Port Harcourt Refinery Makes First LSSR Fuel Oil Sale To Dubai-Based GTT

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While this will have a limited impact on global Very Low Sulphur Fuel Oil (VLSFO) benchmarks for now, the report stated that it spells trouble for Atlantic Basin exporters of clean products into Nigeria and the wider region.

However, low sulphur fuel, commonly used for running boilers and furnaces in various industries, including textile and cement manufacturing, is different from Premium Motor Spirit (PMS) or petrol, which has been the issue of contention since the refinery started operation almost two weeks ago.

But Kpler stated that the Port Harcourt refinery sold its first LSSR cargo, with a sulphur content of 0.26 percent to Dubai-based Gulf Transport & Trading Limited (GTT), to be loaded aboard the Wonder Star MR1 in the coming days.

It added that the 15 kt cargo, sold at a $8.50/t discount to the NWE 0.5 per cent benchmark on a Free on Board (FOB) basis.

“The LSSR was produced from the 60,000 bpd section of the refurbished Port Harcourt refinery following a November 26 announcement that it began processing crude oil.

“LSSR production from this train is expected to steady at about 60kt per month over the near term. The larger 150, 000 bpd section of the refinery, however, remains offline and will start-up after production from the first phase stabilises,” the report noted.

The Port Harcourt refinery which only began production after about seven postponement of scheduled commencement of operations, had met with cynicism from the Nigerian public, especially after it was revealed that the facility was blending petrol instead of carrying out proper refining.

The Nigerian National Petroleum Company Limited (NNPC), had defended itself, saying that blending is not a crime anywhere in the world.

However, the latest report stated that the LSSR export comes amid mounting pressure on NNPC to ramp up production of refined fuels, alongside the Dangote refinery, following numerous delays to the project.

The gradual ramp up of Nigeria’s second refinery, Kpler stated, will alter the petroleum product landscape in Nigeria and West Africa and will help displace imports from traditional suppliers in the region and Europe, as reflected by Nigeria’s falling Clean Product (CP) imports.

While the anticipated LSSR streams from Port Harcourt will have a muted impact on VLSFO benchmarks given the anticipated limited near-term production volumes, it argued that Nigeria’s reduced petrol import dependence will continue to weigh on near-term margins in the Atlantic Basin, adding to VLSFO blend stock availability.

“The pressure will only be compounded as the Dangote and PH refineries ramp up production, and the rehabilitation projects at the Warri and Kaduna refineries near completion”, it added.

Kpler’s estimates have pinned operations at the Port Harcourt refinery at 20, 000 bpd. Looking ahead, it stated that the potential ramp-up to full capacity of 210,000 bpd would weigh on fuel imports to the country, after Dangote’s rising refinery runs already pressured petrol imports to multi-year lows since October.

Before the gradual start-up of the privately-held Dangote refinery in Nigeria one year ago, the country’s downstream sector was dominated by state-owned facilities that were constructed back in the 1960s-1980s.

The 210,000 bpd Port Harcourt, the 125,000 bpd Warri and the 110,000 bpd Kaduna plants boasted a combined capacity of 450,000 bpd until 2016, after which all of them were subsequently shut down due to financing and technical issues resulting in almost zero operational refining capacity left in late 2018.

While the rehabilitation of these state-owned facilities has been a topic of frequent discussion over the past years, only the restoration of the 210,000 bpd Port Harcourt refinery is making visible progress.

NNPC awarded the $1.5 billion contract for rehabilitation to Italian engineering company Tecnimont SPA and the project began in April 2021. Works have seen several delays, with announcements by NNPC already stating last year that operations would start in December 2023.

“Kpler’s in-house crude stocks data corroborates that test runs have been ongoing, with the Petroleum Products Marketing Company (PPMC) inventories dropping from 1.5 million barrels in August to 1.3 million barrels in October to around 1 million barrels in November, with current crude inventories set to enable refinery runs of around 30,000 bpd for one month.