News Post
New Refining Capacity Potential in Nigeria
With the start of operations at the 650,000 barrels per day (bpd) at the Dangote refinery earlier this year, the potential picture of new refinery production could be starting to clear after years of inactivity and inefficiency. If the Dangote refinery has long term success, it will usher in a new domestic market for a country that has been primarily reliant on imports for decades.
However, it is worth mentioning that the Dangote refinery has recently been purchasing crude oil for processing onsite from the United States despite being what OPEC considers to be the largest oil producer in Africa. This early purchase of U.S. crude is an indicator of just how competitive American oil production has become on the global level, but the amount of production possible from this refinery is still significant as Nigeria strives to become a net fuel exporter.
There is a considerable history in Nigeria of reliance upon imported oil and refined petroleum products as the country has struggled with several impeding factors like geopolitical issues, security challenges, economic struggles, and illegal refineries among other problems that have made new refining capacity a difficult proposition. Sustained success with Dangote could smooth the way into renewed production, specifically in rehabilitated facilities and eventual new refinery construction.
One avenue of improvement that would benefit from the success of Dangote is the ongoing rehabilitation of the Nigerian National Petroleum Corporation (NNPC) existing refineries in the cities of Port Harcourt, Warri, and Kaduna. NNPC saw these long-lived facilities fall into extreme inefficiency and nearly moribund production over the years, but the state company is endeavoring to rehabilitate these facilities as soon as the end of this year. NNPC started the rehabilitation of the Port Harcourt refinery in 2021 with a $1.5 billion plan to update and repair the facility to a potential 210,000 bpd capacity. This project has been undergoing testing in recent weeks and it could be completed by the end of the first quarter of 2024. The 125,000 bpd Warri project could complete its rehabilitation along the same timeline, and the 110,000 bpd Kaduna refinery rehabilitation plan is currently expected to be completed by the end of the year.
New refinery construction in Nigeria has proven to be difficult in gaining solid footing over the years, but the Dangote plant’s success could ignite new construction plans. Recent years have shown some success with smaller modular type refineries like the upcoming 12,000 barrel per day Azikel refinery and the two phase 30,000 bpd Waltersmith refinery, while some other refinery plans have been on hold for some time. There has been one new refinery plan in Nigeria that was announced just last month, with the 100,000 bpd Midoil refinery intended for development in Lagos.
Construction Boxscore Database analysts are continuing to study this project for any upcoming news and further details and announcements to come.
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