Africa’s largest crude oil producer, Nigeria, has decried the poor performance of refineries in the nation as it turns to China for expertise. Nigeria’s NNPC is in talks with a Chinese company over one of the state-owned oil refineries. These remarks were noted by the firm’s chief executive earlier this week. Executive Bayo Ojulari said the company was seeking experienced operators as equity partners to revive its four refineries after years of losses.

Furthermore, the underperformance highlighted by these refineries has also been startling. He said an internal review carried out shortly after assuming his role last April showed the refineries were running at huge losses. This is despite high operating costs and heavy spending on contractors while processing volumes remained low. NNPC’s board has approved a strategy to bring in refinery operators with proven expertise rather than contractors. Moreover, he noted adding that the company was in advanced talks with several interested parties.

Scope on Nigeria as Africa’s Largest Crude Oil Producer and Refineries Performance.

Nigeria has struggled for years to rehabilitate its aging refineries, which have operated far below capacity. This has forced Africa’s largest crude oil producer to rely heavily on imported fuel despite its production capabilities. The government hopes new partnerships will help reverse that trend. “I’m just coming from a meeting with one of the potential investors,” Ojulari said, without giving a name.

“They are going to the refinery tomorrow to inspect. It’s a Chinese company that has one of the biggest petrochemical plants in China.” Moreover, Ojulari said the plants have been halted to allow time to assess options for restoring them. This also coincides with the launch of Dangote Refinery which offered “breathing space” for domestic fuel supply. He said NNPC was not selling the refineries but would relinquish a portion of their equity to partners to enable the plants to self-finance their operations.

Project Factsheet

• Country: Nigeria
• Sector: Oil refining / downstream energy
• Project owner: Nigerian National Petroleum Company (NNPC)
• Context:
  • Africa’s largest crude oil producer facing chronic underperformance of state-owned refineries
  • Refineries operating far below capacity and recording sustained losses
• Key issue identified:
  • High operating costs
  • Heavy contractor spending
  • Low processing volumes
  • Significant financial losses revealed by internal review
• Strategic response:
  • Shift from contractor-led rehabilitation to experienced refinery operators
  • Introduction of equity partners with proven operational expertise
  • Board-approved strategy to revive all four state-owned refineries
• China involvement:
  • NNPC in talks with a Chinese petrochemical company
  • Potential investor operates one of China’s largest petrochemical plants
  • Site inspection planned as part of due diligence
• Transaction structure:
  • No sale of refineries
  • Partial equity stake to be relinquished to partners
  • Aim is self-financing and operational sustainability
• Current status:
  • Refineries temporarily halted to assess restoration options
  • Advanced discussions ongoing with multiple interested parties
• Market backdrop:
  • Nigeria heavily reliant on imported fuel despite crude output
  • Dangote Refinery providing temporary relief to domestic fuel supply
• Strategic objective:
  • Restore refinery performance
  • Reduce fuel imports
  • Improve efficiency and long-term viability of Nigeria’s refining sector