All posts tagged refining gap

By Dimeji Bassir

In April 2021, the Nigerian government announced it had let out a $1.5Billion contract to Italian Marie Technimont for the rehabilitation of its 210,000 barrels a day portharcourt refinery which became operational in 1965. The news generated a lot of furore within the citizenry with a prominent Nigerian Banker stating the government was about to embark on a brazen and expensive adventure.

About the same time, the global oil and gas multinational, Shell, announced it had taken the decision to scale back its global refinery footprint by greater than half, having permanently shuttered its 240,000 barrel-a-day convent refinery in Louisiana a few months earlier.

The coincidence, and contrast in strategy between one of the largest global international oil companies and the eleventh largest OPEC country by reserves size couldn’t be more stark.

For Shell, the objective of downsizing its downstream business is to prioritize its most profitable assets while divesting from businesses that no longer align with its strategic objectives. Basically, a move towards strategic optimization.

In the case of Nigeria, a country which at best could be described as a sleeping oil giant that consistently underutilizes a lot of the things it is naturally endowed with. The West African OPEC nation has consistently underperformed its OPEC quota for close to ten years. Despite having an installed production capacity of two million barrels a day, its average daily oil output in September 2023 was 1.35 Million barrels per day, the highest it had been in the entire year.

The context of the outrage surrounding the announcement of the $1.5Billion rehabilitation contract lies within the May 2023 report which showed that the government had spent $25 Billion between 2013 and 2023 on fixing the refineries and yet had spent $10 Billion on petroleum subsidies in the year 2022. Juxtaposed with reporting from an ICIR report which revealed that the Port Harcourt refinery had posted losses five years in a row (2014 – 2018) totalling ₦206Billion. The story of the Nigerian refineries cannot be told without invoking raw emotions among the country’s  citizenry who are desperately yearning for available and affordable petroleum products.

To underscore the absurdity of Nigeria lacking everything it has, the country which has been described as oil rich and energy poor is blessed with an abundance of natural gas—north of 200Trillion cubic feet—which represents about a third of Africa’s total gas reserves. Yet commercializing its gas molecules to meet domestic power demand in a sector begging for critical structural reforms remains a mirage. 45% of the country’s two hundred million people remain without access to the power grid.

The passage of the Petroleum Industry Bill in 2021 birthed the Petroleum Industry Act (PIA) with one of its core mandates being the transformation of NNPC, the government-controlled agency, to a commercially driven limited liability entity. Theoretically, the impact of this transformation is expected to manifest in a restoration of operational oomph which had been lacking in the NNPC going by its track records of under-performance over the years.

Delivering capital projects with speed and efficiency has always been a major challenge, both for private and public corporations. Project performance data studied across governments and organizations globally shows that projects delivered under budget and ahead of schedule are the exception, not the norm. Data presented in Figure 1 below supports this point.

Figure 1:

Projects don’t go wrong but in many instances simply just start wrong. But it’s seductive to think that the only thing that separates us from the project delivery results we desire is one unique secret sauce we are yet to learn. Whereas in reality, there are a number of missteps which conspire and eventually derail capital projects, having been left unfettered for so long along the way.

Figure 2: Some causes of project derailments Source: PWC

While all megaprojects are susceptible to veering off track, some are more vulnerable than others, particularly those under the wrong stewardship. Project controls help, but they must be kept very tight. Due to the mission-critical and costly nature of the ongoing revamp works at the Nigerian refineries in Warri and Port Harcourt, the least desirable scenario is where project owners and managers are consciously or unconsciously stuck in a state of ineptitude and/or profligacy, what the writer refers to as the “Naija factor,“. The affliction of the Naija factor and its close cousins; cronyism, political meddling etc is rife. But those are not the focus of this article and will not be dwelt upon.

