By Pagaebi Opuene
Nigeria has four refineries of world standard, with a total assumed installed capacity of 445,000 barrels per day. The country has 4 existing refineries that have been operated sub-optimally for various reasons. Nonetheless, demand shortfalls are met through importation. Currently, efforts are ongoing to rehabilitate and revamp the existing refineries- in order to stabilize and produce to designed capacity, meet up with increase in demand for white products (PMS, DPK & AGO) and to deal with the economic imperative of immediate import-substitutionas there is the need to close this gap and stem the flood of imports; these all prove the case for the establishment of a new refinery in Nigeria[1]. New refining capacity will thus be required to meet supply gaps and conserve on foreign exchange.[2]
Given factors such as the technicality, considerations of prospective investors, government policy on roil subsidy and high cost of projects, the economic viability of an additional refining capacity remains relative.
Given factors such as the technicality, considerations of prospective investors, government policy on roil subsidy and high cost of projects, the economic viability of an additional refining capacity remains relative.
The Global Refining Industry
The running and establishment of refineries is different from country to country but depends on the policies and objectives of government.
The global refining industry is faced with the following scenarios:
- Refineries can be
- Fully government owned.
o Jointly owned.
o Privately owned.
o Fully or partially operated for profit purposes.
o Operated without any profit objectives.
o Operated as a feedstock for a downstream process plant.
Generally, in deregulated economies refineries are commercially run and their operations are determined by highly capitalized capital which allows refineries to operate at maximum installed capacity, amortize the investment, recover the cost of depreciation and plan for replacement of plants
.
Refinery Characteristics
The refining and petrochemical plants are integrated complexes that process crude oil into various by-products according to international standards. Crude oil source and end products are major considerations in the design and refining methods of these plants. The refining operation is a continuous chemical process of separation and reorganization of molecular composition of hydrocarbon chains in the crude oil structure.
These plants transform crude oils into products such as Liquefied Petroleum Gas (LPG), Premium motors Spirit (PMS), Household Kerosene (HHK), Automotive gas oil (AGO) etc. Petroleum refineries make use of ten to twenty different processes to transform crude oil in to products.
Refineries are capital intensive, have long lead times and are long lived. They are highly specific assets and their operation and throughputs impact the environment.[3] The optimization of a refinery requires different tradeoffs.
Decision to invest in a refinery project especially for expansion or increase in capacity is largely dependent on the increase in demand for its products which is usually difficult to ascertain due to product import and industry perception of long term demand. This has led to certain levels of over capacity in the global refining industry and has resulted in reduction in operating refineries mostly in Europe and the United States of America (USA).[4]
African countries have about 7% of the world distribution of refineries and 3.8% of the total crude refining capacity, with North Africa clearly the leader in region. Crude refining activities are concentrated in Egypt, Algeria and Libya and about 11.2% of global conversion activities going on in the area. Nigeria, with crude capacity of 445,000 barrels per day is the leader in West Africa. However, most production facilities and infrastructure in the region are rapidly decaying, epileptic and inefficient and require a huge capital infusion for modernization. Unfortunately, the region is enmeshed in unpredictable political and economic instability that makes foreign investment unattractive. Other ineptitudes like uncoordinated policies and inconsistency in fiscal measures government, low level of industrialization and apathy to technology are factors militating against efficient management and future expansion of refineries in the region.[5]
Overview of Refining activities in Nigeria
Nigeria has four refineries of world standard, with a total installed capacity of 445,000 barrels per day. The federal government has monopoly of crude oil refining with overall objective of meeting local petroleum products consumption currently put at 445,000 barrels per day.
All these refineries process Nigerian crude oil streams from various oil fields. The refining and petrochemical plants in Nigeria are integrated complexes that process crude oil into various by-products to international standard. The four refineries are peculiar and are run entirely as partially commercialized government owned establishments.
Distribution of Petroleum products
Refined petroleum products are distributed nationwide through pipelines to designated depots of the corporation. Transportation from the refineries and the depots is handled by road tankers, bulk rail wagons and coastal barges to the marketers’ outlets and consumers alike. The Nigerian National Petroleum Corporation (NNPC) has over 3,000 kilometers of pipeline connecting seventeen coastal and inland storage depots to distribute refined petroleum products nationwide. The pipeline and distribution network is made up of three separate and unconnected systems for the supply of petrol (PMS), kerosene (DPK, HHK) and diesel (AGO) to the depots while low-pour fuel oil (LPFO), high-pour fuel oil (HPFO) and liquefied petroleum gas (LPG) are supplied directly from the refineries.
