OPEC: Dangote Refinery May Increase Pressure on Existing Plants | The Journal

OPEC: Dangote Refinery May Increase Pressure on Existing Plants

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The Organization of the Petroleum Exporting Countries (OPEC) has said that the expected increase in new refining capacities in Nigeria and other African countries may increase pressure on existing plants on the continent.

The organization recently released the 2020 World Oil Outlook. The Report states that the estimated refining capacity will rise between 2020 and 2025 at around 5.2 million barrels per day based on the review of announced and planned refinery projects.

‘Significant capacity additions are also expected in Africa in the medium-term period. Additions of new refining capacity are clearly in line with oil demand growth expectations, which show positive trends in most developing countries,’ it said.

Based on the report, the additions expected in Africa total around 0.8 million bpd or 15 per cent of the global volume.

It said, ‘The largest project expected to come online is the Dangote refinery in Nigeria in 2022, as well as several smaller projects in Egypt and Algeria.

‘This significant increase in refining capacity is somewhat larger than incremental demand in the medium-term and could help to reduce product imports, especially in West Africa.’

According to OPEC, in Latin America and Africa, there are a number of old and inefficient refineries that have relatively low utilization rates.

It said, ‘The new refining capacities, which are projected to come online in the medium to long-term, may increase pressure on these existing plants with two ways out – either closure or refurbishment.

‘Both markets are expected to grow considerably, which would support refurbishment of older plants. However, due to the lack of financing and rising internal competition, some of these plants may be closed in the coming years.’

OPEC noted that there’s the probability of delay in some projects as a result of the crisis caused by the outbreak of COVID-19. This would lead to a shift in commissioning dated from the first period towards the second half of the medium term.

‘Furthermore, the uncertainty is even higher for projects in the second half of the medium-term period. Consequently, it is possible that some projects expected to go online in the medium-term period may become operational only after 2025, it added.

OPEC said the expected commencement of new refining capacity in Africa in the medium term could reduce exports from Europe to the continent.

According to OPEC, Africa is projected to add 2.9 million bpd of distillation capacity by 2045. It said while the refining capacity additions in the medium-term are estimated at 0.8 million bpd, refinery additions in the period 2025–2030 are expected to be above 0.9 million bpd.

Peace Omenka

Photo Credit: Middle East Monitor

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