Nigeria’s Path to Modular Refineries: A Positive Outlook with Funding Challenges
The Organization of Petroleum Exporting Countries (OPEC) recently announced that Nigeria is on track to establish small modular refineries with a capacity of 20,000 barrels per day (bpd) each in the medium term. This projection is part of OPEC’s World Oil Outlook, and it highlights positive developments in Nigeria’s refining sector.
The World Oil Outlook report estimates that Africa will experience medium-term distillation capacity additions of 1.2 million barrels per day (mb/d). A significant portion of this capacity expansion is attributed to Nigeria’s Dangote refinery, which can process 650,000 bpd. The Dangote refinery was officially inaugurated in May 2023, with commercial operations scheduled to commence this month for diesel and aviation fuel and in November for petrol refining.
Furthermore, the Outlook mentioned, “Moreover, Nigeria is set to witness several small modular refineries established in the medium term, with capacities of up to 20 thousand barrels per day (tb/d) each.” This development signifies the country’s commitment to enhancing its refining capacity.
However, despite these positive prospects, Nigeria faces several challenges. Funding obstacles for modular refineries and the increasing incidents of sabotage attacks on oil pipelines and oil theft have impeded the sector’s smooth progress.
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Momoh Oyarekhua, the Chairman of the Crude Oil Refineries Association of Nigeria (CORAN), proposed a potential solution during an Arise News interview in July 2023. He emphasized the need to support modular refineries to make fuel more affordable for Nigerians. By eliminating the costs associated with sending crude oil abroad for refining and importing refined products, this approach aims to lower fuel prices for consumers.
Oyarekhua also stressed the importance of modular refineries purchasing crude oil in Naira, aligning with their income generated in Naira from selling products in the Nigerian domestic market. This approach seeks to reduce the burden on the foreign exchange market.
The recent decision by the Nigerian National Petroleum Company (NNPC) to resume sole fuel importation into the country due to foreign exchange challenges has further highlighted the need for a comprehensive strategy to enhance the domestic refining sector.
While Nigeria’s journey towards modular refineries shows promise, addressing funding challenges, securing the infrastructure, and ensuring economic stability will be essential to realizing the full potential of these projects and achieving energy self-sufficiency.
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