Nigeria's Port Harcourt sells first LSSR cargo signaling operational start up

Another closely watched refinery in Nigeria has sold its first low sulfur straight run fuel oil (LSSR) cargo, pointing to a gradual and phased start-up of operations. While this will have a limited impact on global VLSFO benchmarks for now, it spells trouble for Atlantic Basin exporters of clean products into Nigeria and the wider region.

Port Harcourt sold its first LSSR cargo, with a sulfur content of 0.26% % wt and a 0.918 g/ml density at 15°C, to Dubai-based Gulf Transport & Trading Limited (GTT), loading onboard the Wonder Star MR1 in the coming days. The 15 kt cargo, sold at a $8.50/t discount to the NWE 0.5% benchmark on an FOB basis.

The LSSR was produced from the 60 kbd section of the refurbished Port Harcourt (PH) refinery following a November 26 announcement that it began processing crude oil. LSSR production from this train is expected to steady at about 60 kt per month over the near term. The larger 150 kbd section of the refinery, however, remains offline and will start-up after production from the first phase stabilizes.  

Nigeria gasoline imports by origin country (kbd)  

Source: Kpler

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 refinery has faced mounting scrutiny since its announced start-up, fueling doubts about its operational status and the accuracy of official statements regarding its performance.

Nevertheless, the gradual ramp up of Nigeria's second refinery will alter the petroleum product landscape in Nigeria and West Africa. This will help displace imports from traditional suppliers in the region and Europe, as reflected by Nigeria's falling clean product (CPP) imports, dragging imports into the wider west Africa region lower too.  

ARA: gasoline stocks in independent storages (Mb)

Source: Kpler calculations based on Insight Global data

While the anticipated LSSR streams from Port Harcourt will have a muted impact on VLSFO benchmarks given the anticipated limited near-term production volumes, Nigeria's reduced gasoline import dependence will continue to weigh on near-term FCC 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.

FCC refinery margins ($/bbl)

Source: Kpler calculations based on Argus Media and MarketView pricing data

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