Energy

OTL Africa: Refining in focus as product import deadline looms

With four refineries and its status as a leading oil and gas producer, Nigeria was expected to process refined commercial crude oil for domestic consumption and export. But that has not been the case for many years as a result of the poor state of its refineries.

Consequently, the nation has become a major fuel importer with very negative implications for its economy. The nation’s new Petroleum Policy has indicated that Nigeria’s refining capacity is one of the smallest..

On a per capita basis, Nigerian refining capacity (theoretical maximum capacity which is far higher than actual current operational capacity) is one of the lowest, even among other African countries: Libya: 6.17 bpsd/capita; Algeria: 1.37 bpsd/capita; South Africa: 1.11 bpsd/capita; Egypt: 0.96 bpsd/capita and Nigeria: 0.3 bpsd/capita.

The figure shows how the capacity utilisation of Nigeria’s refineries has underperformed by such a large extent. Globally, refining is a very low margin business and refineries have to be kept working very efficiently 24/7 in order to make any profit. The Nigerian refineries however are performing well below capacity.

Across the refineries, capacity utilisation has fallen from a high of just under 60per cent in 2002 to just 14per cent in 2014. To have any chance of succeeding commercially, Nigerian refineries need to operate on a globally acceptable cost structure and need to operate at 90 per cent utilisation or more.

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