Can mini-refineries solve Nigeria’s refining dilemma?

There has never been a doubt about the large size of the Nigerian market for refined petroleum products. Nigeria’s estimated domestic consumption is 400,000 barrels per day. With 4 crude oil refineries located in Port Harcourt, Warri and Kaduna with a total refining capacity of 445,000 barrels per day (bpd), the country’s installed refining capacity could easily meet the estimated domestic consumption but the country is heavily dependent on importation of refined petroleum products.

The idea of subsidizing the retail price of refined petroleum products fuels corruption and encourages the importation of the product rather than local refining. Government has issued various refinery licenses in the past but no appreciable progress has been made. However, the ambitious plan by Dangote Group to build a 400,000 barrels-per-day refinery in Nigeria is picking up pace

Mini-refineries to rescue

As more countries are discovering oil, Nigeria’s crude exports will begin to drop soon leaving us with excess crude instead of excess crude account.

 Drawing from the experiences of the existing refineries and the long running issue of turn-around maintenance, mini-refineries could be an option. With their relative low capital cost and speed and ease of construction, mini plants offer a solution particularly when there is a need to adapt rapidly to meet local demand.

Mini-refineries can be scaled up with modules from 4,000 to 30,000 bpd primary distillation capacity added together to create a refinery of 100,000 bpd or more, should demand dictate.

Ready-made template

Emirates National Oil Co. (ENOC) and UK-based Pyramid Engineering’s plan to build a7,500 barrels per day mini-refinery in Fujairah, UAE by end-2015 in a growing trend for mini-refineries instead of much more expensive world-scale plants in Asia.

In September 2013, Iran reported that it was moving ahead with plans to build eight mini-refineries within the next three years to convert nearly 500,000 bpd of gas condensate from the giant offshore South Pars gas field in the south of the country.

Down-side

There are downsides to construction mini refineries. The plants lack the economy of scale of a large refinery and they can only produce the most basic of fuels, an obvious drawback for countries seeking to cut emissions by upgrading fuel quality.

The choice however, is to ascertain whether the benefits of mini-refining capacity at low cost outweighs the environmental risk of higher emissions.

Frank Uzuegbunam