New Oil Refineries for Nigeria

Nigeria’s crude oil production rose in June to 2.48 million barrels per day (bpd) of oil. The country has four refineries (two in Port Harcourt, one in Kaduna, and one in Warri) which “have a combined installed capacity of 445,000 bpd.” These refineries often operate under capacity or not at all, however, meaning that Nigeria ends up importing an estimated 85% of its fuel. News that Nigeria will open six new refineries (through a $4.5 billion deal with US firm Vulcan), then, could mean that the country will reverse this trend. New refineries could even help deal with tensions over the fuel subsidy, an issue that generated massive protests this January when the government tried to remove it.

First, the good news:

According to [former energy minister Umaru] Dembo, the new refineries, which are slated to all be finished in about two and a half years, could have additional benefits for the local economy.

“Definitely, it will mean more jobs for Nigerians if this comes to fruition,” he said. “There’ll be very many things that will be available for the people…we hope there will actually be electricity.”

Now, the bad news:

The reported 180,000 barrels a day that the six new refineries would produce is a surprisingly low number.

I am no expert on oil or fuel, but it seems that Nigeria will need to refine more oil than that before the price of fuel will come down substantially across the country.

The BBC adds that the deal comes just after some shakeups within the National Nigerian Petroleum Corporation:

President Goodluck Jonathan sacked the boss and several other executives of the state oil company, NNPC, after a probe into the industry found $6.8bn had been lost due to fraud in the past two years.

In 2010, China and Nigeria signed a deal for China to build three refineries in Nigeria, but from what I can tell they have not yet been completed.

On a final note, it is worth reading this history of Nigeria’s oil and gas industry, which depicts a growing gap between refining capacity and domestic demand from 1965 to the early 1990s. It is also worth noting that Niger (with Chinese help) is constructing a refinery that will meet its domestic demand (Niger’s estimated population of 15.5 million is less than a tenth of Nigeria’s). Niger might even export fuel to Nigeria.

What do you think? Will the new refineries make a difference for ordinary consumers in Nigeria?

3 thoughts on “New Oil Refineries for Nigeria

  1. I suspect that the national price depends more on the subsidy than the number of refineries, there’s rather little a government can do to alter oil prices (with the exception of Saudi Arabia) besides subsidies. I note that they don’t specify where the refineries are going to be built and I’m a bit skeptical at the claims of job creation. New oil work can create some jobs for some people, but generally that’s specialists and stores that build up around them.

  2. the new refinary will reduce the price of every goods and services including the petroleum in nigeria for the benefit of consumers both the poor and the rich.

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