The Nigerian National Petroleum Corporation hinted yesterday that overhaul projects of the nation’s ailing refineries will commence in the second quarter of 2018.
According to Reuters, the chief operating officer of refineries and petrochemicals, NNPC, Anibor Kragha, disclosed yesterday that NNPC is in the final stages of talks with consortiums including top traders, energy majors and oil services companies to revamp its long-neglected oil refineries in an effort to reduce its reliance on imported fuel.
Speaking during a presentation to the African Refiners Association in Cape Town, South Africa, he said, “We believe that by the second quarter of this year we will …start getting the ball rolling on the refurbishment and rehabilitation exercise and believe this will run to the end of next year.
“We are working with consortia right now, negotiating terms, trying to finalise the time sheets so that we can access the money… through the end of 2019 when we believe we will have the minimum 90 percent capacity utilization in place,” he told delegates at the African Refiners Association conference in Cape Town.
NNPC has three oil refineries with a total capacity of 445,000 barrels per day (bpd), but they struggle to run anywhere near that level due to years of neglect. According to NNPC reports, the highest capacity utilization last year was just under 37 percent, and it fell as low as 5.92 percent in November.
The federal government plans to give Nigeria’s refineries until 2021 to meet lower sulphur fuel requirements that will start phasing in this year for imports. Kragha said Nigeria will begin cutting the sulfur levels allowed in imported fuels in July in line with the promise of West African nations to ensure higher quality fuel as part of a United Nations Environmental Programme (UNEP) campaign. Nigeria will lower the top level of sulfur in diesel to 50 parts per million (ppm), from 3,000 ppm, Gasoline sulfur level cuts, a cost that will be borne largely by the government due to capped prices for the fuel, will start in October, moving to 300 ppm from 1,000 ppm.
Kragha said that while Nigeria was committed to cleaner fuel standards, “significant costs” complicated efforts to meet the deadline. The presentation said that the first shift to cleaner gasoline would cost $11.7 million per month, and the second $15.7 million per month. The diesel reduction would cost $2.8 million per month.
Nigeria is targeting a cut to 150 ppm by October 1, 2019, Kragha said. The Standards Organization of Nigeria (SON), the body responsible for setting requirements for imported goods, published tighter quality rules last year, but another government body – the Department of Petroleum Resources (DPR) – did not issue revised specifications.
Kragha told journalists in Cape Town that the ministries of Environment, Health, Petroleum Resources and Industry and Trade were working together to finalize rules that would be distributed to importers at some point in the second quarter. Nigeria imports roughly 900,000 tonnes of gasoline every month, accounting for 60 percent of West African imports of the fuel, meaning its choices on fuel quality are likely to impact the entire region.
James McCullagh, analyst with Energy Aspects, said that meant “NNPC currently has the right — rather than the obligation — to actually import it (cleaner fuels). This latest move would merely crystallize that obligation,” he said.
Meanwhile, Oil prices yesterday crashed, extending falls from the previous day, as the relentless rise in U.S. crude output weighed on markets. U.S. West Texas Intermediate (WTI) crude futures were at $61.20 a barrel down 16 cents, or 0.2 percent, from their previous close while Brent crude futures were at $64.80 per barrel, down 15 cents, or 0.2 per cent.
Both crude benchmarks dropped by around one per cent the previous session.
“Oil prices fell on the back of concerns that surging U.S. production could push inventories in the U.S. higher,” ANZ bank said yesterday. U.S. crude oil production soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.
U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA). The rising U.S. output comes largely on the back of onshore shale oil production.
U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to a record high 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly productivity report on Monday.
That expected increase would top the 105,000 bpd climb in March from the previous month, to what was then expected to be a record high of 6.82 million bpd, the EIA said.
US Shale Output To Hit 131,000 Barrels Per Day In April – EIA
U.S. crude production from major shale formations is expected to rise by 131,000 barrels per day in April from the previous month to a record high 6.95 million bpd, the U.S. Energy Information Administration (EIA) said in a monthly productivity report on Monday.
That expected increase would top the 105,000 bpd increase in March from the previous month to what was then expected to be a record high of 6.82 million bpd, the EIA said. The expected increase in April is largely driven by gains in oil production in the Permian and Eagle Ford formations, according to the report.
U.S. shale oil production is seen as potentially disrupting the global supply balance, as increases offset cuts by producers including members of the Organization of the Petroleum Exporting Countries and Russia. Oil production is expected to rise by 80,000 bpd in the Permian to a record high 3.2 million barrels a day in April, according to EIA data going back to 2007.