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Zainab Calcuttawala

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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Nigeria’s Oil Refinery Capacity Set For Much-Needed Increase

Refinery

Despite being Africa’s largest crude oil producer, Nigerian refining capacity is low, which forces the government to spend foreign currency reserves on purchases of refined oil goods. Building new refineries within the country’s borders would allow Lagos to revitalize aging oil facilities while preserving foreign currency resources.

By 2019, Nigeria plans to process in-country all fuel needed for domestic consumption.

"We reached an agreement that Agip will build a brand new refinery of 150,000 barrel capacity,” Emmanuel Ibe Kachikwu told reporters following a summit with Eni this week. The two parties will soon sign a memorandum of understanding to seal the deal.

Nigeria’s oil industry and economy have been suffering badly, not only from the low oil prices but also from the persisting militant attacks on oil infrastructure that have crippled crude oil production. The sabotages reduced Nigeria’s output from more than 2 million bpd at its highest point in 2015 to 1.4 million bpd last summer, the lowest production level in 30 years. The militant groups have slowed attacks in recent months, allowing output to recover marginally.

Due to the domestic strife, Nigeria was exempt from the OPEC production-cut deal, but since the cartel struck the agreement at end-November, Nigeria has been gradually lifting output, possibly undermining efforts by fellow OPEC members who are trying to keep supplies low.

Related: OPEC Confident In U.S. Shale’s Lack Of Longevity

Nigeria has learned from the 2.5-year supply glut that has pulled down oil prices to $50 levels. The country reduced the unit technical cost (UTC) for producing oil to $27 per barrel by the end of 2016 from $70 per barrel in 2014, according to Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC).

“With reduced cost of production, govt’s share of economic revenue will improve which means reduced budget deficit,” NNPC said on Twitter in updates of Baru’s speech.

By Zainab Calcuttawala for Oilprice.com

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