Can Chinese investors revive Nigeria’s troubled state-owned refineries?

Nigeria’s state oil company is considering an equity partnership that could give Chinese investors a controlling stake in the Port Harcourt and Warri refineries of about 51%, marking a potentially significant shift in the country’s downstream restructuring strategy.

The proposed arrangement follows the signing of a memorandum of understanding on April 30 between the Nigerian National Petroleum Company Limited (NNPCL) and Chinese firms Sanjiang Chemical Company Limited and Xinganchen (Fuzhou) Industrial Park Operation and Management Co., Ltd. – neither of which has experience in large-scale refinery rehabilitations.

The framework extends beyond conventional refinery rehabilitation contracts in Nigeria in that it may involve long-term equity participation by the Chinese firms in the two refining assets. Previous rehabilitation contracts gave contractors fixed fees to complete the work, with little incentive tied to whether the refineries operated efficiently afterwards. A technical equity partnership would mean the Chinese firms collect returns based on the refinery’s commercial performance. 

Sources familiar with the discussions told The Punch that the structure is being modelled on the ownership framework of Nigeria LNG Limited, under which investors hold majority equity stakes, participate in governance, and retain long-term operational responsibilities.

Commonly known as NLNG, Nigeria’s liquefied natural gas export company was established in 1989 to monetise vast natural gas reserves by processing natural gas into liquefied natural gas (LNG) for export. Shell plc (LSE: SHEL) TotalEnergies (EPA: TTE) and Eni (BIT: ENI) collectively hold 51% and NNPCL the remaining 49%.

Under the proposal, the Chinese firms would support the completion of outstanding engineering and rehabilitation work at the Port Harcourt and Warri refineries, while also providing operations and maintenance services aimed at improving efficiency, reliability, and fuel quality standards.

The parties are also exploring expansion into petrochemicals and gas-based industrial projects through the development of co-located industrial hubs around the refinery complexes.

“The scope includes capacity expansion, yield optimisation, petrochemical integration, and compliance with clean fuel standards and exploration of gas-based industrial projects in Nigeria,” an NNPCL official told the outlet, speaking on condition of anonymity because he was not authorised to comment publicly.

Ojulari described the agreement as a major milestone after more than six months of engagement between NNPCL and the Chinese firms.

“All parties recognise mutually beneficial opportunities for the development and long-term sustainable profitability of NNPCL’s refining assets in Nigeria and the collective weight required for success,” he said.

He added that the arrangement represented “a significant step on the journey towards identifying potential technical equity partner(s) to restart and expand NNPCL’s refineries and to explore opportunities in co-located petrochemical and gas-based industries.”

According to the report, the MoU remains non-binding and any final agreements would still require regulatory approvals, as well as detailed technical, operational, financial, commercial, and legal due diligence.

An NNPCL source told The Punch the framework differs from traditional engineering, procurement and construction arrangements because it envisages long-term ownership and operational participation by the Chinese partners.

“Instead of a conventional contractor arrangement, the MoU suggests possible equity participation using an NLNG-type model of joint governance arrangements and a long-term partnership framework,” the source said. “This implies Sanjiang/Xinqianchen may take ownership or operational participation rather than acting solely as an EPC contractor.”

Industry analysts said the proposed structure could reflect concerns within NNPCL over the sustainability of previous refinery rehabilitation efforts.

Clement Isong, executive secretary of the Major Energies Marketers Association of Nigeria, said bringing in technically competent partners with equity stakes could improve operational efficiency and accountability.

“This is an innovative way of getting the assets to work in an efficient and sustainable way,” Isong told The Punch. “The key difference is that the third party they have brought is taking equity. He’s a part-owner of the refinery and so would want the refinery to work so he can get returns on his investment.”

Sanjiang Chemical Company Limited is a petrochemical firm primarily focused on ethylene oxide, ethylene glycol and surfactants rather than crude refining. Xingcheng (Fuzhou) Industrial Park is focused on industrial park management, investment facilitation and infrastructure development. Both are private entities rather than major Chinese state-owned engineering firms with specialized refinery rehabilitation experience

If concluded, the arrangement would deepen Chinese involvement in Nigeria’s downstream petroleum and gas sectors, while potentially transforming the refineries into broader petrochemical and industrial processing hubs.

Refinery capacity and operational problems

The Port Harcourt refinery has a combined installed refining capacity of 210,000 barrels per day (bpd) across its old and new plants, while the Warri refinery has a nameplate capacity of 125,000bpd. Although neither is officially classified as fully idle, they have struggled with repeated shutdowns, low utilisation rates, and incomplete rehabilitation despite billions of dollars spent on repairs.

The Port Harcourt refinery rehabilitation project was previously awarded to Italian engineering group Maire Tecnimont (BIT: MAIRE) in 2021 under a roughly $1.5bn programme financed largely through Afreximbank support.

NNPCL repeatedly announced progress milestones and, in late 2024, declared that the old refinery section had resumed operations. However, several issues later emerged, including questions over actual throughput and intermittent shutdowns, and the facility has reportedly been idle since May 2025.

The Warri refinery has had an even more troubled recent history than Port Harcourt. It was officially restarted in December 2024 after more than a decade of limited or no meaningful operations following a rehabilitation programme that reportedly cost about $897mn.

At the restart, NNPCL said the refinery was operating at about 60% of installed capacity and producing products including kerosene, diesel and naphtha. However, the restart quickly ran into problems, and the facility was shut down again by January 25, 2025, reportedly due to safety and technical issues related to the crude distillation unit heater system.

The federal government spent an estimated $2.39bn trying to fix these two refineries under the previous administration. Some estimates put total rehabilitation expenditure across Nigeria’s state refineries at $25bn between 2010 and 2023.

Africa’s largest oil producer continues to rely heavily on refined-product imports and increasingly on supply from the 650,000bpd Dangote Petroleum Refinery, which is one reason NNPCL is now considering a deeper equity-partnership model rather than continuing with state-led rehabilitation alone. Nigeria officially became a net exporter of petrol this March, thanks to Dangote, which aims to boost output to 1.4mn bpd in less than 30 months.