Nigeria Starts Era of Micro Refineries With Tiny New Plant

(Bloomberg) -- Nigeria’s efforts to revamp its aging refineries may be bogged down due to a lack of resources, but Africa’s top oil producer is moving ahead with mini-plants in an effort to help end its dependency on fuel imports.

The country’s first modular refinery, built by independent producer Waltersmith Petroman Oil Ltd., began operations in the southeastern Imo state earlier this month. It’s part of a wider initiative to have the tiny plants making at least 10% of the nation’s fuel within five years.

Waltersmith owns a 70% stake in the new facility -- which will initially produce mainly diesel, kerosene and naphtha -- with the government holding the rest. The company is seeking to expand output at the plant tenfold in the next three years, eventually producing more gasoline.

“The plan to commence the expansion of the capacity of the refinery to 50,000 barrels a day to refine crude oil and condensate is an important aspect of the economic reform the country is undergoing,” Nigerian President Muhammadu Buhari said via video conference during the ceremonial opening of the refinery on Tuesday. He instructed all government agencies and the state oil producer to help ensure Waltersmith has access to crude and condensate feedstock.

Nigeria, which imports almost all of its fuel at a cost of about $7 billion a year, has been trying for years to upgrade its four aging state-owned refineries, decades-old plants that have a production capacity of 445,000 barrels a day. Africa’s richest person, Aliko Dangote, is also building a 650,000 barrels-a-day plant in the country, though it’s not expected to be in operation before late next year at the earliest.

The Waltersmith facility won’t solve Nigeria’s dependence on imports -- its 5,000 barrels-a-day capacity is equivalent to about 1% of the country’s fuel imports. However, the government has licensed a total of 40 mini-refineries. At least 80,000 daily barrels of modular refining capacity is expected to be completed in the next five years, according to Simbi Wabote, head of the Nigerian oil industry’s local content agency.

“These modular refineries have the potential to grow into massive refining clusters,” he said. “We reckon that at least 10% of Nigeria’s oil production should be refined through the modular refineries.”

©2020 Bloomberg L.P.