Nigeria banks on Dangote, modular refineries to close fuel supply-demand gap

Nigeria is putting a great deal of hope on the 650,000 barrels per day (bpd) Dangote Petroleum Refinery, and and another 250,000 bpd expected to come from the condensate refineries through private sector partnership, respectively, to close a huge supply-demand gap for petrol and other products in the country, according to Mele Kyari, chief executive of the Nigerian National Petroleum Corporation (NNPC).

Currently, Nigeria, Africa’s top oil producer, imports 100 percent of its petroleum products as none of its four state-owned refineries, with a combined 445,000 bpd capacity is functioning. Efforts to repair the refineries are yet to yield dividends.

Aliko Dangote, president of the Dangote Group, said recently that he was dissatisfied with the fact that Nigeria is a leading oil producer, but imports all her petroleum needs, adding that it was the unsavoury situation the nation found itself that pushed him to take up the challenge to embark on construction of his gigantic refinery project, which is one of the biggest in the world.

The business mogul said some 29,000 Nigerians would be employed in the refinery when it is completed; and that would also help in the employment generation drive of the Nigerian federal government.

Meanwhile, as investments in hydrocarbons continue to wane, due to energy transition and geopolitics, the world economy faces shortages, high energy prices, rising inflation and sluggish growth. Only last week, EU energy ministers converged to discuss the current high gas prices.

Kyari, who was speaking at the 15th oil trading logistics (OTL) Africa downstream week in Lagos, said NNPC and other modular refineries are expected to be the major drivers of Nigeria’s demand for petroleum products, which is projected to grow massively in the nearest future.

“NNPC Refineries’ 445,000 barrels-per-day (BPD), Dangote Refinery’s 650,000 BPD and the 250,000 BSD expected to come from the Condensate Refineries through the private sector partnership, respectively, would supply the requirement of Premium Motor Spirit (PMS) needs in Nigeria,” he said.

The CEO explained that the diversification of NNPC’s portfolio through acquisition of 20 percent equity, valued at $2.6 billion, in the 650,000 bpd Dangote Refinery located in the Lekki Free Trade Zone, would ensure national energy security and guarantee a market for Nigeria’s 300,000 bpd.

“NNPC is adding 215,000 BPD of refining capacity through private sector driven co-location at the existing facilities in Warri Refining and Petrochemical Company (WRPC) and Port Harcourt Refining Company (PHRC) respectively. Modular refineries are also adding capacities such as the 5,000 BPD Waltersmith refinery, which will be upgraded to 50,000 BPD. Additional 250,000 BPD is expected to come from the Condensate Refineries through the private sector partnership. The co-location and Condensate refineries will close the PMS supply-demand gap and create positive returns to the investors,” the NNPC helmsman added.

He said the corporation has progressed with its refineries rehabilitation programme to boost its participation in the oil & gas value chain by awarding the $1.5 billion Port Harcourt Refinery rehabilitation contract, with the commitment to deliver on Warri and Kaduna plants later.

Kyari said the demand for natural gas could grow about four times over the next decade, increasing from 4.8 billion cubic feet per day (bcf/d) in 2020 to between 10–23 bcf/d in 2030. He added that the Nigerian federal government has begun a positive gas development and commercialisation effort, with current supply to the domestic market at about 8 bcf/d to power, 0.77 bcf/d to industries, and about 54 bcf/d is flared; while 3.2 bcf/d is for export gas through the LNG and the West Africa Gas Pipeline (WAGP).

According to him, achieving this growth in demand would be occasioned by increasing the dispatchable capacity of existing power, in line with the Presidential Power Initiative, which is less than 1.4 bcf/d). He added that the growth would be achieved through ensuring delivery of major fertiliser projects (Dangote, Brass) 5 bcf/d), and enabling industrial demand for natural gas in the northern axis of the country (1.2 bcf/d).

On the global oil market outlook, Kyari said some $10.4 trillion global stimulus in response to the COVID-19 pandemic has led to the rebound in consumer spending, while incentives for long-term investments in hydro-carbon have waned. He stated that hydrocarbons would continue to be relevant in the global energy mix for the next two decades, quoting recent data by the Organisation of Petroleum Exporting Countries (OPEC).

On the issue of downstream in transition, the NNPC boss noted that the Nigerian oil and gas industry has been in transition prior to the passage into law of the Petroleum Industry Bill (PIB), in response to the global energy transition and decarbonisation initiatives. He maintained that it would be difficult to discuss the transition in the downstream sub-sector in isolation from the overall evolution that was happening in the industry.

He said NNPC had diversified its portfolio over the years, transiting to an energy company with new investments in gas, power, and renewables; with key pipeline projects ongoing to assure delivery of gas to the demand nodes.

“The OB3 project, which brings gas from East to West, is nearing completion. The 614 km Ajaokuta, Kaduna, Kano (AKK) project, which was launched by Mr. President in June 2020, is progressing very well. These could add up to $40 billion to annual GDP and create additional six million jobs,” Kyari said.