With the concerted refinery investment campaigns by government and private players in the domestic midstream petroleum industry, attention has started shifting away from production capacity redundancy to supply gaps that might arise when plant developments attain commissioning.
Naturally, whereas players with integrated business models already have clear plans on meeting feedstock requirements for their refining projects, feedstock demands from midstream focused investments present market opportunities for which the government might seek increased production quota from the Organization of Petroleum Exporting Countries (OPEC).
Calculations by Oracle Intelligence show that despite recovery of 445,000 barrels per day refinery capacity by the Nigerian National Petroleum Corporation (NNPC), new 650,000 barrels per day plant development by Dangote Refinery, and about 61,000 barrels per day scalable modular plants onsite oil fields in the country, new proposals for refinery projects raise the potential for capacity growth especially as the local market players demand price deregulation.
After a deal for princely billion dollars funding arrangement, NNPC is currently processing tenders for refinery rehabilitation jobs that entail significant retrofitting, upgrade and modernization of the plants with parts to be sourced from the original plant manufacturers,
The 24 month rehabilitation programme will see the 210,000 barrels per day Port Harcourt Refinery, the 150,000 barrels per day Warri Refinery and the 110, 000 barrels per day Kaduna Refinery are expected to be back by early 2023 at 90 percent of nameplate processing capacity. The plan indicates targets of processing some 400,500 barrels of crude oil to produce 46.8 million liters of refined products.
The overhyped 650,000 barrels per day Dangote Refinery whose commissioning date has remained fluid and repeatedly shifted also raises the potential for imminent local demand surge for crude oil.
Inland, the Niger Delta Exploration and Production Company declared that it would soon start production of 600,000 litres petrol per day to complete the product range as it upgrades its plant capacity to 11,000 barrels per day modular refinery at operated Ogbele marginal field onshore Niger Delta.
Meanwhile, WalterSmith Petroemann commissioned 5000 barrels per day modular plant in Ibigwe on November 24 also performed ground breaking for a total of 45,000 barrels per day of additional plant capacity to be realized in second and third phases of the refinery development.
If all the domestic refining plant developments and rehabilitation works are delivered as planned, local crude oil demand will jump to 1.156 million barrels of crude oil daily (mbd) and significantly unlock more upstream production capacity outside restrictions imposed by OPEC.
Major concern that will ultimately arise in the emerging scenario is how to mobilize the right set of investments to boost production capacity to justify demand for increased OPEC quota for the country which is currently fixed at 1.526 mbd, just slightly higher than envisaged domestic demand.
According to official production figures of members of coalition of 22 countries that cooperate in preventing supply glut to maintain healthy prices in the market, Nigeria posted average daily production of 1.54 million barrels of crude oil for the month of February.
Nigeria’s crude oil exports which surged by 70,000 barrels per day in February despite overall production decline by the coalition of producing countries seeking stronger prices with supply sentiments broke the country’s production ceiling with OPEC.
The Nigerian production figure for February, according to the group’s output performance compiled by Platts, is a significant improvement on the country’s 1.47 million barrels per day (mbd) production in preceding January and higher than her allocated production quota of 1.516 mbd.
The report has it that Nigeria has continued to register slight quota indiscipline in the group with performance of 92.33 percent in the month.
Oracle Intelligence reports that Nigeria is an eminent member of the Organization of Petroleum Exporting Countries (OPEC) which forms the largest bloc in the coalition of producers that controls market forces at the global petroleum exchanges.
The OPEC and coalition primarily apply production quota on crude oil production and export, creating flexibility for countries with robust mix of hydrocarbon liquids to achieve signature blends with additional production condensate and natural gas liquids.
This whereas Nigeria’s production with OPEC is pegged at 1.516 mbd, actual output is calculated at 2.3 mbd when condensate and NGLs are factored in the country’s crude export blends.
Besides, it is not clear whether calculations also include volumes assigned to local refineries, including the 445,000 barrels per day for the three refining companies of the Nigerian National Petroleum Corporation (NNPC) and other smaller refineries onsite oil production fields onshore Niger Delta.
With rising oil prices and the prevailing desperate need for the country to boost it foreign exchange income, the emerging dual market for the nation’s crude oil presents an immense revenue opportunity for the government. And deepening the domestic crude oil demand for local refining, and boosting upstream development and production to meet the demand challenge require government to create congenial investment conditions for upstream and midstream investments.