Problems and list of refineries in Nigeria

As a nation that depends heavily on crude oil for exports, one would expect that there would be working refineries in Nigeria to boost the economy. But this is Nigeria, a nation where things are done upside down, and attempts to right wrongs are done when they are often too late.

Crude oil was first discovered in commercial quantity in Oloibiri in present-day Bayelsa State in 1956 when Shell D’Arcy drilled the first successful well. As Nigeria’s economy grew, especially after witnessing the first oil boom of the 1970s, the nation depended heavily on black gold and gradually neglected other sectors of the economy.

So when oil prices dropped, of course, Nigeria suffered, with no refineries to reduce the cost of importing refined products. Now that oil prices have risen again, Nigeria is yet to take advantage of the boom. So what is the problem with the refineries in Nigeria? Are there even refineries in Nigeria? Let’s find out.

Table of Content hide 1Problems of refineries in Nigeria 1.11. Bad governance and corruption 1.22. Lack of maintenance 1.33. Vandalism 1.44. OPEC regulations 2First refinery in Nigeria 3Refineries in Nigeria and who built them 4List of private refineries in Nigeria

Problems of refineries in Nigeria

Oil refineries convert crude oil into fuel products, lubricating oils, bitumen, and chemical feedstock. These refineries are supposed to boost the nation’s economy. But in Nigeria, oil refineries are more liabilities than assets due to a number of problems. The following are the problems of refineries in Nigeria.

1. Bad governance and corruption

Bad governance and corruption are nothing new in Nigeria’s oil and gas industry. They are key factors that have affected the performance of the refineries. Nigerian refineries are 100% owned by the government. So there is no independent control of or access to their funds. All requests for operations, including sourcing for funds, must go through bureaucratic processes.

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Approvals for any meaningful maintenance are subjected to a series of considerations first by the refinery management committee, then the corporate refineries directorate,  corporate management committee, followed by the corporate board, and finally by the National Federal Executive Committee chaired by the President of the Nation, depending on the amounts required. It’s a long, tedious process that can take months which affects operations.

Meanwhile, thousands of unscrupulous practices will occur during these bureaucratic processes. Millions of funds have been swindled under the very nose of the government. There is little accountability because the people who are responsible are also culprits in the corrupt practices. Refineries cannot effectively run under these conditions hence the problems.

2. Lack of maintenance

Normally, a working refinery can continue uninterrupted operations for 24–36 months based on proper maintenance culture. Then it’s expected to systematically shut down for a period to carry out Turn Around Maintenance (TAM). When TAM is delayed, it affects the performance of these refineries. The maintenance culture in Nigeria is poor in all sectors, including the oil and gas sector. It has resulted in the breakdown of facilities, forcing the government to rely on imported refined oil products to make up for the high demand in the country. This waste of foreign exchange could have been avoided if these refineries had undergone periodic maintenance.

3. Vandalism

There have been more than 15,000 cases of pipeline breaks in the last 10 years, and most have to do with vandalism than wear and tear. These cases of vandalism have been linked to Niger Delta militants, a group of angry residents who have protested government neglect of their ordeals through violence. Random kidnappings of both government and oil workers in the Niger Delta region, particularly the expatriates, have contributed to these problems.

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According to a publication on UKESSAYS, Nigeria has lost an estimated 16 billion dollars in export revenues due to shut-in oil production since 2005. Militant attacks on oil infrastructure have also crippled Nigeria’s domestic refining capabilities. This has led to a massive loss of revenue and worsened the problem of under-recovery of crude costs.

4. OPEC regulations

The Organization of the Petroleum Exporting Countries (OPEC) was founded in September 1960 and has 13 countries as member states. Nigeria joined OPEC in 1971. However, one cannot say that the body’s regulation of oil production of its members has favoured Nigeria to maximize its production. Since 1982, members of OPEC have often agreed upon an overall oil production cap and individual production quotas, but there are no official standards but simply rely on an ad-hoc basis.

Nigeria has not been able to turn excess of 500 tbpd into ‘petrodollars’ for its economic development due to the aforementioned problems. Countries with a lesser population, such as Saudi Arabia and UAE, have bigger reserve levels of crude oil deposits, which means they can generate lots of petrodollars for economic development, while Nigeria is restricted to a lower quota that generates minimum export income. Nigeria depends on crude oil for exports, so you can imagine the impact on the refineries and the economy at large.

First refinery in Nigeria

Nigeria’s first refinery was built at Alesa Eleme near Port Harcourt and began operations in late 1965 with a capacity of 38,000 barrels per day. The refined oil products were enough to meet domestic requirements at the time. However, the refinery expanded production to 60,000 barrels per day after the civil war but couldn’t meet up with the demands of the growing population.

Before then, crude oil was first discovered when Shell D’Arcy drilled the first successful well at Oloibiri in 1956. The company changed its name to Shell-BP Petroleum Development Company of Nigeria Limited and continued its operations until it could no longer keep up with the demands of oil products in the growing economy.

It was Shell-BP that built and completed the first refinery in Nigeria in 1965 to meet the product needs of the country. That refinery is now called Port Harcourt Refining Company (PHRC).

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Refineries in Nigeria and who built them

There are currently five refineries in Nigeria. Four of them are owned by the federal government through the Nigerian National Petroleum Corporation (NNPC). The fifth is owned and operated by Niger Delta Petroleum Resources (NDPR). The four refineries built and owned by the federal government are:

• Port Harcourt Refining Company (PHRC) Limited (built by Shell-BP but acquired by the federal government in 1978).
• Warri Refining & Petrochemicals Company (WRPC) Limited.
• Kaduna Refining and Petrochemicals (KRPC) Limited.
• Indorama Eleme Petrochemicals Company Limited (IEPL).

List of private refineries in Nigeria

Below is a list of private refining companies in Nigeria, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)

S/N	COMPANY	PLANT LOCATION	LICENSE ISSUED	CAPACITY (BPSD)	LICENSE STATUS
1	Niger Delta Petroleum Resources (NDPR)	Ogbelle, Rivers State	Licence to Operate (LTO)	1000	Plant is Operational
2	Amakpe International Refinery	Eket Akwa Ibom State	Approval to Construct (ATC)	12000	Process unit fabricated and awaiting shipment and installation.
3	Resource Petroleum & Petrochemicals Inc.	Ibeno, Akwa Ibom State	Approval to Construct (ATC)	100000	Licence is Valid. Plant is yet to be installed
4	Kainji Resources Limited	Oguta, Imo State	Licence to Establish (LTE)	24000	Licences issued in July 2013
5	Omega Butler Refineries Nigeria	Ikpokiri, Rivers State	Licence to Establish (LTE)	20000	Licences issued in July 2013
6	Dangote Industries Limited	Lekki Free Trade Zone, Lagos	Licence to Establish (LTE)	500000	Licences issued in September 2014

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