Domestic Refining and Capacity utilization
The refineries (KRPC (Kaduna Refining & Petrochemical Co. Ltd), PHRC (Port- Harcourt Refining Co. Ltd), WRPC (Warri Refining & Petrochemical Co Ltd) ) in 2008 received a total of 45,533,304.84 barrels (6,205,546.00 MT) of crude oil, with an opening stock of 2,205,414.00 barrels (300,750.70 MT) out of which 39,264,519.46 barrels (5,353,263.00 MT) was processed into various petroleum products. In 2007, 19,059,670.28 barrels (2,600,227.83 MT) was processed. This shows an increase of over 106%. Basically an average of refinery output of metric tonnes per day for each the refineries is as follows: KRPC- 2,926.35 MT (19.56%), PHRC- 5,064.95 (17.84%) and WRPC- 6,546.94 (38.52%) with their respective capacity utilization. A cumulative performance of the refineries for the last 12 months is represented in the chart below.[6]
Refined Capacity Utilization (Jan-Dec, 2008)
Source: NNPC website / Annual Statistical Bulletin 2008.
The crude oil sourceS and their end products are major considerations in the design and refining methods of these plants. Nevertheless, their operations and products meet acceptable international standards, features and specifications. They are continous chemical processes of seperation and reorganisation of the molecular composition of hydrocatbon chains in the crude oil structure. Aggregate domestic production by the refineries was 4,426,861.00 metric tonnes of various products which include, Premium Motor Spirit (PMS), Household Kerosene (HHK), Automative Gas Oil (AGO) and Fuel Oil in 2008. For purpose of economic analysis we would take a look at finished products of PMS and HHK from January to December 2008 which is represented in the chart below.
Source: NNPC website/ Annual Statistical Bulletin 2008
Nigeria refineries were designed to produce 13.17 Million Metric Tonne Per Annum (MTPA) of White Products (PMS, DPK & AGO); they have on the average produced only about 32% of this volume (4.18 Million MTPA). While the refineries were designed to produce 5.67 Million MTPA of Gasoline, they only produce an average of 25% of this volume (1.42 Million MTPA) over the past 10 years. Over the next 5 years, it is expected that these refineries would stabilize to about 63% of design capacity due to current efforts of rehabilitation, producing approximately 8.36 Million MTPA of white products.
Petroleum Product Imports
Nigeria’s demand profile for White products is estimated currently to be 15.24 Million MTPA. At present production levels, there are subsisting shortfalls which are met through importation. Therefore the necessity for import-substitution provides a case for additional refining capacity. A total of 4,596,144.81metric tons of PMS valued at $4,578,606,958 and 909,542.32 metric tons of HHK valued at $1,082,333, 206.87 was imported in 2008.[7] Below is the chart representing the total imports by the Nigerian National Petroleum Corporation from January – December 2008.
Source: NNPC website/ Annual Statistical Bulletin 2008
The energy demand and mix are quite difficult to forecast. This is because of the complex nature of the various factors that determine their pattern. Certainly, events of the past few years have shown a market that has an unpredictable behavioral pattern and one that has often rendered well articulated projections grossly inaccurate. With regard to petroleum products demand in Nigeria has been influenced by economic growth rate, increased vehicle activity and inadequate electricity supply which is now privately supplied by PMS and AGO powered generators.[8]
NUTSHELL:
Refineries are a very important link in the oil and gas value chain of any nation or region. In this article, Pagaebi gives us a sense of the global refining industry before honing specifically on Nigeria with a view to sheding more light on the domestic refining infrastructure and utilization capacity. For more information on this article and to view Pagaebi's professional profile, click here.-->
Am sorry but while this write-up is a good attempt at describing the present state of things it falls short in terms of execution. I ll just say a few things and shut up :D. For a blog or website of this quality - and am assuming this is Feso's project and Feso is one for excellence - your charts and tables should be formatted in such a way as not to make the choice of word processing, spreadsheeting or plotting software obvious. It's standard practice at least at least in most standard articles. There are many templates online for most of these things if you are too busy to do the tweaking yourself.
ReplyDeleteSecondly the writer presented the same sets of facts in different forms over and again. That style is more suited to writing educational material where you really want your audience to grasp the fact you are thrashing. And even then there is a limit. Articles that are meant for leisure reading or meant to stimulate interest or create awareness must be interesting read and manage to capture the readers attention from beginning to end.
Hope I have not said too much. Nice job though. Cheers!
Dear Anonymous,
ReplyDeleteThank you for the comments; 'highly appreciated. The work is not my project (or research work- as you infer) however, I have reviewed and give it a high recommendation for the following reasons:
(1) The approach of this blog is not to ''peer review'' articles because nobody peer reviews conversations on facebook. I believe that articles on this site should be regarded for their ''conversational value''. As such, this article meets the requirements of this blog- which are to add to the discourse and appeal to the ability to do so from a researched and information-backed manner. As such we sacrifice the luxury of templates and obvious software for the simplicity and flow of conversational value
(2) The articles are usually presented ''as-is'' . As such, there is no distortion of the content of the material as submitted by the writer. In this regard I should state that the format of this blog is to split excellent ''full research papers'' into as many bits as possible- typically 2 articles or more. As such you may experience this repetition due to the segmented nature of the articles. My apologies for this.
(3) The basic requirement for acceptance of research papers for publishing as articles is the passion of the writer and the ability to pass across a message. Our site adds conversational and networking value to our readers; as for the strength of academic aesthetics, there may be some trade off. Please forgive us for this.
Thank you though- your comments are well noted and we will work to improve where we can. Keep reading.
cheers