MATRIX is a fully Nigerian Oil & Gas Service that occupies a prime position in chemical and pipeline services in Nigeria and keen on building virile and highly respected indigenous Nigerian petroleum products and services organization operating actively in the upstream and downstream. The Chief Executive Officer, Matrix Petro-Chem Limited, Dr. John Erinne, in this interview with Prince Okafor, talks about why the Federal Government should not see Modular Refineries as a one stop measure to bridge the importation of petroleum products into the country. Excerpts
What do we need to know about modular refinery?
First of all, it’s important for us to explain what a modular process plant is. It’s modular, simply because of the way it’s constructed. It’s built in modules in the fabrication yard, and then these modules are transported to site, and quickly erected. This is different from the normal conventional construction whereby some of the equipments are fabricated. Others are fabricated in the yard and transported, and all of them are erected one by one and interconnected to make a process plant.
In general terms very simplistic sense, small plants are essentially amenable to modularisation big world scale process plant refineries are not really built on modules because we will have a problem of transporting very heavy modules over long distances.
So when we talk about modular refineries, I believe that in this country, what we are talking about is more or less small kinds of refineries. It is good to make that distinction to be able to clarify for Nigerians. Two of them may coincide sometimes, but it may not necessarily be the same all the time. But the attraction of modular refineries is because it’s quick, already more or less pre-engineered to an extent, so you put together the different process you need to mount them on modules and then transport them to the site.
Talking about modular refineries, what do you think Nigeria is up to?
What I believe is that the concept we are looking at more is the concept of small refineries. Maybe, they will be modularised; the key thing is not that the plants are in modules, but that the plants are small size.
How much does it cost to establish a modular refinery?
Nigeria has a population of about 180 million. There is nothing absolutely wrong with a company having an interest in modular refinery. Modular refineries could have a role to play in the economy, especially in the oil and gas sector, but the only things is that any business group that wants to go into it must make sure that it does the study very well, that it has a very sound feasibility study that clearly advises whether it’s viable or not and how it should proceed to avoid running into catastrophe down the road.
Can the refineries help to tackle shortage of petroleum products?
Look at it this way, consumption of refined products in this country is in the interim, maybe about 60 million litres per day. Let’s observe a small refinery; an average small refinery can be able to push out a million litres of petroleum product optimistically. That means you need about 50 or 60 of such plants, meaning that these cannot be the only the solution to the shortfall in production of refined products in this country. Also, what it means is that modular refineries can only help to breach some aspect of the gap, which cannot be the sole solution.
Clearly, you need so many of them to be able to breach the import gap, and what that tells you immediately is that it would not be an efficient solution, and that also underscores the fact that globally, we are moving into world scale process plant, for petroleum products and petrochemicals.
Looking at the nation’s economic issues, how soon do you think we will be able to construct these plants?
Well, possibly by 2019, we will have one at our doorstep in Lagos State,Dangote Group is building a refinery, the biggest single train refinery in the world. Hopefully, it comes to fruition in 2019, then we are going to have a world scale plant by our doorstep, and that’s one step, and that plant could actually be a game changer.
Do you think the Federal Government is getting it wrong in its effort in bridging petroleum importation gap?
The government has got it all wrong and with due respect, when I say government, it just didn’t start with the people who are in charge today. Over the years, our government had got it all wrong, because we have four refineries that are not refining much.
When did we start getting it wrong, and how can it be corrected?
I am not a historian, I might not be able to tell exactly when they started getting it wrong, but I can tell you that in the last 15years or so, the refineries have been in extremely bad condition and we have been relying exclusively on imports, which is extremely disgraceful. The solution is simple; the government cannot run the refinery. Refining is very serious business, big business, it must be subjected to commercial discipline, discipline in the marketplace, if you don’t, what you get is what we have in Nigeria. It should be run on commercial basis, meaning you cannot run it as an extension of civil service where politicians and civil servants have a bureaucracy stake. No, a refinery has to be run as a business, that’s the best way you can be sure that it will deliver. The government will continue going round in a circle. The only solution which they try to avoid strenuously is to reduce their stake in the refineries and hand over majority stockholdings to people who know how to run refineries, people who have the expertise, the financial resources and all it takes to run such a business.
