Industry Trend Analysis - Downstream Reforms Showing A Modicum Of Progress - JUNE 2017

BMI View: Nigeria ' s downstream reforms are showing signs of promise, with refinery utilisation reaching hitting multi-year highs in January and new import agreements helping to plug the refined product deficit.

Reforms to Nigeria's beleaguered downstream sector are starting to show promise in 2017. The state-run domestic refineries recorded combined utilisation rates at multi-year highs in January, boosting supplies of fuels and taking some pressure off Nigeria's deep import dependence. All of Nigeria's refineries were online in January with combined utilisation rate of 36.73% up from 7.55% the previous month. The jump in utilisation rates suggests that combined effects of upgrades and more consistent feedstock supplies are having a positive effect on refining performance, posing upside risk to our refined products production forecast. However, we remain sceptical about how sustainable these utilisation rates are, particularly given historically volatile swings in output. We are therefore sticking to our 53,830 barrels per day (b/d) refined fuels forecast for 2017 but do concede that the 36.73% rate is certainly encouraging.

Reforms to import liberalisation have also been making headway. The Nigerian National Petroleum Corporation (NNPC) has recently announced a preliminary list of recipients for the countries second round of Direct Sale of Crude Oil and Direct Purchase of Products Program (DSDP). The tender for the new DSDP contract was well subscribed with 128 companies submitting bids. The DSDP was designed to replace the previous Crude Oil Swap initiative that was suspended early last year due to a parliamentary committee revealing major corruption in the notoriously shady deals. The first DSDP scheme started in April 2016 and has been extended for April 2017 delivery given the delays to the signing of the new DSDP contracts.

Domestic Refiners Off To A Good Start In 2017
Refineries Consolidated Capacity Utilisation, %
Source: NNPC, BMI

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