FG Grants Licences for Establishment of 9 Refineries

Nigeria to Get 9 Additional Refineries

“Nigeria is poised to actualize the targets of 2 million barrels per liquid oil production...”

FG Unveils Energy Reforms: Boosting Local & International Investment in Nigeria's Energy Sector

The Nigerian government has taken a significant step towards enhancing the country's refining capacity. Through the Nigerian Midstream and Downstream Petroleum Authority (NMDPRA), nine licenses have been issued for the establishment of modular refineries. This development was announced by NMDPRA's Chief Executive, Farouk Ahmed, at the 2024 Oil Trading & Logistics Africa Downstream Energy Week in Lagos on October 28.

Licenses Breakdown

• Nine licenses issued for the establishment of modular refineries
• Seven licenses granted for construction purposes
• Four licenses granted for operational purposes

According to Ahmed, these licenses were issued under President Bola Tinubu's administration over the past year, demonstrating the government's commitment to boosting local refining capabilities. The recent activation of the Dangote refinery has also contributed to Nigeria's increasing refining capacity.

This move is expected to reduce the country's reliance on imported refined products and create economic opportunities. However, some stakeholders have raised concerns about the quality of products produced at the Dangote Refinery, leading to calls for investigation and suspension of NMDPRA's leadership.

“Over the course of the last year, the NMDORA has revised and consolidated its regulations through strategic industry stakeholder engagements with a view to streamlining the regulatory framework for ease of doing business and compliance. This is complemented by the issuance of relevant guidelines on automation for processes to strengthen regulatory clarity and enhance compliance.

“Our refinery sector has been expanding rapidly with the issuance of nine licences to establish, seven licences to construct and four licences to operate modular refineries,” he stated.

President Bola Ahmed Tinubu's leadership has significantly improved Nigeria's industrial sector, particularly in oil and gas, thanks to innovative policies introduced within the last 18 months. According to Ahmed, Chief Executive of the Nigerian Midstream and Downstream Petroleum Authority (NMDPRA), these reforms have made the sector an attractive and profitable destination for investments.

Some of the key policies include:

Tax Incentives: Tax credits for non-associated gas greenfield development, midstream capital, and gas utilization investment allowance.

Streamlined Contracting Process: Reduction of petroleum sector contracting costs and timelines, with clear deadlines for approval and a raised minimum value threshold requiring approval.

Local Content Compliance: Emphasis on balancing domestic participation with investment cost competitiveness, prioritizing qualified Nigerian contractors.

These policies have positioned Nigeria to achieve its goals of producing 3 million barrels of crude oil per day and 10 billion standard cubic feet of gas for local consumption. Moreover, enhancing domestic refining capacity will enable Nigeria to become a net exporter of petroleum products, further solidifying its stance in the global oil and gas market.

“Indeed, the Nigerian petroleum industry collector has all the complements of enabling structures to facilitate its growth and success. The NMDPRA is fully committed to supporting all the reform initiatives of Mr President and the mainstream and downstream subsector through enhanced regulatory processes, including efficient issuance of licences, permits and provisions,” he declared.

The regulator is implementing transformative reforms to open up Nigeria's petrol market to greater competition.

“Our inspired target is to achieve a fully liberalised and mature market for all petroleum products and natural gas, where the market fundamentals lead to robust price discovery and attractive investment opportunities. The Federal Government is deepening the liberalisation of the energy market through robust policies and provision of generous incentives to increase investment by both domestic and international companies,” he added.

The Dangote refinery is expected to bolster Nigeria's fuel supply once fully operational, Ahmed stated.

“Dangote Petroleum Refinery and Petrochemical Limited came on stream in February 2024 for the production of some petroleum products such as automotive gas oil, and aviation fuel.

“The refinery commenced production and supply of Premium Motor Spirit in September 2024. It is expected that supply from the factory will improve significantly when it is fully completed and licensed,” he said.

Ahmed is pushing for a comprehensive domestic pricing framework for Liquefied Petroleum Gas (LPG) to make it more accessible and affordable for consumers nationwide. This move aims to address the fluctuations in global LPG prices, which have seen significant changes in various regions, including a notable decline in the APAC region due to oversupply and subdued demand.

To make cooking gas more affordable, Ahmed's agency is engaging with major producers like Chevron Nigeria Ltd, Mobil Producing Nigeria Ltd, and Nigerian LNG to prioritize domestic production and supply. This collaborative effort should help stabilize prices and ensure a steady supply of LPG to meet local demand. By promoting domestic production, Nigeria can reduce its reliance on imported LPG, which has been affected by global market dynamics, including logistical challenges and supply disruptions.

Stakeholders Involved:

• Chevron Nigeria Ltd
• Mobil Producing Nigeria Ltd
• Nigerian LNG

Expected Outcomes:

• Increased domestic production
• Improved supply chain
• Reduced reliance on imported LPG
• More affordable cooking gas for consumers

By establishing a comprehensive domestic pricing framework and promoting local production, Nigeria can enhance energy security, support economic growth, and improve the overall well-being of its citizens.

“NMDPRA will engage stakeholders in development of domestic LPG pricing framework in order to make the product readily available and affordable for the consumers. With regards to alliances, we will continue our quarterly domain- specific engagements with key stakeholders and on-demand engagements with other relevant parties to address ongoing and emerging concerns,” he said.

Nigeria is making significant strides in liberalizing its energy market, thanks to the Federal Government's strong policies and incentives aimed at attracting both local and international investment. This move is expected to boost the country's energy sector, making it more competitive and efficient.

The gas sector is a key focus area, with a licensed processing capacity of 16 billion standard cubic feet per day, transportation capacity of 5 billion standard cubic feet per day, and distribution capacity nearing 1.5 billion standard cubic feet per day. These impressive numbers underscore the government's commitment to developing Nigeria's gas resources and ensuring a steady supply to meet growing demand.

Key Developments in Nigeria's Energy Sector:

Liberalization of the Electricity Market: The Electricity Act 2023 has repealed the Electric Power Sector Reform Act 2005, introducing a more favorable business environment and encouraging private sector participation.

Renewable Energy Integration: The Act promotes the development and utilization of renewable energy sources, providing a framework for their integration into the national grid.

State Electricity Markets: States are now empowered to establish their own electricity markets, reducing reliance on the national grid and promoting localized energy solutions.

These reforms demonstrate the government's dedication to transforming Nigeria's energy landscape, making it an attractive destination for investors and paving the way for sustainable growth and development.

“Nigeria is poised to actualize the targets of 2 million barrels per liquid oil production, projected 10 billion standard cubic feet of gas target for domestic utilization, and a robust domestic refining capacity, leading Nigeria to become a net exporter of petroleum products,” he said.