Nigeria: $3.097bn Investment Opportunities Exist in Condensate Refineries, NNPC Says

The Nigerian National Petroleum Corporation (NNPC) has said investment opportunities worth nearly $3.097 billion currently exist in the country’s condensate refineries’ space. Group Managing Director of NNPC, Mallam Mele Kyari, stated this on Tuesday in Lagos in his keynote address at the 15th Oil Trading and Logistics (OTL) Africa Downstream Week.

Kyari said between $1.6 billion and $2.7 billion were required by the corporation to improve the supply and distribution of petroleum products, revamp Liquefied Petroleum Gas (LPG) infrastructure, and build Compressed Natural Gas (CNG) plants in the country.

Kyari, who was represented at the event by the Group Executive Director, Downstream, NNPC, Mr. Adetunji Adeyemi, projected that Nigeria’s petroleum product demand would grow to 17.3 million metric tons by 2025, up from the 15.1 million MT in 2020.

The theme of the conference was, “Downstream in Transition: Getting Set.”

Kyari added that the country would need a refining capacity of about 1.52 million barrels per stream day (MBPSD) to meet its petrol requirement in the next four years.

He said, “As Nigeria’s demand for petroleum products is expected to grow from 15.1 million MT in 2020 to 17.3 million MT by 2025, the country needs a refining capacity of about 1.52 million barrels per stream day (MBPSD), to meet its PMS requirement in the next four years.

“The NNPC refineries’ 445,000 BPSD and Dangote Refinery’s 650,000 BPSD running at 60 per cent and nameplate capacity, respectively, would supply 76 per cent of that requirement, leaving a shortfall of about 17 million litres of PMS daily.

“NNPC is adding 215,000 BPSD of refining capacity through private sector driven co-location at the existing facilities in PHRC and WRPC, respectively. Modular refineries are also adding capacities, such as the 5,000 BPSD Waltersmith refinery, which will be upgraded to 50,000 BPSD.

“Additional 250,000 BSPD is expected to come from the Condensate Refineries through the private sector partnership. The co-location and condensate refineries will close the PMS supply-demand gap and create positive returns to the investors.

“About $3.097 billion investment opportunities exist in condensate refineries while $1.6 – $2.7 billion is required by NNPC to improve the supply and distribution petroleum of products, revamp LPG infrastructure and build CNG plants.”

Kyari said the demand for natural gas could grow about four times over the next decade, increasing from 4.8 billion cubic feet per day (bcf/d) in 2020 to between 10 – 23 bcf/d in 2030.

He said currently, supply to the domestic market was about 8bcf/d to power, 0.77 bcf/d to industries, and about 54 bcf/d was flared, while 3.2 bcf/d was for export gas through the LNG and the West Africa Gas Pipeline (WAGP).

According to him, achieving this growth in demand would be occasioned by increasing the dispatchable capacity of existing power in line with the Presidential Power Initiative, which is less than 1.4 bcf/d).

He added that the growth would be achieved through assuring delivery of major fertiliser projects (Dangote, Brass) 5 bcf/d), and enabling industrial demand for natural gas in the northern axis of the country (1.2 bcf/d).

On the global oil market outlook, Kyari said, “Some $10.4 trillion global stimulus in response to the COVID-19 pandemic has led to the rebound in consumers’ spending while incentives for long-term investments in hydrocarbon has waned.”

He stated that hydrocarbon would continue to be relevant in the global energy mix for the next two decades, quoting the recent data by the Organisation of Petroleum Exporting Countries (OPEC).

According to the data, the world oil demand was expected to rise from a pandemic stricken 90.6 million bpd in 2020 to 108.2 million bpd in 2045, thereby accounting for 28 per cent of global energy needs. The OPEC data further stated that the rise in demand would be driven by growth in world population, which is set to expand to 9.5 billion by 2045, and the huge potential for expanding access to modern energy services for the under-served.

“However, $11.8 trillion in oil-related investments will be required mostly in the US upstream to meet the market needs,” Kyari noted.

On the issue of downstream in transition, the NNPC boss noted that the Nigerian oil and gas industry has been in transition prior to the Petroleum Industry Bill (PIB) passage in response to the global energy transition and decarbonisation initiatives.

Kyari maintained that it would be difficult to discuss the transition in the downstream sub-sector in isolation from the overall evolution that was happening in the industry. He said NNPC had diversified its portfolio over the years, transiting to an energy company with new investments in gas, power, and renewables, pointing out that key pipeline projects are on-going to assure delivery of gas to the demand nodes.

He stated, “The OB3 project, which brings gas from East to West, is nearing completion. The 614km Ajaokuta, Kaduna, Kano (AKK) project, which was launched by Mr. President in June 2020, is progressing very well. These could add up to $40 billion to annual GDP and create additional six million jobs.

“The corporation has progressed with the Refineries Rehabilitation Programme to further boost its participation in the Oil and Gas value chain by awarding the $1.5 billion Port Harcourt rehabilitation contract with the commitment to deliver on Warri and Kaduna Refineries.

“The rehabilitation of critical downstream infrastructure comprising of major pipelines, depots and terminals through the Build, Operate and Transfer (BOT) financing model is on course.

“The federal government has declared 2021 – 2030 as decade of gas development in Nigeria.”

Kyari explained that the transition in Nigeria’s oil and gas sector was being driven by the global decarbonisation efforts to switch to renewables in response to environmental concerns.

As investments in hydrocarbon continued to wane due to energy transition and geopolitics, Kyari said the world economy faced shortages, high energy prices, rising inflation and sluggish growth.

Peter Uzoho

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