Can you comment on government policies and incentives to attract and retain investors in the downstream sector?
I don’t think people are complaining seriously in the downstream, especially in bulk trading and marketing. On the part of scarcity, such complaint revolves around scarcity of forex to be able to import products. Again, it all goes back to our scandalous dependence on imports. I will also say that one issue that disturbs the downstream is the pricing of petroleum products. Some of the players may not complain, but for the good of the economy, we must look at the pricing. We have had serious scandals because of the so called subsidy regime has been administered. Specifically, it encourages corruption and sharp practices. These are reasons why it’s always better to operate a market-driven regime so that the market decides on what you do. If it’s good, you buy; if it’s not good, you hold on. If we try to socialise all such things, we end up running into trouble. In fact, experience has shown that it doesn’t work and our problem still remains that we are still not running a deregulated pricing regime in the downstream.
Is Matrix Energy looking at venturing into the construction of a modular refinery at any time soon?
No, we are not going into refining.
What’s Matrix role in trying to balance this scarcity issue and the importation problem?
One of our business arms is advisory and project development service. We have clients that we advise, carry out studies for and also manage their projects and things like that. Through that, we advise prospective investors on optimum investment which includes areas related to refining. So that’s the closest we can to refining in our business model.
Can you comment on the Federal Government’s directive that oil companies should relocate their headquarters to the Niger Delta?
You can’t keep pushing companies up and down. We are witnesses to the fact that many of the International Oil Companies, IOCs, had actually moved their operations to the Niger Delta in early 2000, but by mid to late 2000, the situation in the Niger Delta became unattainable to them. They could no longer operate from the Niger Delta. Consequently, many of them started moving to Lagos. You cannot blame or expect them to transfer their operational headquarters again, without knowing what’s going to happen tomorrow. Let’s be fair to them, I have never seen anything unrealistic like that. I feel the Federal Government is playing politics.
What other things you would like to enlighten Nigerians on, on modular refining?
All I would say is that, there is a lot of talk about modular refinery and it’s sounding like a one-stop remedy for the problem of product supply, for the problem of illegal refining. I would like to caution on what is extremely wrong about that. The problem of illegal refining is very complicated and must be addressed in a very holistic fashion. You can rule modular refining as people expect and expect it to work, you must also understand that refining cannot be used as a social gesture to move people away from illegal refining and you grab them unto modular refining, it doesn’t work, and it not going to work. So, I will still recommend that modular refining should be done by private companies. They can handle it, get their numbers right and go ahead to make the funds and invest. I would also say that the government needs to ensure that it creates attractive conditions for such investors to be able to put in their money and expect some reasonable returns. For the operators of the illegal refineries, modular refinery is a far cry from what they are doing, they are no meeting point.
Therefore, my first suggestion is that they should receive extensive training in technical skills and discipline, to give them legitimate means of livelihoods. The government should set up a training scheme for them. When this happen, the government will have every ground to be able to move in and stop the theft of crude oil because illegal refining goes pari-passu with theft of crude oil from the pipelines. Crude oil is stolen and put into this refining process and they boil up and get diesel of extremely poor quality. So you can run a system like that. I don’t see how you can grab these people out from such a system to now go and operate the modular refinery. So, we need to set up proper training programme for them.
If they are private individuals who set up small refineries, these people can easily fit into those plants as operators when they have enough training. Also, sometimes in this country, we like shortcut measures. It does occur to me as if the government is looking for shortcut measures. One of the fundamental issues at stake is the underdevelopment of the Niger Delta, the people feel totally ignored and they believe that by stealing crude oil from the pipeline, they are getting their own reasonable reward of what is happening in the environment. It is not a sustainable system, therefore the government needs to do a lot more to provide infrastructure in the region. We must provide infrastructure for them. A combination of infrastructure, amnesty, and training would reasonably take care of crude oil theft and illegal perpetrators.