OPEC Declaration in Saudi Arabia: GAIL Sets To Begin 100,000 BPD Construction Of Refinery

Following the recent declaration of the Organization of Petroleum Exporting Countries (OPEC) at the World Oil Outlook in Saudi Arabia that Nigeria is set to witness the set-up of some modular refineries with a capacity of 20,000 barrels per day, Gasoline Associates International Limited (GAIL) has concluded plans to begin the construction of a 100,000 barrels-per-day (BPD) capacity refinery in November 2023.

Recently licensed by the Federal Government of Nigeria for 100,000 BPD production, Gasoline Associates International Limited (GAIL) will construct a 100,000 BPD refinery and petrochemical plant in Ipokia, a local government area bordering the Republic of Benin, in Ogun State. The Sino-Nigeria cooperation is situated on a land mass of over 1,000 hectares, lying along the coastal plain of the river Yewa in the north of Badagry Lagoon and the Bight of Benin.

The multinational refinery company, when completed, will be zero-pollution greenfield technology-based, reducing Nigeria’s dependence on imported gasoline and petrochemical products arising from the low capacity utilization of state-owned refineries in Nigeria, and providing 120 MW power plants for the refinery as well to serve the Ogun State Industrial Hub.

The refinery is anticipated to contribute immensely to meeting local demand for fuel and other petrochemical products while contributing to the nation’s overall socio-economic development. 

It will also create new investment, jobs, and training opportunities in Nigeria, thereby enhancing human capital development across the country.

The 100,000 BPD GAIL’s refinery and petrochemical plant in Ipokia, Ogun State, when completed, will compete with Dangote Refinery in meeting the local petroleum products demand in Nigeria and other neighboring countries.

The recent declaration by OPEC suggested that Nigeria is set to witness the set-up of small modular refineries with a capacity of 20,000 BPD in the medium term. It said Africa will experience medium-term distillation capacity, with the addition of 1.2 million BPD. A significant portion of this increase is attributed to Nigeria’s Dangote refinery which accounts for 650,000 BPD of much-needed capacity expansion in the country, and which was launched a few months ago by former President, Muhammadu Buhari.

Although this is a positive projection, one of the major obstacles Nigeria currently faces stems from funding challenges for modular refineries and the increasing incidents of sabotage attacks on oil pipelines, as well as oil theft. These hindrances significantly impede smooth operations and progress.

In July 2023, Momoh Oyarekhua, Chairman of the Crude Oil Refineries Association of Nigeria (CORAN), highlighted a potential solution during an Arise News interview: support for modular refineries. He stressed that backing these refineries would lead to more affordable fuel for Nigerians by eradicating several associated costs.

Oyarekhua specifically pointed out the expenses linked to sending crude oil abroad for refining and then importing the refined products. This process involves costs related to clearing refined petroleum products at the terminal, port charges, and the involvement of middlemen in transporting products to Lome, from where they are then shipped into Nigeria.

In addition, Oyarekhua emphasized the need for modular refineries to purchase crude oil in Naira, aligning with their income being generated in Naira from selling products in the Nigerian domestic market. This approach aims to reduce the burden on the forex market. To illustrate further, he presented a scenario where 40 modular refineries, each with a capacity of 10,000 BPD, would need to purchase crude oil in USD, amounting to a substantial monthly expenditure. This emphasizes the necessity for a streamlined approach, ensuring that feedstock procurement aligns with the country’s economic interests and stability.

Last week, the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari, said that the company is now back to being the sole importer of fuel into the country after a few months of encouraging private marketers to import. The reason he gave for the turnaround in policy implementation is the current exchange rate from Naira to USD which has crippled the ability of private marketers to import fuel despite having the license for it.

Although the Gasoline Associates Integrated International Refinery Project was licensed for 100,000 BPD, it will have the capacity for increased output with the goal of reaching a significant level of 450,000 BPD. This welcome news and development is indeed a testament that Nigeria’s petroleum industry is set for a major boost that will enhance local productivity of petroleum products, investments, and job opportunities.

By Richard Odusanya Email: odusanyagold@gmail.com

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