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Between modular refineries and fuel sufficiency

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By Chikodi Obioma 

ONE popular maxim among people who are indigenous to South Eastern part of Nigeria is that obu ihe ojo mmadu ihapu ara nneya wee nua akpu  (it’s an abomination for a child to suck the boil on its mother’s chest in the stead of its mother’s breast). Again, it is an abomination (aru) for people to stand in the middle of an ocean and begin to wash their hands with saliva (O bu aru mmadu ino n’etiti oshimiri wee jiri asu kwuo aka).

The two axioms are illustrations of Nigerians’ nasty experiences in relation to petrol, which is a by-product of crude oil with which God blessed the country abundantly. Crude oil started being the beginning-and-the-end of all socio-economic activities after agriculture that “breastfed” the country was abandoned. Every now and then, Nigerians will be on the throes of one petrol palaver or the other.

Most times, fuel scarcity will hold us at the jugular. When this happens, Nigeria’s poor will agonise staggeringly because of the cost of foodstuff skyrockets. This is because everything in Nigeria is fuel-dependent, including, arguably, making one’s wife pregnant.

As the late Professor Chinualumogu Achebe would argue, if a man could not say from where the rain started beating (drenching) him, he will not know where the rain stopped drenching him. Nigeria and Nigerians began experiencing problems that resulted from the oil and gas sector when the four refineries in Nigeria stopped functioning as a result of criminal neglect by successive administrations.

Matters came to a head when the Federal Government refused to address the issues of oil pollution that resulted in environmental degradation. Those from the region, especially their youths, began agitation and every time government would tell them that their better life was in the pipeline so much so that the youth could no longer bear it and began breaking the pipelines to find out the things government had put there.

Some of them with little technical knowhow went into building illicit refineries which government kept on destroying without the thought that it could have been legalised by issuing licences to some operators or convert them to government property, improve on them for refining crude oil since our refineries have been consigned to the trash can of history.      

However, as religious gatekeepers would say, for everything, there is a season, there seems to be a season to end the debilitating issue of fuel and gas  wahala  in Nigeria. That time may be now that President Muhammadu Buhari has vowed to fix the country’s oil and gas sector. To walk the talk, he appointed a savvy in the oil and gas sector, Chief Timipreye Sylva as Minister of State for Petroleum Resources to join him to move the sector forward.

Ever since the duo started managing the sector, Nigerians are experiencing a sharp difference. To fix the sector, they have evolved several methods to make things work. Unlike previous administrations, the current APC administration has been quick to support moves to establish modular refineries as a way to boost the country’s refining capacity.

As part of its strategy to reposition the oil and gas industry, President Buhari in 2016 launched a roadmap of short and medium-term priorities aimed at developing a stable and enabling the oil and gas landscape with improved transparency, efficiency, stable investment climate and a well-protected environment tagged “7big wins”. The fourth initiative in the roadmap, “Refineries and local production capacity” seeks to transit Nigeria from being an import-dependent nation into a net exporter of refined petroleum products through the modular refineries as vehicle.

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This is seen as one of the ways and means of tackling non-availability of petroleum products. This much was evidenced when President Buhari performed the virtual inauguration of the National Oil and Gas Excellence Centre on January 21, this year. One of the issues he spoke about was modular refinery. He mentioned the completion of the 5,000 barrels per day Waltersmith Modular Refinery in Imo State which is the  biggest modular refinery to be inaugurated.

The phase one of the refinery began operations in November last year after the firm was granted a licence by the Department of Petroleum Resources, DPR, in June 2015. With the expansion of the refinery to 50,000bpd capacity in November last year, the country is set to begin a phase of reduced import of petroleum products. It is expected that the refinery would deliver 271 million litres of refined petroleum products a year as the crude oil storage capacity of the refinery is approximately 60,000 barrels.  

With President Buhari’s instruction to DPR and the Nigerian National Petroleum Corporation, NNPC, to provide all necessary support in securing oil and condensate feedstock for the second phase, there are indications that the project will be a success. Although it is said that Edo is not Imo, what is happening in Imo with regard to the modular refinery is also happening in Edo as the Edo Modular Energy refinery is set to increase crude oil production from 6,000 barrels per day (bpd) to 60,000 bpd.

The project will enhance fuel sufficiency in the country and reduce the sufferings of Nigerians in every facet. Projections are that some of its products will be exported to boost foreign exchange earnings and by the time it extends operations into different phases, the firm would be able to take care of more than 80 per cent of diesel requirement in Nigeria.

The investment is also expected to benefit Edo people through job creation, increased revenue and ease of pressure on other refineries.  If Sylva’s commitment to easing life for Nigerians doesn’t become flaccid, another modular refinery-the Atlantic Modular Refinery on Brass Island, Bayelsa State, will begin operation before this year ends. Going by his pedigree, Sylva doesn’t fail if he promises as his name is fast transmuting to Ekwueme (doing what he says).

If Chief Sylva’s intentions about the modular refinery initiative are to promote availability of petroleum products in the country, conserve foreign exchange utilisation for the importation of petroleum products, promote socio-economic development in order to stop restiveness, criminal and illegal refinery activities thereby sustaining peaceful co-existence in the Niger Delta and mitigate environmental degradation associated with illegal refinery activities, crude oil theft and pipelines vandalism, then Nigerians are on their way to the Promised Land. 

Even though there are divergent views about the economic viability of these modular refineries, Chief Sylva should not be distracted by these on-shaky-ground arguments since there are shreds of evidence that as of January last year, the average net profit margin for the industry was 6.8 per cent, according to data from NYU Stern School of Business.  

Chief Sylva should not be deterred by any infinitesimal drawback on the sector precipitated by competition from shale oil, excessive supply, generous financial markets and the coronavirus pandemic that had a deleterious effect on the sector’s net profit margins. The question: is there some silver lining on Sylva’s plans for the industry which favours arguments for modular refineries?  

Nigeria has inadequate refining capacity and meets all the criteria, hence the opportunities for modular refineries because they are simple, fast to start up and usually operating at optimal capacity. In theory, this is an advantage over larger refineries. It can also commence production with a small capacity of 5,000BPSD or 10,000BPSD, and grow its capacity over time by adding more modules.

Huge investment opportunities in the mid-downstream sector that will result in growth of the Gross Domestic Product, GDP, and jobs creation are some of the enormous benefits of modular refinery initiative.  One of the crucial components of this initiative is government’s support for the establishment of the third party financed Greenfield and modular refineries for in-country petroleum products sufficiency that will stimulate products export. 

To make this plausible, it is planned that the refineries should be scalable and located within refinery clusters for effective operations and minimal environmental footprint.  This is a great strategy on the part of the government. Chief Sylva, as the Minister of State for Petroleum Resources, has a date with history with regard to saving Nigerians from the shackles of unending fuel scarcity and coldblooded importers of petroleum products who rip off the country of billions of Naira in form of petrol subsidy.

Chief Sylva needs to write and etch his name in the minds of Nigerians. The time to do that is now, during the current era of modular refineries. If he succeeds, his name will become Beast slayer. Nigerians would have the cause to sing that Chief Sylva has done what others could not do as people of Israel sang for David when he killed the Goliath on their flesh.

Vanguard

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