LAGOS (Reuters) - Nigeria has decided to shut down all its oil refineries as it works to secure funding and a model to upgrade them, the head of Nigerian National Petroleum Corporation (NNPC) said on Wednesday.
The three refinery sites in Africa’s largest oil exporter have worked only sporadically due to years of underinvestment. It has been working to revamp them, but has struggled to find external financing to do so.
“Today, after proper scoping, which was not done in the past, we know exactly what to do to get them back on stream,” NNPC head Mele Kyari said.
Nigeria, Africa’s largest oil exporter, is scrambling to cut nearly $5 billion from its budget amid an oil price crash brought on as coronavirus lockdowns slashed global demand and a market-share battle between Russia and Saudi Arabia flooded the world with oil. This week it also sought nearly $7 billion from international lenders.
In statements posted on Twitter, Kyari said the oil industry will look to cut costs and extend payments wherever possible to survive oil prices that hit 18-year lows late last month.
Running Nigeria’s refineries is costly, as they are decades old and poorly maintained, and even world-class refineries are cutting output due to falling fuel prices.
While Kyari said they had secured funding without providing details, several previous deals - including with oil traders - to fund repairs have fallen through, and a source close to the discussions told Reuters other funding had yet to be confirmed. [reut.rs/3e8Xtz0]
Kyari said NNPC was pursuing “a different model” for the refineries, including the type used by Nigeria LNG, which is run by international companies such as Shell, Total and Eni alongside NNPC.
Price caps have forced NNPC to import nearly all the gasoline the nation comsumes. While Kyari also said Nigeria had eliminated subsidies, experts said that the retention of price caps meant the government could incur costs again when international fuel prices rebound.
Kyari also expressed optimism that a meeting this week between OPEC and other producers could yield a fresh deal to shore up oil prices. The group is due to hold a video conference on Thursday at 1400 GMT.
“We believe the ongoing engagements between global oil producers will bring back demand and once that happens, the market will balance and fully recover by year-end,” he said.
Reporting by Libby George; editing by Jason Neely and Emelia Sithole-Matarise