20 December 2017, Sweetcrude, Lagos – Nigeria has a bleak outlook with regard to increasing its oil production in the next few years, a report from BMI Research has said.
“The low oil price and uncertainty around the security, fiscal and regulatory environment has resulted in insufficient…investment decisions to deliver long-term growth,” the report said, citing also the problems of limited project pipeline and the growth in domestic crude demand from new refineries.
The report specifically stated that Nigeria may struggle to increase its oil production to meet new demand from two refineries expected to come on stream between 2020 and 2022 while at the same time sustaining exports as some countries had done.
The refineries are the 650,000 barrel per day, b/d, Dangote refining plant in Lagos and the 250,000 capacity Petrolex refinery located in Ibefun, Ogun State. The Dangote plant is billed to come on stream in 2019/2020 and Petrolex refinery in 2021/2022.
Pointing out that Saudi Arabia had successfully managed this challenge by adding new capacity in 2013 and 2015, the report noted that Nigeria has a ‘bleak’ outlook in this regard.
“As a result of the limited project pipeline and the growth in domestic crude demand from refineries, either crude oil exports will fall, or refineries will run at lower utilisation rates,” the report added.
It said there was a possibility that both scenarios could happen, with crude oil exports dropping as more domestic crude is processed at new refineries, and new refineries running at low utilisation rates given ‘crude oil export commitments and inconsistent supply’.
The $12 billion Dangote refinery and the Petrolex plant with a budget of $5 billion are expected relieve Nigeria of fuel importation, conserve foreign exchange spendings and boost export of petroleum products from Nigeria.
As at May 2015 when the President Muhammadu Buhari government came into office, Nigeria’s crude oil production stood at 2.1 million barrels per day, mb/d, but militant activities in the Niger Delta reduced this to as low as 1.3mb/d sometimes in 2016.
As at last month the country’s output has soared above 2mb/d, a large volume of this comprising condensates – a very light oil in high demand by refineries as it provides a high proportion of gasoline and diesel fuel.