Crude oil exploration in Nigeria began in 1937, when Shell D’Arcy was awarded exclusive concessionary rights over the entire country [Nigerian National Petroleum Corporation (NNPC)]. In 1956, Shell D’Arcy drilled the first successful well in Oloibiri, in present-day Bayelsa State, and discovered crude oil in commercial quantities for the first time. Shell D’Arcy changed its name to Shell-BP Petroleum Development Company of Nigeria Limited in the same year. It continued to grow, and, the first crude oil export from Nigeria was made in 1958. Importation of petroleum products was used to meet demand as the country’s economy grew. Shell-BP Petroleum Development Company saw an opportunity to address the country’s product needs soon after independence. It started a project near Port Harcourt to create the country’s first refinery. The Shell-BP Refinery was completed and commissioned in 1965, with a capacity of 38,000 barrels per day (bpd). It was only a basic hydro-skimming device. Under a participatory agreement with Shell-BP, Nigeria’s Federal Government obtained a 50% stake in the company. When the Nigerian government expanded its investment to 60% in 1972, it was renamed the Nigeria Petroleum Refining Company (NPRC), but it remained a joint venture under private sector management and supervision (NPRC Company reports 1972).
A Naphtha Catalytic Refining Unit (CRU) was added to the premier refinery in 1972 after it was decongested. The production capacity was increased to 60,000 barrels per day (bpd). Apart from bitumen, which was still imported, the plant met all of the country’s usual petroleum product needs. The refinery was a totally private enterprise that sold its products directly to Nigerian marketing companies under a contract in which they paid for indicated crude supply capabilities, lifted products realizable from those capacities, and paid the refinery a processing charge in return. For all parties concerned, it was a highly effective and profitable arrangement. Taxes and excise duties were collected by the Federal Government.
The Federal Government purchased the remaining 40% shares of the company through an outright purchase and renamed it NNPC Refinery, Port Harcourt. It was entirely Nigerianized and placed under government administration after that. This acquisition (of the remaining 40% shares owned by Shell-BP) occurred a year after the NNPC had already been established in 1977. The Nigerian National Petroleum Corporation (NNPC) was formed by the merger of the Nigerian National Oil Corporation (NNOC) and the Ministry of Petroleum, and was staffed primarily by professionals recruited from the private sector, International Oil Companies (IOCs), in order to strengthen Nigeria’s ability to compete in the fast-growing oil industry.
It may be important to note that oil geopolitics influenced a number of decisions made in Nigeria during the early years of the business. In 1971, Nigeria became a member of the Organization of Petroleum Exporting Countries (OPEC). OPEC was formed in 1960 to co-ordinate its members’ petroleum policy and to give technical and economic assistance to its members. One may argue that a primary goal of the grouping of petroleum exporting countries was to gain control of crude oil prices from the IOCs and boost the take by the host country governments. They have been successful to a significant extent.
Demand for petroleum products was expected to outpace NPRC production by the mid-1970s, according to forecasts of the NNOC’s economic monitoring unit. As a result, the NNOC began planning for the construction of a second refinery in Warri. The Warri Refinery Project was finished in December 1977 and put into operation in January 1978. It was a 100,000 bpd conversion plant with a naphtha catalytic reforming unit (CRU) and a gasoline FCCU (Fluid Catalytic Cracking Unit). Both existing refineries were once again able to meet the country’s entire petroleum product demand.
Both the northern and southern sections of the country were experiencing increased economic activity. Long-haul trucks and rail were used to transport goods to the north – Kano and Kaduna, as well as parts of the middle Belt. Demand would overwhelm the two existing refineries’ production capacity by the mid-1980s, according to projections. As a result, it was decided to construct a third refinery in Kaduna, closer to the high-demand areas of the north. In 1980, the Kaduna Refinery was built and put into service. It was a modern conversion refinery, similar to the Warri Refinery, but it was divided into two sections: a 50,000 bpd Fuels Plant with a CRU and FCCU, and a 50,000 bpd Lubes Plant for the production of lubricating oil, blend stocks, waxes, and bitumen. Because all Nigerian crudes were napthenic, waxy crude was imported from Saudi Arabia and Venezuela as a feedstock for the Lubes Plant. The Kaduna Refinery was successfully commissioned by the Nigerian National Petroleum Corporation (NNPC) and operated at full capacity.
The NNPC possessed a well-functioning Economic Intelligence Unit and a Product Supply and Distribution Unit that kept track of Nigeria’s petroleum consumption patterns. According to projections from 1983, a supply gap would arise by 1989 based on the current rate of economic development. As a result, the idea for the New Refinery Project was born. The Nigerian National Petroleum Corporation (NNPC) planned to start exporting petroleum products. As a result, two refineries were proposed: one with a capacity of 100,000 barrels per day (bpd) in Port Harcourt and another with a capacity of 100,000 bpd in Calabar, which had a deep sea draught. The purpose of the second factory was to produce just for export. Both of the initiatives started at the same time. By the third quarter of 1984, Basic Engineering Design and Licensor Process Design packages had been completed. Unfortunately, the government decided at that time to build only one 150,000 bpd refinery in Port Harcourt. As a result, early in 1985, only the New Port Harcourt Refinery Project was approved and awarded. NNPC constructed and commissioned the refinery at design capacity in 1989. Extra products were efficiently exported after all local demands were met.
Presently, there are four large refineries existing in Nigeria and they are as follows:
- The old Port Harcourt Refinery was built in 1965 and has a capacity of 60,000 barrels per day.
- Warri Refining and Petrochemical Company was established in 1978 and has a capacity of 125,000 bpd.
- Kaduna Refining and Petrochemical Company was established in 1980 with a capacity of 110,000 bpd.
- Commissioned in 1989, the New Port Harcourt Refinery, with a capacity of 150,000 bpd was added to the fleet.
