Local refining seen as viable option as OPEC sets to cap Nigeria’s production
The Organisation of Petroleum Exporting Countries (OPEC) is set to put a limit on how much oil members Nigeria and Libya can produce putting the issue of ramping up refining capacity into public discourse.
Following an OPEC meeting on June 7, delegates told the Wall Street Journal that OPEC is considering putting a limit on how much oil members Nigeria and Libya can pump as surging production from them is complicating the cartel’s plans to influence crude prices
However, Nigeria in the past has indicated willingness to cap production. Ibe Kahcikwu, Nigeria’s minister of state for petroleum resources last May said that Nigeria is not averse to joining production caps if the need arises.
“Nigeria is definitely becoming a worry for us,” said a delegate to OPEC from a Persian Gulf Arab country. OPEC delegates from several other countries echoed his concerns reports the Wall Street Journal.
Libya’s crude-oil output has surged to over one million barrels a day, up from 400,000 in October, while Nigeria’s output has risen to 1.6 million barrels a day, up 200,000 barrels a day since October.
The challenge for Nigeria is being able to raise production to levels before militancy became very fierce. This is why analysts have urged the Federal Government to concentrate on local refining of petroleum products as the country has the potential to become West Africa’s refining hub by 2030 with a potential to export 94 million litres of petroleum products daily with the right conditions
A recent study by PwC Nigeria on Nigeria’s Refining Revolution, said the country with proven crude oil reserve of over 37 billion barrels could be West Africa’s refining hub.
The West African sub continent consumes 22 billion litres of petrol, 11 billion litres of diesel and 1 billion litres of aviation fuel annually, indicating the size of the market available.
Locally too Nigeria consumes huge volumes of refined products. Over 17 billion litres of petrol is consumed in transportation and power sectors, 3 billion litres of diesel and 400 million litres aviation fuel are consumed of which between 60 and 90 percent are imported, indicating the huge market available in Nigeria.
“With oil prices expected to remain low in the medium to long term, the focus on ramping up domestic refining capacity should become imperative. Lower oil prices would mean cheaper crude feedstock and higher refining margins for refiners.
A shift from crude production to crude value realisation will see Nigeria becoming a net exporter of refined products by start of the next decade,” says PwC.
The scenarios envisaged where that Dangote refinery with a 650,000 barrels per day will come on stream in 2019, and Nigeria’s three refineries with 445,000 bpd capacity operate at over 15 percent capacity and modular refineries bring about 100,000 bpd capacity.
“The modular refinery model is now emerging as a credible solution to the dismal share of domestic refineries. The model is gaining credence due to its comparatively lower establishment and running costs,” says a statement by the Department of Petroleum Resources (DPR).
ISAAC ANYAOGU