The shortage of crude oil and inadequate funding have significantly hindered the operations and development of seven refineries in Nigeria, raising concerns about the country’s ability to boost local refining capacity and reduce dependence on imported petroleum products.
Industry stakeholders warned on Thursday that without a steady crude supply, efforts to attract investors into the refining sector could remain futile.
Refineries Struggling Amid Crude Supply Deficit
According to Eche Idoko, National Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), refinery owners are struggling to operate due to a lack of crude feedstock.
“Crude availability is a major issue. Many of these refineries are unable to move past the Final Investment Decision (FID) stage because investors fear that securing a steady supply of crude is uncertain,” Idoko explained.
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shows that 15 refinery operators hold licenses with a combined refining capacity of 1,151,500 barrels per day (bpd). However, only 852,000 bpd is currently operational due to crude shortages and technical challenges.
Several refineries, including the 10,000 bpd OPAC refinery and the 2,500 bpd Duport refinery, remain inactive due to poor feedstock supply. Similarly, the state-owned Kaduna refinery, despite receiving approval to refine crude, is not operational.
Dangote Refinery Halts Naira-Based Sales Over Crude Allocation Issues
The Dangote refinery, Nigeria’s largest private refinery, recently suspended sales of petroleum products in naira, citing concerns over crude allocation and currency mismatches.
Insiders revealed that the Nigerian National Petroleum Company Limited (NNPCL) had diverted large crude volumes to foreign creditors to repay loans, making it difficult to sustain the naira-for-crude arrangement with Dangote.
Industry Players Call for Government Intervention
Idoko stressed that resolving the refinery crisis requires government-led efforts to guarantee crude supply and create funding opportunities for investors.
“Modular refineries can only increase capacity if two key issues are addressed: a guaranteed feedstock supply and accessible funding for refinery projects,” he said.
Similarly, Chinedu Ukadike, National Publicity Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), blamed the refinery crisis on fluctuating government policies, security issues, and poor community relations.
“The government must ensure energy security and guarantee returns on investment. Many refineries are located far from oil-producing areas, and some nearby wells are already inactive,” Ukadike noted.
Experts Warn of Policy Failures and Declining Crude Production
Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), attributed refinery failures to technical knowledge gaps among operators.
Meanwhile, oil and gas analyst Olatide Jeremiah criticized the NNPCL’s priority on crude sales to foreign buyers, warning that it starves local refineries of much-needed crude.
“Nigeria produces just 1.5 million barrels per day, which is inadequate given our commitments to forward sales deals and foreign contracts. The NUPRC must work to boost production to 2.5 million bpd to stabilize the refining sector,” Jeremiah advised.
The Way Forward
With several refineries inactive and investors hesitant due to crude supply uncertainty, industry experts are urging the government to:
- Increase crude production to meet local and international demands.
- Ensure reliable crude allocation for Nigerian refineries.
- Develop robust funding mechanisms to support refinery projects.
- Implement stable policies that attract investment in the refining sector.
Until these challenges are addressed, Nigeria’s dream of self-sufficiency in petroleum refining remains at risk.
