Mixed Reactions Trail Resumption of Port Harcourt Refinery

Last week, the Nigerian National Petroleum Company Limited said the 60,000 barrels per day section of the Port Harcourt Refinery has resumed operations amidst controversy over the state of the refinery. However, if the story is true, it means the development has opened up for the first time in decades, competition in Nigeria’s oil refining sector amid the presence of Dangote Refinery, Peter Uzoho writes

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n a wide celebratory mode, the Nigerian National Petroleum Company Limited (NNPC) announced the resumption of production of petroleum products at the old Port Harcourt Refinery, which has an installed 60,000 barrels per day (bpd) nameplate capacity. 

According to information from the national oil company, production started at the refinery last Monday, while the lifting of products with trucks was to commence the following day (Tuesday).

However, there are still doubts among many Nigerians and industry experts that the facility has actually started producing. Some are disputing NNPC’s claim that trucks have started loading products at the refinery as of Tuesday. The argument stems from the way NNPC and other stakeholders loyal to it hurriedly made a show of the commencement of operation at the refinery after years of delay and deadlines missed.

The old Port Harcourt refinery and the new one located in Eleme in Rivers State have two operational units established in 1965 and 1989, respectively, with a combined installed capacity of 210,000 bpd, the older being a 60,000 bpd facility and the newer plant having a 150,000 bpd capacity.

The Nigerian federation through the NNPC owns four refineries which have not been functioning and producing for many years, including the two Port Harcourt refineries, as well as the Warri and Kaduna refineries, with a combined 450,000 bpd capacity.

The Port Harcourt refinery has been under rehabilitation since 2021 following the approval of $1.5 billion contract by the federal government in 2019 and the federal government had said the rehabilitation will be completed in three phases of 18, 24 and 44 months.

Providing a scanty detail of the volume from the now producing 60,000 bpd old Port Harcourt Refinery, NNPC said it was refining 1.4 million litres of petrol per day, a figure viewed by industry and market experts as an extremely low figure by all estimations, when compared with the output of the Dangote refinery.

The company said the reactivation was in fulfilment of its pledge to re-stream the Port Harcourt Refining Company (PHRC), signalling the commencement of crude oil processing from the plant and delivery of petroleum products into the market.

It also disclosed that trucks had commenced loading petroleum products, which included Premium Motor Spirit (PMS) or petrol, Automotive Gas Oil (AGO), otherwise called diesel, as well as Household Kerosene (HHK) or kerosene, while other product slates will be dispatched as well.

Era of Competition Begins 

Although the volume now coming out from the old Port Harcourt refinery is nowhere close to that of Dangote Refinery, which is producing over 30 million litres of petrol, aside from other products, industry experts believe that the return of the 60,000 bpd facility has opened the door of competition in the Nigerian refining and petroleum marketing business. 

According to them, it is a positive development in the country as Nigeria’s dream of becoming a refining hub and ending the importation of refined products is manifesting. 

With more than one refinery existing in Nigeria, the experts said Nigerians be assured of product availability. 

Sharing his thoughts on the impact of the old Port Harcourt Refinery returning to production, Managing Partner at Teno Energy, Dr Timothy Okon, stated that every additional litre of petroleum products is a welcome addition to the stock of petroleum products available in the country. 

He said if the other refineries including the 150,000 bpd new Port Harcourt refinery, the Warri and Kaduna, start working again, and join the old and Dangote Refinery, they will result in having multiple price hubs in the country.

Okon explained: “What happens obviously, is that, from each of the price hubs, you will be able to assess what options you have, concerning price. So the more supply is available, the greater the likelihood that the market dynamics will take over completely. 

“So, instead of having one point at which you have some sort of domestic refining, you will now have different points. So the implication for what the market will do with more supply, means that there wouldn’t be scarcity. If there is scarcity, prices generally go up. But I want to also remark here that the market controls the price. 

“So the supply chain, the distribution chain needs work so that there are no hiccups and therefore, those will interfere with supply and also impact on prices.”

Oil and gas expert, Mr. Olabode Sowunmi, hailed the coming back on the stream of the old Port Harcourt refinery after years of shutdown, saying it was a piece of good news for the country.

According to him, people should at least feel fine and be comfortable with the good news and celebrate the good news for whatever it is. 

Apart from the immediate value of the project, he said Nigerians should also look at the short-term and the long-term value in order to appreciate it despite its limited production capacity.

“So more people are going to be employed in that place. You are going to have vendors who are going to supply services from cleaners to janitors to even good vendors who are going to supply things. So there are going to be economic activities around that place. So those values also need to be looked into”, Sowunmi stated.

However, with some commentators positing that the Port Harcourt refinery will trigger a price war in the coming months between Dangote and NNPC, Sowunmi disagreed, saying instead, there will be a competitive market.

“In terms of what you are calling a price war, that may not be the right word for it. It’s a competitive market. So when you are talking about a free market enterprise, you have as many entrants as possible and as many people for the consumer to reap the benefit because what many refineries will do is to ensure that Nigerians get a cost-reflective price.

“In other words, you are not going to have any particular provider being able to shortchange Nigerians by particularly putting a margin that is not realistic in terms of pricing. So I think whichever way you look at it, it is good news all the way and I think people should be happy about it just as the residents are”, he said.

No Competition with Dangote Refinery for Now 

Sharing his thoughts as to whether the Port Harcourt refinery can challenge and compete with Dangote Refinery, energy expert, Mr. Ademola Adigun, brushed off such insinuation, saying Dangote is the leader in the redefining space at the moment.

He said NNPC will still be blending for some time whereas Dangote’s product remains superior in quality, adding that the 60,000 bpd Port Harcourt refinery was only producing just about 1.8 million litres a day, far lower than Dangote’s volume.

Adigun told THISDAY: “I don’t see any competition right now because Dangote is still a leader in the market.  NNPC is still going to blend for some time. Dangote’s product is superior in quality. It’s good for Nigerians They have options. But the contribution of NNPC is just too small to make an impact in the market.  60,000 barrels per day is not enough to become a competitor with Dangote of 650, 000 barrels per day. 

“NNPC and Dangote prices cannot be the same. Dangote has very good quality petrol, which has high desulfurization.

NNPC is blending naphthalene to get petrol, which has high sulfur content. So, the prices can’t be the same. What will probably happen is that NNPC’s price might be cheaper, but the quantity they have is not enough to make a dent in the market.

“If we’re consuming about 35 million to 40 million litres a day, NNPC is going to produce additionally, about another 1.8 million litres.  It’s not enough to cause its impact. Now, maybe in diesel, which they are producing, there will be that differential, but not in petrol.”

Despite the insignificant volume the old refinery is producing now, Adigun said Nigerians should still celebrate its resumption of operation.