A Review of the Nigerian Energy Industry

OPEC to cut upstream investment to $12b by 2021

*OPEC flag.

*Almost 8 million barrels per day refining projects 2016-2021

OpeOluwani Akintayo

07 July 2018, Sweetcrude, Lagos — Estimated projects planned by the Organisation of the Petroleum Exporting Countries, OPEC sits at a total of $12 billion on just 12 upstream projects by 2021, as against $40 billion spent on 35 projects in 2017.

Statistics obtained from the group shows that on top of the huge capacity maintenance costs faced by OPEC member countries, they continue to invest in new projects and reinforce their commitment to the oil and gas market as well as to the security of supply for all consumers, except that number of projects will drop by 2021.

This is a reflection of OPEC’s well-known policy that is clearly stated in its Long-Term Strategy and its Statute.

In the medium-term, about 160 projects, with an overall estimated cost of some $156 billion, are being undertaken by the group.

A breakdown showed that in 2017, the countries spent a total of $40 billion on 35 projects, however, investments slide in 2018 with $35 billion to be spent on 30 projects.

In 2019, the members plan to invest $30 billion on 25 projects, and in 2020, $37 billion will be spent on about 32 upstream projects, with upstream investments dropping to the lowest in 2021: just $12 billion will be spent on 12 upstream projects.

On the flip side, the upcoming projects landscape for the medium-term (2016–2021) for OPEC member countries’ downstream sector is affected by two factors: the lifting of international sanctions on Iran, and the return of Gabon to the Organisation: apparently the budget was planned before the current imposition of sanction on Iran by the United States.

The group plans an almost 8 million barrels per day, mb/d of potential refining projects in OPEC member countries with a relatively new surge in capacity additions from Iran if all projects are implemented as planned.

However, a review of the viability of these projects suggests that around 2.2 mb/d of distillation units will be added to the refining sector in the countries in the period 2016–2021.

This combines around 1.7 mb/d of additional crude distillation capacity and 0.44 mb/d in the form of condensate splitters.

Condensate splitters additions are planned in Iran and Qatar and set to start falling off by 2020. The overall OPEC Member Countries’ distillation capacity (including splitters) is set to reach a level of 13.3 mb/d by 2021.

An important set of secondary units will also be undertaken during the period 2016–2021, the bulk, around 1.9 mb/d, will be added in the form of desulphurization units, and the rest, estimated at around 1.2 mb/d, will come in the form of conversion capacity, 0.62 mb/d, and octane units, 0.63 mb/d.

The additional refining capacity in OPEC member countries will come from condensate splitters, new greenfield and ‘grassroots’ projects, supplemented by expansions at existing facilities. The largest OPEC Member Countries’ new refineries are megaprojects, expected to come on stream during the medium-term period; these are in Kuwait (Al Zour project), Saudi Arabia (Jizan project) and Venezuela (Anzoetagui).

Other relatively sizable projects, with a common trend among crude producers to process heavy crudes domestically and also aiming to satisfy increasing local demand, include new refineries in Lobito, Angola; Manabi (Refinery del Pacifico), Ecuador; Khozestan and Kermanshah projects in Iran; Fujairah and Dubai projects in the UAE.

Algeria has chosen to settle for medium capacity refineries in Arzew, Hassi Messaoud and Tiaret to satisfy its growing local refined products demand. No clear picture can be envisaged yet from projects in Libya.

The total estimated additions will bring OPEC member countries’ base capacity to over 13.3 mb/d in 2021 and will require a level of investments of $66.5 billion in order to implement the foreseen additions (distillation and secondary units) between 2016 and 2021.

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