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1.6 mbpd modular refineries contribution hits dead end —Investigation

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By Ediri Ejoh

refineries nigeria

THERE are indications that the Federal Governments’ plan to add additional 1.6 million of barrels per day, through new modular refinery may meet dead end, as lack of funds and inefficient policies in the petroleum sector continue to hamper the refineries coming on stream.

It would be recalled that over 45 licenses have been issued between 2008 and 2018. However, only one modular refinery has been recorded to have been commissioned.

Vanguard investigation shows that the execution of the refinery projects was constrained by many challenges especially lack of funds and difficulty associated in securing competent technical partners. Some owners of these licences, who spoke to Vanguard, said that funds have remained the greatest challenge in bringing the refineries on stream, calling for more support from the Federal Government.

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Experts believe that until local entrepreneurs embrace global best practices of corporate governance which allows for competent management of resources without sentiment, the quest for foreign or local investor putting their funds into projects perceive as rewarding will remain a mirage.

Meanwhile, The Department of Petroleum Resources, DPR, has also projected that with government’s efforts at least five modular refineries with each processing up to 40,000 barrels of crude per day would be operational in Nigeria in the next five years.

It noted that government had also approved total waiver (100 per cent) on customs duties for equipment imported for licensed modular refinery projects. “These efforts by the government and the support from the DPR have changed the modular refinery projects landscape in the last two years.”

The success rate of establishment of mini (modular) refineries in Nigeria is low; only one modular refinery has been commissioned since 2008 out of about 43 firms issued licence to establish them.

“However, construction of 7,000bpsd OPAC Refinery in Umusetti, Delta State, and 10,000 bpsd Niger Delta Petroleum Resources Refinery expansion project in Ogbelle, Rivers State, started and are near completion owing to the implementation of government policies and the support from the Department of Petroleum Resources. A few other modular refinery projects, namely Edo Refinery, Ikpoba Okha; Petrolex Refinery, Ijebu Ode; African Refinery, Port Harcourt and Southfield Refinery, Ologbo, have either completed detailed engineering, secured modules to relocate or the equipment are being fabricated at the manufacturers yard,” DPR stated on its website.

“However, PwC publication reiterated that Nigeria’s refining sector is currently not operating at full potential as laudable attempts are being made by the current administration to drive private investment.”

These include plans to upgrade existing refineries and the issuance of 25 refining licenses (conventional and modular) to indigenous companies. These initiatives, if executed rigorously, will drive growth and reforms within the sector in the medium to long term.

“The combined capacity of the 25 candidate refineries stands at approximately 1.6 million bpd. Three (3) of the licensed companies are billed to construct conventional stick-build plants with capacity estimated at over 850,000 bpd, while 22 licenses are to construct modular units estimated at about 700,000 bpd in combined capacity.

“We have run our thesis, (Nigeria will become a net exporter of refined products by start of the next decade) through a number of scenarios which depict possible outcomes in the refining sector up until 2030. The scenarios are based on some forward assumptions about refining in Nigeria and the West Africa region. Our outlook illustrates the potential of the sector with focus on the volumes that modular refineries can contribute to bridging the supply gap in the country and regionally.  These are presented in three different scenarios.”

In our scenarios, key assumptions are made across refinery setups: modular and conventional. Modular refineries are assumed to be set up close to crude sources either within existing refineries or on onshore marginal fields. They are also assumed to be set up close to consumption clusters thereby making them better positioned for domestic supply. On the other hand, conventional refineries are assumed to be set up to source for crude internationally and to supply both international and domestic markets,” PwC added.

Vanguard

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