Introduction
Nigeria’s growing demand for locally refined petroleum products has increased interest in modular refineries. These smaller, flexible facilities offer an opportunity to process crude oil closer to producing areas, reduce dependence on imported fuel and support local economic development. However, challenges such as crude supply, financing, infrastructure and competition from larger refineries remain. This article explores the future of modular refineries in Nigeria and their potential role in strengthening the country’s refining industry. In this article, we explained modular refineries, the futures, opportunities and the challenges.
A modular refinery is a refinery constructed from consistent processing units that can be assembled relatively quickly and, depending on the design, expanded as demand and investment capacity grow.
The basic concept is different from that of a huge combined refinery. Rather than building an enormous facility designed to process hundreds of thousands of barrels of crude oil per day from the beginning, a modular project may begin with a capacity of a few thousand barrels per day and add processing units later.
In Nigeria, examples have included facilities associated with companies such as Walter smith, Aradel, OPAC and Duport. NMDPRA data cited in early 2026 indicated that Waltersmith, Edo Refinery and Aradel were operating during November 2025–January 2026, while OPAC and Duport were shut during that period.
Why Modular Refineries Matter to Nigeria
Nigeria’s refining problem has never been purely about refinery capacity.
It has also been about location, infrastructure, reliability, logistics and the ability to transform crude oil into commercially valuable products within the country.
A modular refinery can potentially address some of these issues.
- They can decentralize refining capacity
Large refineries tend to concentrate processing capacity in a few locations. Modular facilities can be distributed across different oil-producing and consuming regions.
This creates the possibility of bringing refining closer to crude-producing areas and petroleum-product markets.
For example, a refinery located close to an oil-producing area may have an opportunity to reduce some transportation costs associated with moving crude long distances before processing.
The concept is particularly relevant to the Niger Delta, where substantial oil production exists alongside communities and businesses that require petroleum products.
- They can support local economic development
A functioning refinery is more than a facility containing distillation columns and storage tanks.
It creates demand for:
engineers;
technicians;
security services;
transportation;
fabrication;
maintenance;
catering;
environmental services;
logistics;
laboratories;
construction;
equipment suppliers; and
other support businesses.
The potential therefore extends beyond fuel production.
A successful modular-refinery ecosystem could become a platform for industrial clusters around oil-producing communities.
- They can create opportunities for indigenous investors
The capital required for a mega-refinery can be enormous. Modular projects offer investors the possibility of entering the refining business at a smaller initial scale.
That does not make them cheap projects. Refining remains capital-intensive, and the financial risks can be substantial.
But modularity can create a different investment model: build, operate, stabilize, reinvest and expand.
Waltersmith provides an important example. NCDMB says its investment in the Waltersmith modular refinery began in 2018 and that the project subsequently became a proof of concept for the Board’s commercial-investment programmed. The company has since expanded its refining capacity.
The Biggest Challenge: Crude Oil Supply
If there is one issue capable of determining the future of Nigerian modular refineries, it is crude supply
A refinery cannot operate without feedstock.
Nigeria’s Petroleum Industry Act established a framework for domestic crude supply obligations. NUPRC has continued to administer the Domestic Crude Supply Obligation (DCSO), with the Commission reporting that 53.7 million barrels of crude oil and condensate were supplied to local refiners during the second quarter of 2026, representing 97.4% overall performance against the obligation.
However, allocation is not necessarily the same thing as commercially viable supply.
NUPRC’s framework operates on a willing-buyer, willing-seller basis, meaning the commercial terms of transactions remain crucial.
A small refinery cannot necessarily absorb the same crude-price and logistics pressures as a giant facility with enormous purchasing power.
Recent reporting indicates that crude pricing and logistics have remained major issues for domestic refiners. Reuters reported in August 2026 that Nigeria was considering changes to crude-allocation and pricing arrangements to address challenges facing domestic refiners, including proposals around direct delivery from producers to nearby refineries and adjustments to freight-related costs.
Government Policy Will Be Crucial
The government has an important role to play, but the objective should not be to permanently shield inefficient refineries from competition.
The more sustainable approach is to create conditions under which efficient operators can compete.
Policy priorities could include:
- Predictable crude-supply arrangements
Investors need to know where their feedstock will come from and under what commercial terms.
- Clear and stable regulations
Frequent changes in licensing, taxation, pricing or operational rules increase investment risk.
- Infrastructure development
Shared pipelines, storage and transportation infrastructure can dramatically improve refinery economics.
- Faster regulatory processes
Investment delays can increase costs, particularly when imported equipment and financing are involved.
- Product-quality enforcement
All refineries should progressively meet clearly defined product standards.
- Access to finance
Government-backed development institutions can help viable projects bridge financing gaps without turning the industry into a permanent subsidy programmed.
Nigeria has already introduced reforms aimed at improving the investment environment. NCDMB highlighted the 2024 executive orders concerning oil-and-gas tax incentives, local-content compliance and contracting costs and timelines as measures intended to improve investment conditions.
The Future May Belong to Smart Modular Refineries
Technology will also change the sector.
The next generation of modular refineries is likely to use greater levels of:
Automation;
Digital process control;
Predictive maintenance;
Remote monitoring;
Artificial intelligence-assisted optimisation;
digital twins;
Real-time laboratory analysis;
Energy-management systems;
and cybersecurity.
For a relatively small refinery, these technologies can improve reliability and reduce unplanned shutdowns.
Predictive maintenance, for example, can identify abnormal equipment behaviour before a major failure occurs.
That can be extremely valuable because a few weeks of downtime can have a major financial effect on a small facility.
The future modular refinery therefore needs to be technologically sophisticated even if its physical capacity remains relatively modest.
Conclusion
Modular refineries have an important role to play in the future of Nigeria’s petroleum industry. They can support local fuel production, create jobs, encourage investment and reduce dependence on imported refined products. However, their success will depend on reliable crude supply, adequate infrastructure, financing, modern technology and effective regulation. With the right support and efficient management, modular refineries can complement large-scale refineries and contribute to a more sustainable and self-reliant refining sector in Nigeria.
READ: Energy Efficiency in Refineries