-By Teddy Nwanunobi
Nigeria’s economy is glued to its oil and gas sector. That is where the country has sourced its strength over the decades, following the discovery of oil in commercial quantity in its southern town called Oloibiri in 1956. Oloibiri is a community in the Niger Delta region.
Nigeria is currently the leading oil producer in Africa. But sadly, the country is still dependent on imported refined products due to lack of domestic refining capacity.
There have been sustained efforts to improve local refining capacity, given that most of the existing and government-owned refineries are moribund. About 90 per cent of the refined petroleum products consumed in Nigeria are currently being imported, implying huge FX requirements which burden the nation’s finances. Nigeria’s refineries have long operated at low levels due to many years of underinvestment and poor maintenance.
Despite the concentration on the oil sector, Nigeria’s economy has witnessed a steady decline over the years. The recent fall in crude oil prices has triggered conversations around the economic diversification.
Yes, Nigeria’s economy is anchored on the oil and gas industry. But this has not yielded any serious economic growth. What Nigeria needs to do to experience any serious economic growth is just one thing: put an end to the importation of petroleum products.
Sector players know this much. This is why the news of Africa’s richest man, Aliko Dangote, coming up with a refinery was a cheering one. Dangote’s 650,000 barrels per day (bpd) integrated refinery and petrochemical project, which is still under construction in the Lekki Free Zone, Lagos State, is expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion.
The US $18 billion project is expected to generate 9,500 direct and 25,000 indirect jobs. The refinery is expected to process a variety of light and medium grades of crude to produce Euro-V quality clean fuels, including gasoline and diesel, as well as jet fuel and polypropylene. The processing facilities include: a crude distillation unit (CDU) and associated facilities, a mild hydrocracking (MHC) unit, a residual fluid catalytic cracking (RFCC) unit, a naphtha hydrotreater, and a gasoline hydrodesulfurisation (HDS) unit, as well as alkylation units.
The Dangote Refinery will increase Nigeria’s refining capacity two-fold, and help meet the increasing domestic fuel demand, while generating foreign exchange through exports.
Dangote must be commended for taking the lead to invest in the oil sector. As at the time he stepped into the building of a refinery, there was nothing stopping other investors from doing so. But he took the bold step.
It was gathered that some individuals and companies got licenses. They, however, did not make any move to start operations. Some have alleged that he had government connection.
Dangote was to site the refinery at Olokola town, in Ondo State but poor environment forced him to move to Lagos.
Another investor who has taken the bull by the horns to establish an oil refinery in the country, is the BUA Group, one of Nigeria’s leading business conglomerates. The best thing BUA did in doing so is to build his own refinery in Akwa-Ibom State. This is strategic. Siting the refinery’s integrated complex in Akwa Ibom is to take advantage of the location’s proximity to raw feed stocks and export routes to regional countries. Most importantly, BUA’s coming will aid competition.
Unlike the situation where “The fewer the merrier” is well accepted in the society, BUA’s entry (and perhaps more investors following in BUA’s footsteps) will be a welcome development for the country and the citizens.
Towards the end of last month, BUA Group signed a progress acknowledgement statement for Axens, a French firm that prides itself in powering integrated solutions worldwide. The acknowledgment came after an agreement reached by the two parties on 1 September 2020, for Axens to supply process technologies for the design and construction of BUA’s 200,000bpsd petrochemical refinery.
Going by the progress so acknowledged, the refinery project has an estimated completion time of four years. At completion, the refinery is expected to serve as a source of gasoline, diesel, jet fuel (meeting Euro-V specifications) for the Nigerian and larger African markets.
BUA followed it up by letting a contract to Lummus Novolen Technology GMBH to provide technology licensing for the new petrochemical unit to be built at BUA Refinery’s 200,000-b/d grassroots integrated refining and petrochemical complex under development. As part of the contract, Lummus will license its proprietary Novolen gas-phase polypropylene (PP) technology for a new 285,000-tonnes/year PP unit at the refinery, as well as deliver basic design engineering, training, services, and catalyst supply for the project, the service provider said on April 29.
“We look forward to working with BUA Refinery on this critical project and supporting the first Novolen polypropylene unit in Nigeria. Our world-class Novolen technology is well suited to meet Nigeria’s increasing demand for the growing petrochemical products market. It offers a flexible range of industry-leading products for all PP applications, and the industry’s lowest overall capital and operational costs, while providing customers with high process reliability and flexibility in responding to market needs,” Lummus Technology’s President and Chief Executive Officer, Leon de Bruyn, said.
“We are pleased to sign this polypropylene contract for our BUA Refinery and Petrochemicals Project with Lummus Technology, a world leader in delivering polypropylene solutions, which will solve the increasing demand for high-performance grade polypropylene in Nigeria, the Gulf of Guinea as well as the Sub-Saharan Africa Region. We are confident in the capacity and technical expertise of Lummus Technology to deliver a best-in-class, 285,000-ton PP unit for our refinery project scheduled to come on stream in 2024,” AbdulSamad Rabiu, Chairman of BUA Group said.
The contract for the integrated complex followed its September 2020 award to Axens Group to deliver basic engineering, proprietary equipment, catalysts, adsorbents, as well as training and technical services, for the planned multibillion-dollar RFCC-based complex that – alongside propylene, an essential component for the petrochemical industry used in PP-based plastics and packaging – will produce high-quality gasoline, diesel, and jet fuel meeting Euro 5-quality specifications for the Nigerian and regional markets.
On April 14, President of Axens, Jean Sentenac, according to a release, said BUA Refinery’s project was advancing on schedule for on-time completion. There is no doubt that the refinery, which is slated for commissioning in 2024, will help reduce Nigeria’s dependence on imported fuels and petrochemicals, as well as reduce its costs of shipping its domestic crude production abroad for refining by other operators.
BUA’s capacity is not in doubt. Its cement has sustained giant strides in its bid to be a leading business conglomerate in Africa, evidenced by its commitment to maintain active participation in the fields where it currently operates. Apart from its investment in the petrochemical sector, the firm is also currently neck-deep into its sugar refinery with an expected completion date of 2022, among other projects.
By the time the Dangote and BUA refineries are completed, there would be at least an additional 850,000bpsd local refining capacity (excluding capacities from modular refineries) for Nigeria and Africa at large. Ultimately, this development and the output from the increasing number of the local modular refinery are expected to provide the needed supply for local consumption, which, according to the National Bureau of Statistics (NBS) Q1’20 oil import and consumption report, is 5.36 billion litres (364,092bpsd).
Overall, activities in the downstream oil and gas sector have improved drastically over the past three years. The private sector players, such as Dangote, BUA and the private operators of the growing number of modular refineries are on the one hand buoying refining capacity. The Federal Government, it would recall, approved the upgrade of Port Harcourt refinery (a 210, 000bpsd capacity refinery). It has also put in place a monitoring team that would ensure the funds are effectively utilised. Given the scale of demand for petroleum products in both Nigeria and the entire Economic Community of West African States (ECOWAS) region, the country stands to gain significant export revenues, if it increases local refining capacity.
What the national refineries could not achieve, Dangote’s and certainly BUA’s entry will ensure it is achieved. But most importantly, there is room for more entries.