After years of failed refinery repairs, Africa’s largest crude oil producer bets on Chinese partners to revive key oil assets

Nigeria’s state-owned oil company says it is taking a different approach to reviving two of the country’s largest refineries, signalling a shift from years of government-funded rehabilitation projects towards a commercial partnership model backed by foreign investors.

• Nigeria’s state-owned oil company says its planned partnership with Chinese firms to revive two major refineries has entered the due diligence stage.
• The company says the agreement is designed to create commercially viable refining businesses rather than another government-funded rehabilitation project.
• Prospective partners will finance the technical and commercial assessment before any binding agreement is signed.
• The move marks another attempt to revive state-owned refineries that have consumed billions of dollars while operating far below capacity. 

The Nigerian National Petroleum Company Limited said the memorandum of understanding it signed with two Chinese companies to rehabilitate and operate the Port Harcourt and Warri refineries has entered a detailed technical and commercial evaluation phase, stressing that no final investment agreement has yet been reached.

DON'T MISS THIS: Nigeria turns to China to help fix its broken refineries

Group Chief Executive Officer Bayo Ojulari said the evaluation is intended to determine whether the proposed partnership can deliver profitable and self-sustaining refining operations rather than another round of temporary repairs.

“Fixing a refinery takes more than pipes and pumps. It takes the right partners,” Ojulari said, adding that the memorandum is only a framework for exploring cooperation and should not be interpreted as a binding contract.

Unlike previous rehabilitation programmes financed largely through public resources, the prospective Chinese partners are expected to bear the cost of the due diligence process, allowing technical, financial and operational assessments to be completed before either side makes long-term commitments.

A different strategy for ageing refineries

The latest development follows an agreement signed in April between NNPC and China’s Sanjiang Chemical Company Limited and Xinganchen (Fuzhou) Industrial Park Operation and Management Co. Ltd. to explore the rehabilitation, operation and possible expansion of the Port Harcourt and Warri refineries under a technical equity partnership.

DON'T MISS THIS: After $25bn in failed refinery revamps, Nigeria turns to China for fresh restart

According to NNPC, discussions extend beyond refining and could include investments in petrochemicals and gas-based industries, including methanol production, as part of efforts to improve the commercial value of Nigeria’s downstream energy sector.

Nigeria is Africa’s largest crude oil producer, yet it has relied heavily on imported petroleum products for years because its state-owned refineries have struggled to operate consistently.

The Port Harcourt refinery has a combined installed capacity of 210,000 barrels per day, while the Warri refinery can process 125,000 barrels per day.

Together with the Kaduna refinery, they represent about 445,000 barrels per day of state-owned refining capacity. Despite repeated rehabilitation programmes costing billions of dollars over several administrations, the facilities have suffered frequent shutdowns and low utilisation rates.

DON'T MISS THIS: Nigeria turns to China to help fix its broken refineries

The repeated setbacks have intensified debate over whether government should continue funding refinery repairs or bring in experienced private operators capable of running the assets on commercial terms.

The pressure has grown further since the launch of the 650,000-barrels-per-day Dangote Refinery, which has significantly altered Nigeria’s downstream fuel market and raised expectations that domestic refining can operate profitably at scale.

For NNPC, the proposed Chinese partnership represents more than another rehabilitation effort. It is an attempt to prove that Nigeria’s state-owned refineries can eventually compete in a market that is becoming increasingly driven by efficiency, private investment and commercial returns.