NNPC did not do much construction of any sort in the thirty years between 1990 and 2020 and a lot of organizational knowledge has certainly been lost in this period. We can infer therefore that the refinery revamp projects being spearheaded by NNPC are much bigger than the individuals leading them, particularly with little to no operational history to leverage—in planning and executing the projects—along with ingrained cultural inefficiencies to contend with. In the context of the three plants’ dismal operational performance over the years as earlier outlined, it’s no surprise that there’s been more than a few promised completion days albeit all botched.

Refining Economics 101 and why it matters:

Refining operations are complex with extremely tight unit economics. Financial performance is largely driven by two variables- the cost of feedstock i.e. crude oil, and price of refined products e.g. gasoline, jet fuel etc. The difference between a barrel of crude oil and the petroleum products refined from it. This concept, called the crack spread provides an indication of refining margins. Like most commodity play, a refinery operator has no influence on what it pays for feedstock or the price it commands for finished products. Refineries simply fill the market with products until margins, or profits, for refining the products drop. At this point, operators scale back on production to induce supply versus demand balances. This balancing act inevitably separates out those operators who are able to run their facilities efficiently from those who can’t. One of the biggest differentiators between the two groups is reliability which can mean the difference between operational excellence and mediocrity, perhaps even profitability versus bankruptcy.

In short, reliable operations are the strongest correlative indicator to profitable operations as reliability drives utilization which in turn drives profitability.

There are about 700 refineries globally with less than 300 of them accounting for 80% of the world’s approximately 100Million barrels per day refining capacity. Data gleaned from the global refining economics of reliability report shows that North American operators are the paragon of executing optimal reliability programmes. This is primarily driven by the fact that they are 100% private sector owned and operated, do not receive subventions or support from the government, and are driven mostly by a singular incentive which is to consistently deliver value to shareholders.

There are variable and fixed components to refining costs. 80% of the costs in a refinery go to feedstock. Operations & maintenance-related costs are independent of the quantity of crude processed and are fixed regardless of the plant’s overall utilization.

The difference of what is left over after backing out a refiner’s single largest cost from its theoretical revenues is what is available to cover the rest of its costs. Narrow crack spread implies that refiners have fewer resources to invest in sustaining their plants’ operations.

Better reliability enables increased utilization, lowers downtime, and significantly lowers operations and maintenance costs.

The prudent approach to refinery revamp:

Maintenance is the lifeblood of refinery operations, given the extreme degradation that physical assets are subjected to during the course of operations. But it’s important to establish that assets undergo non-age related functional failure. Over 70% of equipment studied in industrial plants experienced the phenomenon called infant mortality whereby there is a high probability of equipment failure shortly after being commissioned to service. While this data is not representative of industry in general, it challenges existing belief of a correlation between asset reliability and operating age, which led to the idea that the more an item is overhauled, the less likely it is to fail. This belief had formed the basis of designing preventive maintenance schedules but is now known to be largely untrue in the world of modern maintenance. Converse to that debunked idea, scheduled overhauls could actually increase overall failure rates by introducing infant mortality into otherwise stable systems. This is why a broadly defined reliability framework that synthesizes all the critical components of modern-day understanding of how machines function and knowledge of maintenance best practices should be adopted by every operator of asset-intensive plants.

Figure 3: Equipment failure shows no correlation to age Source: Reliability Centered Maintenance Book by Nowlan & Heap

In the intricate world of refining, a scheduled revamp aka turnaround, or shutdown, is a large-scale maintenance activity where the entire process unit is taken off stream for comprehensive maintenance related activities. The primary objectives are inspection of equipment, completing replacement of deteriorated parts, installing new facilities, upgrading or revamping the processes or capacities to restore the overall health of the plant and improve safety, health, and environmental conditions. Increased reliability correlates positively with the profitability of refineries.

Think of a revamp as a megaproject consisting of several thousands of integrated tasks that must be completed within extremely tight timelines and stringent specifications in order to restore the plant back to production timeously. Preparation for refinery revamps should ideally take anywhere between six to twenty four months. Avoiding false starts on these complex projects should be the goal of the organization and it means beaming a laser on discovering the unknown unknowns early on at the preparation stage.

