to-liquids venture developed by Chevron, the NNPC and South Africa’s Sasol. Commercialised in June 2014 after a number of delays, the 33,000-bpd facility makes use of 320m normal cu ft of natural gasoline per day to provide excessive-quality diesel, kerosene, naphtha and LPG. With zero% sulphur content material, these refined products are Euro V compliant and all destined for export, largely to Europe, even when the power is finally expanded to one hundred twenty,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 could help make a dent in Nigeria’s massive gas imports, which carried an associated subsidy of over $6bn in 2013, in line with the Petroleum Product Pricing Regulatory Company. In November 2012 the NRSTF found some 19 refinery licences authorised by the Department of Petroleum Sources (DPR), of which seven have been deemed feasible. In the first quarter of 2014 two extra refinery tasks, each with a deliberate capability of 100,000 bpd and each in Lagos State, have been given licences by the Static And Dynamic Seals For Pyrolysis DPR. The primary, backed by the Mid Oil Refining and Petrochemical Firm, could be based mostly at Ejinrin in Ikorodu and the second, by South Atlantic Petroleum, could be at Badagry. The environmental impression assessments for each are ongoing.

Each projects, in addition to any others concentrating on the domestic market, would require enactment of the Petroleum Refineries Act, which has been underneath National Meeting consideration since 2012 and is detached from the broader Petroleum Trade Invoice also pending. The act would set up a legal foundation for private investors to build refineries, in line with BGL, thereby breaking the NNPC’s monopoly on home refining. It would come with new native content material requirements, such at the very least 75% Nigerian refinery staff. Although progress in rehabilitating Nigeria’s present refineries has been uneven, Dangote’s excessive-profile initiative to determine a greenfield refinery might provide the a lot-needed impetus for change, opening the doorways to smaller non-public refineries that would bridge the home refining hole. It will even establish Nigeria as a regional refining centre, with strong influence on the country’s steadiness of funds.