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Scepticism greets Nigeria NNPC's refinery ambitions

13 Mar 2018 13:53 GMT
Scepticism greets Nigeria NNPC's refinery ambitions

London, 13 March (Argus) — Ambitious Nigerian government targets to boost domestic refining capacity through rehabilitation and fresh investments in the state-run refining segment face challenges, according to delegates at the African Refiners Association (ARA) conference.

Firms active in the Nigerian downstream were sceptical of these margins and of NNPC's timelines, pointing to previous unsuccessful attempts to encourage investment in the refineries.

Nigerian gasoline consumption could rise to as much as 41mn l/d by 2025, state-run NNPC estimates, from around 30mn-35mn l/d currently. To meet this and reduce import dependency Nigeria is seeking to work with engineering firms — such as Italy's Saipem — to rehabilitate its three state-run refineries Port Harcourt, Kaduna and Warri. They currently process around 123,000 b/d of crude, compared with their 445,000 b/d nameplate capacity, according to an NNPC official.

The firm is seeking consortiums to operate the rehabilitated plants, which it said could deliver refining margins of as much as $12/bl at the targeted run rate of 90pc.

NNPC is targeting a second quarter 2019 start for rehabilitation work, and said gasoline production could rise by as much as 18mn l/d by 2025 or earlier. In parallel with the rehabilitation scheme, NNPC has identified investment opportunities for new refining plants at Lagos, Kogi and Bayelsa, totalling as much as 750,000 b/d.

NNPC continues to cap its retail gasoline price at 145 naira/l (40¢/l). Some conference delegates said only a fully-deregulated gasoline market could make Nigerian refinery investments attractive. NNPC last adjusted its gasoline retail price cap in 2016, and there is little prospect of a price increase until after the general election in 2019.

Private-sector refiner Dangote is likely to significantly boost Nigerian fuel output when its 650,000 b/d Lekki plant is complete. ARA delegates suggested a start-up was likely closer to 2020-21 than the envisaged 2019. This refinery is expected to produce around 20mn l/d of gasoline at full capacity, the ARA conference heard.

A smaller 12,000 b/d modular refining plant is being developed by private-sector Azikel Petroleum, for a 2019 start-up.