A typical 120 thousand-barrel-per-day refinery would have tens of thousands of unique SKUs in equipment count. Any revamp, such as those ongoing in the Nigerian refineries, which had been moribund for years prior to the initiation of revamp works, required that a comprehensive, granular, reliability-based audit (gap analysis) is conducted to determine the as-is condition at each system, equipment, and component level. The deliverable from that molecular exercise should then serve as input into the detailed scoping of the rehabilitation works.

But very often, missing data—e.g. equipment health (obtained from predictive / condition monitoring technologies), equipment operations and maintenance history, etc.—prevents the conduct of a thorough and granular level equipment reliability-based gap analysis as needed. In such an instance, scoping the revamp is done blindly or based on assumptions rather than being data-driven. In addition to a detailed gap analysis as mentioned above, critical to the success of a revamp is the development of a comprehensive plan that identifies precise worklists, establishes realistic schedules, resources needed, and accurate cost estimates. Important to capture with precision the work to be done and in addition, have the work sequenced correctly. Rigour in risk analysis as well as scope challenge sessions that test for various scenarios on paper should be incorporated into the planning process preferably facilitated by experienced independent third-party consultants.

Recognize the value of experience: Leadership is the key to success on any project or major task. Given the immense responsibility, a refinery revamp manager must be a highly experienced, focused, creative minded and dynamic professional who continually strives for excellence. He must exhibit a leadership style that shows decisiveness, a clear methodology and approach to problem solving and bring a breadth of successful delivery of several revamp within the domain. They must have an innovative, entrepreneurial bent with an open-mindedness to accept divergent thinking and explore new technology that can drive revamp efficiency. They must be someone with deep domain practical experience and a proven track record of success. They will be tasked with assembling the right team, establishing a cohesive team culture, and cascading the project philosophy and ethos throughout the execution team.

Plan slowly, execute swiftly: When it comes to megaprojects, haste makes waste at the start. Bent Flyvbjerg avers in his book ‘ How Big Things Get Done ‘ that planning is the safe harbour as costs of its iteration are relatively low. Furthermore, he talks about the window of doom stating that projects that fail tends to drag on and those that succeed zip along and finish. The author advocates the maxim: ‘Think slow, act fast’ throughout the book. Errors are cheap and often fixable during planning. At execution, they are often fatal. This might seem intuitive but the data suggests that the 0.5% of 16,000 projects studied that succeeded were those where slow and meticulous planning preceded speedy execution.

“The irony of megaprojects is that many are late because not enough time is spent planning.”

Project controls underpin flawless execution: The complexity, notoriously tight timelines and high dependency of tens of thousands of maintenance tasks to be coordinated and completed on a refinery revamp project mandates it to be managed and organized with sound project management and advanced project control techniques. The sheer volume of activities and resources involved, along with millions of manhours, high costs, tough deadlines, a multitude of stakeholders all portend extremely high risks. However, the global best practices to replicate are in the open and available for the open-minded to adopt. Data from the aforementioned pinnacle study shows that the most profitable refineries are those in North America primarily due to the sustained high utilization and lower per barrel spend on reliability.

Figure 4: Correlation between refinery Utilization & Profitability Source: Pinnacle Study

It is no coincidence that the use of robust project controls software applications purpose built for turnarounds in process facilities is highly prevalent in North America. Effectively, these tools, which facilitate efficiency in turnarounds, help to build work packages, dynamically pull in engineering, equipment, BOM and cost data, manage logistics, facilitate management of change, document control etc. within one cloud based application. They are customizable to any project’s unique needs, make it easy to track project progress and enables forecasting with accuracy. They enhance project governance and controls, provide excellent visibility and reporting and obviously correlate positively with operational excellence.

It is immensely difficult to proactively recognize the onset of project challenges and understand the right levers to deploy in order to correct course. Without the right tools, processes and systems, incoherent coordination and ad-hoc decision making prevail, ultimately becoming an albatross on the project. This confluence of ills, have been responsible for derailing even the best planned projects leading to significant cost and schedule overruns.

