February 12, 2024/CSL Research
Based on news reports, the Port Harcourt Refinery is set to start operations following the supply of 475,000 barrels of crude oil by Shell Petroleum Development Company Limited. It was also stated that some activities, including pressure and leak testing to assure pipeline integrity by relevant subsidiaries and maintenance activities on the Oil and Gas Terminal, BOT Refinery export pumps and associated instrumentations were carried out at the terminal in January. This first phase of the project is expected to refine 60,000 barrels of crude oil.
The Nigerian National Petroleum Company Limited, the manager of the refinery, revealed that the second phase of the facility will be completed in the fourth quarter of 2024 and will enhance the capacity to 150,000 bpd.
The Warri and Kaduna refineries are also expected to come onstream before the end of 2024. Over the years, successive governments have tried to revive the country’s ailing refineries with no evident results. Consequently, over 90% of the refined petroleum products consumed in Nigeria are imported. The refineries located in Kaduna, Warri, and Port Harcourt, with a combined nameplate capacity of 445,000 bpd, have long operated at extremely low capacity and at various times had a combined capacity utilization of 0.00%.
Nigeria’s hope of attaining self-sufficiency in the domestic oil refining space looks bright in 2024, with the expected commencement of operations at the Dangote refinery, the Port Harcourt refinery, and several completed modular refineries. While we believe achieving self-sufficiency in local refining might not reduce the cost of petrol significantly, sufficient local refining/export capacity would at least boost the availability of the product and have a net
positive effect on FX liquidity in our view.
Though the nuances around how achieving local refining capacity will impact FX liquidity remains difficult to assess, we are more focused on the ability of the Dangote refinery to export refined petroleum products which should directly support FX liquidity.
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