Base Oil to Stream Again in Nigeria?

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Two years after it closed, a subsidiary of Nigerias national oil company is intensifying efforts to restart a refinery that includes the countrys only base oil plant. Officials said recently that they expect Kaduna Refining and Petrochemical Co. and its 110,000-metric-ton base oil plant to resume operating during the second half of this year.

Lubricant blenders in the area welcomed the prospect, saying output from Kaduna will help lower base oil prices in a lubricant market that relies on imports.

Though the quantity being produced at Kaduna [before it closed] wasnt enough for the local market, it was driving down the cost, said Taiye Williams, general manager in charge of manufacturing and marketing for Lubcon Nigeria. As soon as Kaduna stopped production, importation increased, especially with more independent lube blending plants coming up.

Kaduna Refining and Petrochemical is located in the northern Nigerian city of Kaduna and is owned by Nigerian National Petroleum Corp., a government agency. Industry sources told Lube Report that operational problems began in the second half of the 1990s, when turnaround maintenance that was supposed to be done every two years was left undone for five years. The situation was compounded by vandalism to pipelines supplying crude oil to the refinery from Nigerias Niger Delta region. The refinery ceased production in 2006 and has not operated since.

The Nigerian government has made a priority of reopening Kaduna and another idled refinery in the city of Warri. A local consortium, Bluestar Oil Group, was to have accomplished that after agreeing last year to pay U.S. $721 million for a 51 percent stake in both refineries. That plan was dashed when Bluestar was forced to pull out of the deal following widespread criticism.

Now there once again seems to be a light at the end of the tunnel. The Nigerian government awarded a maintenance contract for the Kaduna refinery to DKG East ITC Sea Oil and Gas Engineering Group in the sum of $23 million. In addition, NNPC has placed an order for heavy crude from Venezuela in preparation for production that is expected to commence about the third or last quarter of the year.

NNPC Group Managing Director Abubakar YarAdua expressed confidence that the Kaduna refinery is on its way to restarting soon.

That is good news for lubricant blenders in Nigeria and the entire West African region. Approximately a dozen major oil companies are present in the countrys lubricant market, along with 65 local blenders. The latter have had to depend solely on base oil imports since the Kaduna plant shut down.

Lubcon, for example, imports between 40,000 tons and 60,000 tons annually at its plant in Ilorin, Nigeria. Williams said he expects the resumption of production at Kaduna should have a large impact on local base oil prices.

The Kaduna base oil plant opened with the refinery in 1988. It is the only base oil plant between North Africa and South Africa.

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