North American refineries have consistently scored high in those metrics that correlate with top reliability performance such as maintenance cost and inventory value as a percentage of the plant value, percentage of assets on BOMs, work split between predictive and preventive maintenance etc.

Operational readiness facilitated by experts from independent third-party outfits underpins the ability to wrap up a revamp project efficiently and transition effectively to commissioning with the least amount of surprises during startup.

Setting the business up for long term success: Broadly speaking, the refining process encompasses the following steps; The separation of crude oil into different fractions – The improvement of quality of some cuts – The transformation of heavy cuts into light cuts – Blending to derive the finished products.

A refinery consists of several distinctly disparate parts; The process units where crude oil is separated to fractions or cuts and additional processing takes place to improve the grade of products – The Utilities i.e. where fuel, power, steam etc. necessary for the refining process are generated – The storage, blending and shipping facilities. A refinery could sit on several tens of hectares with majority of this space comprising of the storage facilities.

The most commercially viable refineries globally are of the fluid catalytic cracking (FCC) type (or equivalent process units), which are capable of transforming heavy distillation fractions into lighter fractions—gasoline, jet fuel etc. While these facilities have the dual advantage of high fuel efficiency and moderate investment cost, they introduce an order of magnitude of complexity into refineries as they became relatively more sophisticated. The introduction of capabilities for deep conversion (residue hydrocracking, coking with coke gasification etc) increased the complexity of the refining system (and of course the equipment spread required to achieve the detail of processing became more advanced).

Capital, whether in the form of investment in a new refinery or the cost of replacing systems / units in an existing one must be recovered as depreciation.

A combined projected spend of over two billion dollars on the ongoing revamps of Port Harcourt, Warri and Kaduna refineries is reflective of the depth of intervention being undertaken and the new administration’s laser focus on completing the protracted turnarounds sooner than later to abate further revenue losses from deferred production, along with costs and schedule completely run amok could not be a more urgent imperative.

The oldest of the four Nigerian refineries was commissioned in 1965 but have barely operated in the last decade. The oldest continuously running refinery in North America was commissioned one hundred and forty two years ago. Refineries that old would ordinarily be fully depreciated. But the four Nigerian plants had been moribund and in some instances cannibalized prior to the commencement of the revamp projects. This means the intervention works to be undertaken are of a very extensive and invasive nature involving system level replacements on a relatively broad scale. This introduces depreciation costs that could triple operating cost per barrel. For example, total refining costs for a 160,000 thousand barrel a day refinery could be as high as $10 per barrel of crude processed (assuming 100% utilization) as opposed to $2 – $3 for a fully depreciated asset.

A plant’s technical limit is an unattainable state where it runs 100% of the time and spends zero dollar on maintenance or repairs. Equally inconceivable is the contrasting scenario exemplified by Nigerian refineries, where tens of billions of dollars have been expended on “ maintenance and repairs “, yet the facilities scarcely operated over the past decade.

Constantly shifting revamp completion deadlines provide the strongest evidence that the ongoing revamp projects are in jeopardy and that the sponsors remain stuck in a state of unconscious incompetence, hence, flailingly grasping at straws.

The influence of existing paradigms prevents humans from embracing novel concepts and has the potential to obscure new opportunities for business leaders. Driving sustained operational excellence requires a paradigm shift, particularly at the leadership level. In order to mirror the operational performance of North American refiners, the entire organization need to adopt a philosophical volte-face and expand beyond their traditional thinking and maintenance work practices. In short, the thinking “ that got us here simply will not get us there “. And to the dismay of ired Nigerians, they will soon learn that the monstrosity of refinery operations & maintenance does not succumb to conjured operations commencement dates. Any startup dates promised in the future, again pulled out of thin air, will equally pass with nothing to show for it.

