The Organization of Petroleum Exporting Countries (OPEC) has said that long-term refinery closures could be expected in Africa.
The group stated this in its World Oil Outlook that was launched in Saudi Arabia on Monday, October 9.
According to the Outlook, long-term closures of refineries beyond the year 2028 are not clearly predicted. Instead, what’s indicated are implied refinery closures, derived from long-term modeling results.
The Outlook stated that refinery closures are estimated by working backwards to achieve a sustainable average utilization rate at a regional level over the long term.
It noted that in developed regions, this sustainable rate is about 80%, but it varies in other regions like Africa and Latin America.
The core assumption is that most of these implied closures will primarily involve simple and less efficient refineries. These refineries will find it challenging to compete with complex and integrated plants as utilization rates decrease over time.
It is crucial to understand that the long-term modelling takes into account expected closures in the medium term (between 2023 and 2028), totalling 1.2 million barrels per day.
The Outlook also stated that the efforts by the Nigerian National Petroleum Company Limited to modernize the local refineries – Kaduna, Warri, and Port Harcourt, could be limited.
A part of the Outlook stated:
- “Closures are possible throughout the outlook period. Latin American and African regions have a large number of older refineries, which operate at relatively low or even close-to-zero utilization rates. Some countries are trying to modernize existing refineries, for example, NNPC refineries in Nigeria, but these efforts remain limited across these regions. This is why closures in these two regions can be expected.”
According to the OPEC Outlook, the future of the global downstream market is uncertain, especially in the mid-and long-term.
Demand for oil in developing countries is expected to rise significantly in the upcoming years, which will lead to a tighter downstream market in these regions due to higher utilization rates.
The Outlook projects that developing countries will keep adding to their refining capacity with the construction of new greenfield refineries. These new projects are expected to be highly complex, often integrating with petrochemicals.
So, innovations like crude-to-chemical technology will also play a role in adapting to changes in the long-term demand for oil. It is important to note at this point that the Dangote Refinery which is expected to start refining diesel and aviation fuel this month and petrol by November, is also scheduled to produce petrochemicals making it a perfect example of an integrated refinery.
How to reduce carbon footprints in the downstream sector
According to the OPEC Report, a key future focus is on lowering the downstream carbon footprint, in developing and developed regions alike.
This is possible through rising energy efficiency and the integration of renewables in downstream operations.
It also noted that carbon capture utilization and storage (CCUS) can provide a strong push for emissions reductions within the downstream sector.
However, to meet the global challenge related to reducing emissions, as well as ensuring energy affordability and energy security, it is clear that all available technologies should be employed.
What you should know
Earlier this month, Taiwo Oyedele, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee pointed out a concerning issue about Nigeria’s local refineries Warri, Port Harcourt, and Kaduna. Despite the government investing over N10 trillion in rehabilitating them, these refineries remain inactive.
Oyedele proposed selling them off, a sentiment echoed by many others. These stakeholders emphasize that the government struggles with efficiently managing public assets and privatizing them could lead to better performance and productivity.
