Refineries in Nigeria and Iraq

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Refineries in Nigeria and Iraq

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abarrelfull wrote on 04 Jun 2010 12:31
Tags: iraq nigeria project refinery

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Whilst much of the refining world struggles with the consequences of refining sector over capacity, countries that should lack the funds are determined to add to the surplus.

First Nigeria

KBR announced today that it has been awarded a contract by Houston-based FPR Inc. to provide Design and Early Engineering Services for the development of the Araromi Refinery Project in the OK Free Trade Zone (OKFTZ) in Nigeria.

Nigeria like many oil producers is keen to go downstream. The country has suffered fuel shortages in the past, and no doubt wants to avoid repeats. According to the EIA, Nigeria imports 85% of its refined products, whilst the refineries are mothballed.

Yet building new capacity is never going to be the answer to a problem that was not caused by lack of capacity, but by market distortions and alleged corruption. Pricing reform and privatisation would solve the problem immediately. Yet this is the route being chosen:

KBR will execute the Design and Early Engineering Services for a low complexity 160,000 barrels per day Greenfield refinery and marine facility estimated in excess of US$3 billion.

What kind of crazy investor builds a low complexity refinery in this day and age?

Meanwhile in Iraq:

Foster Wheeler AG announced today that its Global Engineering and Construction Group has been awarded a feasibility study and front-end engineering design (FEED) contract by the Iraqi Ministry of Oil for a new grassroots refinery at Nassiriya in southern Iraq. The proposed refinery will have a capacity of 300,000 barrels per day.

Iraq may or may not be in need of new refineries, but its existing ones are certainly not in good shape. Like Nigeria, fuel prices are below costs, which means that demand is much higher than it should be.

One person I spoke to with inside knowledge of the market, told me that nobody even has any market projects for Iraq, as their are just too many variables.

Bearing in mind how poor these two countries are, and how much excess capacity there is in the sector, what a massive waste of resources it will be if these projects are actually built.