Stakes are incredibly high and refinery leadership should have the incentive to embrace new philosophies and thinking. It’s impossible to correct course without transitioning through conscious incompetence to conscious competence. This will be evident when they adopt the holistic use of the right tools, systems, techniques and methodologies needed to get the protracted revamps in Warri and Port Harcourt back on track, avoid startup and commissioning hiccups whenever the time comes, and offer the opportunity for Kaduna to start on the right footing.

Adopting a reliability-based maintenance strategy is the key to setting the business up for success in the long term and unlocking value on a sustained basis in Nigerian refineries. This involves instituting foundational elements; (establishing corporate standards for work management in line with best practices, stores and inventory optimization, defining equipment hierarchy/classification/naming convention, accurate equipment master list development, criticality ranking, adoption of RCM techniques, effective use of CMMS, PM/PDM optimization, addressing culture change etc.). These activities, when holistically weaved together and implemented will eventually bring the plants’ operational DNA in line with those of top performers globally. From past experience and also looking at several case studies over the years, value begins to manifest in savings on maintenance spend, increased uptime, higher throughput, reduced fuel costs etc. The right work is being done right, relevant performance indicators are developed and tracked with rigor, time-based preventive maintenance is optimized (PM) to only be performed on no more than 25% of the asset population and over 50% of daily work activities are driven by asset condition data obtained from a robust predictive maintenance (PdM) program.

With several exogenous factors outside of a refinery operators control, the sweet spot is learning to master the balancing act of achieving consistently high utilization at the lowest operations and maintenance—including turnaround—cost.

In conclusion, good refinery operations start with efficient turnaround execution which starts with in-depth understanding of how best-in-class reliability practices enhances refining operations economics. Combining enhanced technology-enabled project controls with a realibility-centric maintenance approach better attuned to new knowledge of machine health, and of how equipment functions, and fail, is the way out of the ongoing revamp fiasco and the way to set the refineries up for sustained success.

If nothing else, the opportunity to alter the narrative buoyed by a sense of accountability to its 200Million Nigerian shareholders, and perhaps personal ambition, should incentivize the project owners to seek outside help in steering the adrift revamp projects back on course, lest they perpetuate the status quo—abundance of promises and bereftness of delivery. Hope is never a strategy, neither is optimism.

Bassir is an oil and gas industry executive with international experience managing a range of major capital projects of varying complexity and scale along with experential knowledge spanning the entire Exploration and Production (E & P) lifecycle. He manages Ofserv, an independent consultancy specializing in subsurface engineering, project management, process improvement and reliability services. He is a certified maintenance and reliability professional (CMRP).

By: Abdulwaheed Sofiullahi, in Abuja

The Crude Oil Refinery-owners Association of Nigeria (CORAN), has presented a solution to the incessant crude oil theft, which threatens to choke off investment in the country’s oilfield development.

The proposal involves the installation of one 10,000 Barrels Per Stream Day refinery per marginal oilfield, leading to 40 such refining plants on 40 marginal fields in the Niger Delt basin.

These 40 plants on forty fields will have a combined 400,000BPSD capacity to service different regions in the Niger Delta basin, CORAN has suggested.

About 20 members of the advocacy group, led by its chairman, Momoh Jimah Oyarekhua, were received at the office of the Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, in Abuja last week.

“This approach will enable the processing of a minimum of around 400,000 barrels of crude oil for refining, subsequently impacting petroleum prices and alleviating the current economic pressures faced by the country on foreign exchange”, Oyarekhua said.

There are currently five functional Modular Refineries operating in the country, with a total nameplate input capacity of 34,500BPSD.

But the actual input into these five plants is no more than 15,100BPSD and those numbers are very optimistic.

