Nigeria will continue swapping crude for fuel for at least three more years because its refineries are still not fully operational.
Africa’s biggest oil producer, which previously had a goal of revamping the plants by this year, will persist with an annual swap program until the refineries are fixed by 2023, Mele Kyari, the state oil company’s new managing director, said in an interview in Abuja. The latest round of the swap program, known as Direct Sale, Direct Purchase, or DSDP, will run until September 2020 and then be extended.
“The DSDP is a child of necessity and not a permanent arrangement,” Kyari said. “So anytime we are able to meet our domestic petroleum products requirement, of course DSDP goes away.”
The West African country has been struggling to become self-reliant in products such as gasoline and diesel for several years because its own refineries are working at a fraction of their capacity. That puts a strain on foreign currency reserves because, in order to obtain fuels, Nigeria is forced to swap crude that it would otherwise sell for dollars.
The Nigerian National Petroleum Corp. said on Aug. 15 that companies including Vitol SA, Litasco SA and Sahara Energy Ltd. were shortlisted to exchange crude for gasoline. The latest round of the DSDP will start next month.
Four plants run by the state oil company operate far below their combined 445,000 barrel-a-day potential, forcing Nigeria to import more than 90% of its fuel requirements.
Stopgap Swap
NNPC first began the swap contracts more than six years ago as a stopgap to curb gasoline shortages as it tried to revamp the refineries. The measure will now continue until at least 2022-23, Kyari said. For this year’s program, NNPC is looking for 14 billion liters, or 14 cargoes monthly.
Kyari said a new target to revamp the refineries has now been set for 2023, starting with the 210,000 barrel-a-day capacity plant in the southern oil hub of Port Harcourt. A preliminary check by Maire Tecnimont SpA on the plant, due to be completed next month, will give the estimated cost of fixing it, he said.
A similar check will also be done on the Warri and Kaduna refineries before repairs, the NNPC chief said.
Nigeria this month named Timipre Sylva as its new minister of state for petroleum resources. He replaced Emmanuel Kachikwu, who pledged two years ago that he would step down if the country wasn’t self-sufficient in refined petroleum supplies by 2019.
“What we are doing is to see how can we get our refineries back on course and how do we support others to increase local refining capacity,” Kyari said. “Ultimately, by 2023 we should be a net exporter of petroleum products, assuming we’re able to get Dangote refinery at full capacity and we’re able to fix our refineries.”
Source: BNN Bloomberg