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Dangote, Modular Refineries Abandon Petrol Refining Over Return Of Subsidy - Investment - Nairaland

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Dangote, Modular Refineries Abandon Petrol Refining Over Return Of Subsidy by chigoziri2403(m): 9:13am On Sep 22, 2023
·With PMS consumption at 99%, FX challenges may continue

Dangote Refinery and other modular refineries operating in Nigeria have shifted their focus away from refining premium motor spirit (PMS) due to the return of subsidies under President Bola Tinubu’s administration.

While Dangote is preparing to start its 650,000-barrel-per-day refinery in the coming weeks, it has decided to produce diesel and aviation fuel instead, as the previously announced deregulation of the downstream segment of the oil industry is now uncertain.

Existing refineries in the country are struggling with a shortage of crude oil exacerbated by declining crude oil production and swap deals arranged by the Nigerian National Petroleum Company Limited (NNPC).

Following the challenge, Dangote has opted to import crude oil to address the shortage.
Nigeria consumes approximately 19.5 billion litres of petroleum products yearly, with about 99 percent of that consumption being PMS, while diesel and aviation fuel make up only about one per cent.

This means that the shift away from PMS production by private refineries, including Dangote, may not significantly alleviate foreign exchange pressure and economic hardships caused by PMS imports.

The Group Executive Director of Dangote Refinery, Devakumar Edwin, stated that the refinery is set to receive its first cargo of crude in the next two weeks and will begin producing up to 370,000 barrels per day of diesel and jet fuel starting in October.

The facility will operate in phases, starting with diesel and jet fuel production, with plans to transition to using Nigerian crude by November.

Edwin also mentioned the possibility of sourcing crude from other countries, such as Russian grades, if global circumstances permit.

The return of subsidies to the downstream oil and gas industry had been reported by The Guardian.
This has been confirmed as the Federal government reportedly paid N169.4 billion in subsidy in August to maintain the pump price of PMS at N620 per litre.

Chairman of the Crude Oil Refineries Owners Association of Nigeria (CORAN), Momoh Oyarekhua, explained that most modular refineries in Nigeria currently produce diesel, naphtha, fuel oil and kerosene.

While naphtha can be treated as PMS (gasoline), the cost of adding a reformer to produce petrol is prohibitively high, which is why some modular refineries don’t have reformers attached to their facilities. Oyarekhua suggested that with the deregulation of petrol, investors might become interested in attaching reformers for PMS production.

The National President of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), Benneth Korie, had said most of the local refineries only turned out diesel and remained unreliable due to crude shortages.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) claimed to have met the crude oil supply requirements of modular refineries, delivering 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023. However, operators of these refineries, including Deputy Chairman of the Crude Oil Refinery Owners Association of Nigeria, Dolapo Kotun, dispute this claim, stating that the crude oil needed for the modular refineries to operate effectively has not been supplied, consistently.


Re: Dangote, Modular Refineries Abandon Petrol Refining Over Return Of Subsidy by AwokenVawulence: 9:14am On Sep 22, 2023

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