Out of the five, for example, only two have dedicated oilfields supplying volumes of crude in excess of 3,000Barrels of Oil Per Day. They are:

• Aradel Holdings’ Three Train 11,000BPSD Ogbele Refining Facility, which has utilized, sometimes, as high as 6,600BPD of crude from the Ogbele field in the last three months.
• Waltersmith Petroman’s 5,000BPD refining plant, which receives 3,000BPD supply from Waltersmith’s own Ibigwe field, as well as between 2,000BPD and 3,000BPD from Seplat’s Ohaji field in the vicinity.
• The OPAC refinery, which receives, on average, 1,500BPD from Pillar Oil’s Umuseti marginal field
• Edo Refinery (published: 6,000BPD capacity) and Duport Midstream Refinery (advertised: 2,500BPD), both in Edo State, collectively receive, at the most, only 500Barrels per day, by trucks from Millenium Oil & Gas/ Decklar Resources’ Oza field in Abia state of Nigeria.

What CORAN wants, is for government to help guarantee the supply of crude to modular refineries which lack “stand by”, crude oil supplies. CORAN is hoping that the government, through with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will engage the group “based on the regulation that has been passed for domestic crude obligation. That obligation compels crude oil producers to supply a share of their crude to local refineries”.

The NUPRC has once claimed in a media release that it had supported modular refineries with crude oil supplies through the Domestic Supply Obligation, but CORAN members vigorously deny this claim, in private, as they do not want to be seen as wrangling with the country’s most powerful petroleum regulatory  agency, in public.

CORAN has also advocated for intervention fund for modular refining business the way government has intervened in the natural gas business. “The buzz everywhere now is about clean energy and government has created funds that people who want to build infrastructure for gas will be able to access; and recently we hear of auto gas and some of those few things that they are trying to do in the gas space”, Oyarekhua told Africa Oil+Gas Report.  “It is impossible for you to think that gas is going to solve all the problems that people or the society will require for their energy. Fossil fuel will still be with us for a long period of time so once you’re creating some form of succour for gas to be produced, which of course will also take a period of time, you also have to support the existing energy producers like us who are in the refinery space that are providing refined products for the society, part of which is diesel, fuel oil and kerosene until such a time where the gas industry is ripe enough. I think gas and fossil fuel are going to be ranked side by side continuously for a very long period of time. But as of today, the focus is on PMS and we are saying that the kind of funds that people who are creating or building gas infrastructure could access, there should also be that kind of fund created for the refinery industry or refinery owners to access in that space. This is what we advocating for”.

At the meeting in Abuja with the Minister of State for Petroleum (Oil),  Oyarekhua  stressed: “Our foreign earnings today are being significantly affected by the importation of roughly 30 to 40 percent of refined products into the country. These are the issues we have come to discuss with the minister, seeking government intervention through reliable supply and guarantees for those in the modular refinery sector”.

By Abdulwaheed Sofiullahi Adeniyi, AOGR Reporter, covering  Regulatory Authorities/SOEs

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has written to debunk allegations that lack of access to crude oil supply is inhibiting investment in mini-refineries, especially by companies who are non-producers of crude oil.

The commission says it has enabled the supply of 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023, using the instrumentality of Domestic Crude Supply Obligation.

This, the commission declares, is “contrary to insinuations from some operators in the refinery business in Nigeria that the continued failure to supply local refineries with crude oil is capable of destroying members’ investment and stifling growth in the sector”.

The NUPRC indicated, in a statement, that only refineries that comply with the relevant requirements of Section 109 of the Petroleum Industry Act, 2021 are entitled to crude supply.

“Between January 2019 and August 2021, the period before the PIA came into effect, 1,726,049 barrels of oil were supplied to two refineries that met the requirements of the law as at the time. The two refineries are operated by Waltersmith and NDPR (now Aradel Holdings). The post PIA supplies were made to Waltersmith, NDPR and OPAC refineries”, NUPRC stated.

The Commission said it recently granted approval for Millennium Oil and Gas Limited to supply by trucking 60,000 barrels of crude oil at the rate of 20,000 barrels per month for three months to Edo Refinery and Duport Refinery in Edo State in Nigeria’s midwest. “In addition, alternate evacuation routes such as trucking of crude oil to refineries has been approved to forestall potential downtime during refinery operations which might arise due to non-availability or vandalism of pipelines”.

