May 13, 2018//-The Federal Government recently launched an aggressive drive to encourage investment in the nation’s modular refineries with a view to reducing the spate of fuel importation into the country.
In this report, MOHAMMED SHOSANYA, ISAAC ASABOR, AND JUSTUS ADEJUMOH, examine the efforts the government has infused into the project and how it can get it right.
Excerpts:
The recent revelation by the Federal government that 13 out of the 35 firms that expressed interest to establish modular refineries have been given licenses is creating excitement for stakeholders on the feasibility of using the refineries to address the perennial fuel scarcity in the country.
A modular refinery is a processing plant that has been constructed entirely on skid mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping the components link together to form an easily manageable process.
To some of the stakeholders, the Federal Government should do more in giving the modular refineries more enzymes to enable the project sail to an appreciable height.
They heaped the necessity for modular refineries on the fact that with four refineries, having the capacity to refine 445, 000 barrels of crude oil per day, Nigeria needs not have any business with fuel importation.
The Nigerian National Petroleum Corporation indicated that in November 2016 alone, it lifted 13,584,651.00 barrels of crude Oil for domestic utilisation translating to an average volume of 452,821.70 barrels of oil per day in terms of performance.”
“In order to meet domestic product supply requirement for the month of November, 2016 about 9,493,640 barrels was processed under the Direct-Sales-Direct Purchase (DSDP) scheme while 3,142,176 barrels was delivered to the domestic refineries for processing and the balance of 948,835 barrels was exported as unutilised,” it added.
Sequel to this development Vice President Yemi Osinbajo, who recently concluded his tour of the Niger Delta disclosed that the federal government is working towards attracting many investors into refining through the issuance of modular refinery licenses.
At the Modular Refineries Association of Nigeria, MRAN conference in Lagos, Osinbajo indicated that the establishment of many modular refineries would culminate in high refining capacity and reduction of petroleum products importation.
Speaking on behalf of the VP, Ambassador Jide Olu said that: “We need to add value to oil and gas production so that our products will be better appreciated especially in this era of shale. That is why the FG is repositioning the oil and gas industry by encouraging local refining and Modular refineries.”
“Modular refineries must form part of our options because it helps us attend to both local and foreign challenges,” he added.
Mr. Luke Anniele, the General Manager, Business Development Downstream and non-oil, NNPC, said that the nation has to stop fuel importation in order to tackle dependence on other nations as well as conserve its scarce foreign exchange.
Professor Locious Igwe, Chairman of the conference, said that the government should license potential investors, including militants who have skills and technology to operate in the sector.
Funding Palaver
On February this year, the Federal Government said it had commenced talks with financial institutions in order to provide funds for investors who were interested in investing in modular refineries.
It stated that it was in talks with a number of potential financiers like the Central Bank of Nigeria, International Finance Corporation and Nigerian Sovereign Investment Authority in order to support private investment in modular refineries.
Rabiu Suleiman, the Senior Technical Adviser to the Minister of State for Petroleum Resources, who at the recent Nigeria International Petroleum Summit in Abuja, noted that the Federal Government would also guarantee regular crude oil supply to modular refinery investors.
He explained that the development will be in addition to tax and Customs duty waivers, which the investors will also enjoy from the government to ensure that their projects take off and remain profitable.
Suleiman said: “We have a lot of programmes that will support modular refining initiative and a lot of incentives have been put together to support this initiative, right from Customs duty waivers. Anybody who wants to invest in modular refining in the Niger Delta is going to benefit from such Customs duty waivers and tax reliefs that are being discussed at very senior level and we have reached a very serious level and that is going to happen.
“On financing, we have engaged the government; the central bank; we have engaged the Bank of Industry; we have engaged Sovereign Wealth Fund; we have engaged The Infrastructure Bank. We have engaged a lot of them, including the IFC and the rest.
“We have all worked with them and they all promised to make contributory finance into that. Only two weeks ago, we engaged with the NDDC the MD made a commitment that they were going to see how they could put in some money even if it means to pick up an equity in one or two or three of the refineries.
“State governments have said they want to be a part. So, we are encouraging a lot of financing. In the next two weeks, we intend to call for an investors’ engagement forum that will address some of the funding arrangements that we intend to bring on board.”
Suleiman stated that crude oil supply to the marginal refineries was more or less guaranteed, adding that refiners in Nigeria should not be denied the commodity when they start operating
Maikanti Baru, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) at the Offshore Technology Conference 2018 Nigeria Oil Industry Award Dinner in the United States, said the Corporation and the Ministry of Petroleum Resources were collaborating to encourage the establishment of modular refineries in the Niger Delta to encourage job creation.
He stated that in the months ahead, the dream of transforming Nigeria from a net exporter of crude oil to a net exporter of petroleum products would become a reality.
He said he was committed to achieving the December 2019 target set by the federal government to end the importation of petroleum products into the country.
Contradiction
But, the minister of state for petroleum resources, Ibe Kachikwu, said that the proposed modular refineries for Delta and Rivers states were not meant to address the current refining challenge faced by Nigeria.
According to him, the modular refineries are expected to only produce an average 2,000 and 10,000 at most capacity per refinery while the average consumption of fuel by Nigeria stands at 630,000 barrels per day.
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