The oil and gas industry in Nigeria has maintained control through a centralised framework for several decades. The upstream and downstream value chains have remained under a single dominant entity because of the Nigerian National Petroleum Company Limited (NNPC) and its support from international oil majors. The country exports crude oil in high volumes for refining by foreign facilities which then sell back petroleum products, thus making Nigeria dependent on worldwide market movements and unclear domestic actors.

The established monopoly is currently being broken down through a silent transformation. The country’s oil-rich regions now feature multiple small modular refineries which operate independently under private ownership. The new refineries serve Nigeria’s fuel market by producing locally, offering competitive prices, and implementing innovative supply chain methods.

The industry forum in Lagos received a powerful message from Chevron Agbami FPSO engineer Onasanya Oluwasegun who served as a mechanical systems specialist. Onasanya discussed Nigeria’s oil and gas sector transformation with energy professionals, policy experts and upstream operators during the event and emphasized the disruptive influence of modular refineries in a well-established monopolistic framework.

It’s quite frustrating that Nigeria, despite being Africa’s top oil producer, still has to import refined fuel. For years, the country’s four state-run refineries in Warri, Kaduna, and Port Harcourt have barely been operational. As a result, we’ve relied on imports, which have been driven up by subsidies and price-fixing from monopolies, creating an inflated cost for gasoline and diesel.

Engr. Onasanya Oluwasegun, a mechanical system specialist at Chevron Agbami FPSO with over 15 years of experience, points out that the system has been inefficient for a long time. He notes that depending on imported products leaves us vulnerable to sudden price hikes, currency changes, and logistical issues. Thankfully, modular refineries are starting to provide a local answer to this ongoing challenge.

The Rise of Modular Refineries

Modular refineries are designed to refine from 1,000 bpd to 30,000 bpd. Their output may seem paltry against mega-refineries such as Dangote’s 650,000 bpd facility, but their location and decentralised nature are a more nimble, regionally appropriate one.

Companies like WalterSmith Petroman, Duport Midstream and Niger Delta Petroleum Resources (NDPR) are already working, while many more are at various stages of construction or ready for final regulatory approval.

“Modular refineries don’t only have to do with refining of crude, they refine the economics of the downstream sector,” Onasanya adds. “They reduce the length that fuel travels to bring them closer to the community that really needs them, they cut off a lot of middlemen, and bring the final price down to the user.”

One of the most demonstrable effects of modular refineries is on pricing mechanisms. Local refining helps keep fuel from passing along expensive shipping lanes or incurring demurrage waiting fees at clogged docks. Transportation costs are slashed, resulting in lower pump prices, particularly in the areas where modular sites are set up.

This force appears to be translated into retail fuel pricing. For this reason, even in states in the north, where the modular refineries do not function, the price of diesel and petrol is lower in Edo, where the refineries are, than in the north.

“There is the emergence of price differentiation in different regions,” says Onasanya. “Where we used to have a flat regulated price, now we’re starting to see supply-and-demand-driven pricing kick in — and that only happens in competitive markets.”

Crude Monopoly vs. Downstream Autonomy

Modular refineries have a lot of potential, but they face significant issues, especially when trying to get crude oil. The NNPC controls how crude oil is distributed. Without a clear and reliable way to obtain crude oil, many modular refineries can’t operate at full capacity or sometimes don’t even start working after they are set up.

Onasanya points out that the problem is fundamental. You can’t make the downstream part of the oil industry open and free while keeping the upstream part under strict control. If modular refineries can’t buy crude oil at fair prices, then the monopoly simply changes form instead of improving.

Despite these issues, modular refineries are pushing for more independence. They aim to own parts of the oil extraction process or secure agreements to obtain their crude oil. This effort is gradually transforming the traditional power structures in the industry.

Policy and Reform Driving Competition

This change was made possible by the 2021 Petroleum Industry Act’s (PIA) enactment. The law allowed market-driven pricing, removed fuel subsidies, and opened up the downstream industry. Together with the NMDPRA’s efforts to fast-track licenses for modular refineries, the present policy environment is more favourable for competition than it has ever been.

Policies are needed that really impose fair play rather than just permit competition on paper. Modular refineries should have assured access to crude, electricity, and distribution networks. Otherwise, we run the danger of creating castles in the sand.

Experts think that as the country turns toward energy independence, expanding modular refineries may help to lower Nigeria’s import cost, stabilise fuel prices, and provide jobs. Still, success will depend on integration in governance as well as in infrastructure.

Onasanya argues, “Imagine a Nigeria with thirty modular refineries operating at 10,000 bpd each. “With 300,000 bpd, that much of our domestic gasoline demand could be fully satisfied without a single vessel crossing our borders. Though ambitious, that vision is not a fantasy anymore. The modular movement is redefining Nigeria’s oil monopoly rather than just eroding it.