NUPRC insists it remains steadfast in delivering on the mandate stipulated by the PIA and will not relent in ensuring that a conducive and suitable supply of feedstock to all licensed refineries operating within the country is sustained. It further stated that any refinery operator or group of refinery operators in Nigeria not receiving or claiming not to be receiving feedstock from appropriate agencies are yet to satisfy the mandatory requirements as stipulated by law.

“The NUPRC wishes to state the facts to provide insight and clarity to the general public as follows: Section 109 of the Petroleum Industry Act (PIA) 2021 mandates that the Domestic Crude Supply Obligation (DCSO) be placed on all holders of Petroleum Mining Leases and Oil Mining Leases in Nigeria in a bid to ensure crude oil supply to local refineries. Under Section 109(2) of the Petroleum Industry Act, the Commission gazetted the Production Curtailment and Domestic Crude Oil Supply Obligation Regulations which provides clarity on the obligations of the stakeholders of the domestic crude oil supply value chain.

“The PIA prescribes its implementation mechanism requiring the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) to furnish the Commission with domestic crude requirements of licensed operating refineries on an annual basis which would form the basis for the Commission to issue the crude supply obligation on the producing companies in the upstream sector. It also mandates the requirement for the transaction to be on an arm-length commercial basis between the producer/supplier and the refiner.

“The Commission has provided an enabling framework for the supply of crude oil to be negotiated between the lessee and the oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil as stipulated in section 4 (7) (b) of the Domestic Crude Supply Obligation (DCSO) regulations in either the Nigerian Naira or the United States Dollar or a combination for flexibility to be agreed by the parties.

“Consequently, the Commission placed priority on developing this regulation for the operationalization of the mandate and developed the regulation to ensure the availability of a regulatory framework for DCSO. The Ministry of Justice has gazetted the Domestic Crude Oil Supply Obligation Regulations developed by the Commission, which provides the framework for placing crude oil supply obligations to operators of petroleum mining leases and Oil Mining Leases in Nigeria.

“Section 4(8) of the DCSO regulations states that “A lessee who has not complied with his DCSO where a willing buyer(s) exist shall not be granted an export permit for the export of crude from his lease area.” This further reaffirms the Commission’s drive to enforce DCSO to holders of oil leases within the country.”, the NUPRC concludes.

Angola’s state hydrocarbon company, Sonangol, has signed a memorandum of understanding with China National Chemical Engineering (CNCEC) to construct the Lobito Refinery in the coastal Benguela province.

Sonangol’s CEO, Gaspar Martins, signed the document in Beijing, in the presence of minister of Mineral Resources, Oil and Gas, Diamantino Azevedo.

The MoU follows a public tendering process launched in late 2022 for interested companies and individuals to invest in the Lobito refinery, in the country’s southwest. Private investors will own 70% of the company, the tender advised, with Sonangol controlling 30% stake, according to the proposed corporate governance structure.

Angolan news agency ANGOP reports that “the infrastructure will supply the domestic market and the countries of the Southern African Development Community (SADC) region”.

The Lobito Refinery, the largest of Angola’s four planned refinery projects -as newbuilds or overhaul- has the capacity to process 200, 000 barrels of oil per day.

Angola’s oldest refining facility, the 65 year old Luanda Refinery, underwent a refurbishment in the last three years; increasing gasoline production from 395,000 litres to 1.5Million litres per day.

The Cabinda refinery, under construction, with a capacity for 60,000BPSD, will enter the first phase of completion in late 2023, with the second phase expected to be completed in 2025. In this project, Sonangol holds 10% and GEMCORP 90% in terms of corporate structure.

In Soyo, Zaire province, the American company Quanten leads a consortium constructing the 100000BPSD Soyo Refinery under a build, own and operate (BOO) contract. Sonangol holds 10% in the corporate structure, while the Quanten led consortium retains 90%.

As recently as the end of December 2022, Quanten reported on its website it had completed the “Demining of the entire 712 hectares of the Soyo Refinery project site”.