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Nigeria NNPC seeks USD1 B oil prepay to revamp refinery

January 15/2021

MOSCOW (MRC) -- Nigeria’s state oil firm NNPC is in talks to raise around USD1 billion in a prepayment with trading firms to refurbish its largest refining complex at Port Harcourt, seven sources familiar with the discussions said, said Hydrocarbonprocessing.

If the financing is concluded, the long overdue rehabilitation of the refinery should reduce Nigeria’s hefty fuel import bill. It would also mark Nigeria’s second oil-backed financing since the COVID-19 pandemic that has added to the difficulty of finding investors as fuel demand is sapped by lockdowns and renewable energy is gaining ground over fossil fuels.

The money would be repaid over seven years through deliveries of Nigerian crude and products from the refinery once the refurbishment is complete, the sources said. Cairo-based Afreximbank is leading the financing. "Afreximbank is looking into a facility for the refurbishment of the Port Harcourt Refinery. However, the borrower is yet to be determined,” a spokesman for the bank said.

NNPC declined to comment. The sources said discussions were taking place with a range of foreign and Nigerian trading houses, including some who have previously worked with Nigeria, and who asked not to be named. Apart from the problems of the pandemic and increased investor preference for carbon-free energy, defaults and fraud in commodity trading, mainly in Asia, have reduced the appetite of foreign banks for exposure to commodity trade finance.

A source at one foreign bank, also asking not to be named, said it was unlikely to participate in Nigeria’s latest effort because of lower credit availability and increased reluctance to take out exposure in a high risk country.

Nigeria, Africa’s most populous country, has four refineries with a combined capacity of 445,000 barrels per day (bpd): one in the north at Kaduna and three in the oil-rich Niger delta region at Warri and Port Harcourt. The Port Harcourt complex consists of two plants with a combined capacity of 210,000 bpd.

In 2019, the refineries lost some 167 billion naira (USD439.47 million), and only Warri processed any oil. In April 2020, they were all shut pending rehabilitation. Nigeria has struggled with the poorly maintained units for decades. Successive NNPC chiefs and politicians have announced a series of unsuccessful plans to revamp, privatise or expand the refineries.

NNPC abandoned a similar attempt in 2019 to partner with oil traders, producers and engineering firms to fund refinery revamps after more than a year of talks, saying it would fund the projects itself. The barely functional plants leave Nigeria completely dependent on imports, and subsidy schemes also cost the country billions of dollars. Nigeria says it eliminated subsidies, but the state’s NNPC is effectively the sole gasoline importer, using some 300,000 barrels per day of oil to swap for fuel.

In December, NNPC opened a bid round for a contract to rehabilitate the Port Harcourt complex. NNPC chief Mele Kyari also said last year that private companies would run the refineries once they were rehabilitated. In July, global energy trader Vitol and Nigerian firm Matrix backed by banks agreed to lend NNPC USD1.5 billion to support its upstream arm NPDC, although the discussions that led to the deal predated COVID-19.

As MRC informed previously, global oil demand may have already peaked, according to BP"s latest long-term energy outlook issued in September 2020, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier last year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40% in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world"s major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.


mrcplast.com
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry.
Category:General News
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