As of 2018, the global oil refining capacity was approximately 100.05 million barrels per day. The global oil & gas downstream market is expected to grow at a CAGR of more than 2% during the forecast period. The Nigerian oil refining capacity has increased by 63% between 2010 and 2018. The Nigerian oil & gas downstream sector is driven by the development of large and modular refineries. However, the market is restrained by poor maintenance and supply disruption resulting in a low utilization rate.
- The increasing refining capacity is expected to drive the demand in the market during the forecast period.
- Digitalization and modernization of the refining and petrochemical sector are expected to reduce the refining costs and process losses. This, in turn, is expected to create an opportunity for the market during the forecast period.
- Improving the existing downstream infrastructure and encouraging private sector investment for the refineries and petrochemcial plants in is expecetd to drive the studied market during the forecast period.
Key Market Trends
Refinery Segment Dominate the Market
- Nigeria is the second biggest oil-rich country in Africa, after Libya. The country is estimated to hold 37 billion barrels of proven oil reserves. However, despite its rich resources, at present Nigeria’s state-dominated oil industry is declining, afflicted by systemic corruption, starved for international investment, and hit hard by weak oil prices. Despite that malaise, oil remains the country’s chief source of income.
- The refineries are dotted around the Niger Delta region are at present producing less than half of the 500,000 barrel per day capacity, with this figure dropping to almost 10% from 2018. The country ageing infrastructure can only produce around 2.5 million barrels of crude oil per day.
- Thus, the government is actively looking to upgrade the existing refieries in the country. For instance, in November 2019, Nigeria’s government pledged to support Nigerian conglomerate Dangote Industries unit Dangote Oil Refining’s 650,000-b/d grassroots integrated refining and petrochemical complex now under construction in southwestern Nigeria’s Lekki Free Trade Zone.
- Therefore, with the government support and increasing upgradation activities, the refinery segment is expecetd to drive the studied market.
Improving the Infrastructure and Encouraging Private Sector Investment to Drive the Market
- Nigeria ranked as the 13th largest crude oil producer in the world with an average daily output of about 2 million barrels per day. Such high production country should have proper downstream infrastrcture.
- However, the downstream sector is currently bogged down with numerous challenges, such as inappropriate product pricing, bridging product supply, insecurity, irregular gas supply, pipeline vandalism, inadequate pipeline infrastructure, non-functional/under functioning refineries etc.
- Therefore, in February 2018, the Nigeria state oil company announced the privatization of the dosntream industry which would help the group repair and build more pipelines across the country.
- Moreover, the country is building new refinery infrastructure. For instance, in December 2019, KBR group announced that it has been awarded the Project Management Consultancy Services contract by Nigerian National Petroleum Corporation (NNPC). Under the contract, KBR, as co-consultant with the National Engineering and Technical Company Ltd (NETCO) will provide technical consultancy services for four greenfield refineries in the ANOH and Western Forcados area.
- Thus, the increasing privatization and new greenfield project is expected to drive the market during the studied period.
The market for Nigeria oil & gas downstream remains concentrated. Some of the key players are Nigerian National Petroleum Corporation (NNPC), KBR Inc., NDEP plc, Indorama Group, and Midoil Refining & Petrochemicals Company Limited.
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