Business

Evaluating slow pace of modular refinery projects

Years after 13 firms were approved by the Federal Government to operate modular refineries and further assist in boosting production of fuel domestically, the refineries are yet to take off fully due to certain challenges, writes AKINOLA AJIBADE

 

From paucity of funds, poor feasibility studies, poor technical and managerial skills, rising cost of technologies occasioned by unfavourable foreign exchange regime in the country, apathy, which investors have suffered in the hands of residents of the communities, which host the plants, the envisioned modular refinery project in the country has suffered obvious delays.

 

While many of the problems are economical and environmental in nature, others are not.

 

Nevertheless, the challenges enumerated above seem to have worsened the plights of the investors. Reason being that many of them do not have expertise and the required capital for the project.

 

Modular refineries

 

They are small-scale types of refineries. They boast of capacity ranging from 1,000 to 50,000.

 

Coupled with this is the fact that they can be enlarged to process more barrels of crude oil in the future.

 

Research had shown that modular refineries could be widened to process between 200,000 to 350,000 barrels, when plants for such needs are enlarged by the owners.

 

The refineries boast of fabricated processing plants, constructed on disk mounted surfaces, with each structure containing a portion of portion of the entire refining process plant.

 

One unique feature of modular refineries is that they are easy to operate and cheaper, unlike the traditional or large scale refineries, which cost between $3 billion and $9 billion.

Capital

Individuals and companies, which intend to operate a modular refinery, according to industry watchers, must have a minimum of $250,000 as a start  up capital, this is aside acquiring land for the project.

The figure, in view of the uncertainty in the local economy, can be more than double.

This is because of the rising economic indices in Nigeria.

Recently, the Nigeria Bureau of Statistics (NBS) put the current inflationary rates at two digits and likely to move to three digits, if nothing concrete is done by the government to fix the economy.

Nigeria’s daily fuel consumption

The Nigerian National Petroleum Corporation (NNPC) had put the country’s fuel consumption at 57.49 million litres in March this year, which, however, dropped to 56 million litres in April, a development, which showed a reduction of three per cent.

Stakeholders’ views

The Managing Director, Power Cam Nigeria Limited, Mr Abiodun Ogunleye, attributed the delay in the take-off of the refineries to poor market prospects, adding that many investors were aware that returns on investments (ROIs) are not going to be impressive at the end of the day.

He said: “ For instance, if a modular oil refiner invests N1 million in the business and fail to get commensurate returns at the end of the year, what the development is suggesting is that there are losses. This contradicts the goals of any business venture.”

Refinery plants, Ogunleye said, cost lot of money, a development, which implies that profits at the end of the year must either be above the capital or equal. Anything less than this is not attractive.

Similarly, he said accessibility to crude oil by modular refinery investors was poor.
According to him, many investors do not have marginal oil fields through which they would get crude oil for refining purposes.

International oil companies (IOCs), Ogunleye said, were in the best position to operate modular refineries.

 

He said the IOCs are multinational and transacting big-ticket operations, stressing that they have marginal oil fields, through which they can access crude oil for processing into petroleum products.

“Modular refineries investors do not have marginal oil fields, a development, which makes it difficult for them to access crude oil for processing into petroleum products,” he noted.

Meanwhile, the Chief Executive Officer, Integrated Oil and Gas Limited, Captain Emmanuel Iheancho, said that the problems facing operators of modular refinery projects were enormous, arguing that funding is one of them.

Iheancho listed others to include feasibility studies, transparency and cordial relationship between immediate and prospective modular refinery company, on one hand, and communities where plants are going to be sited.

Also, another investor in the petroleum sector wished that government provided the enabling environment for modular refinery to thrive in the country.

 

The investor is constructing a modular refinery of 20,000 capacity, in Lagos.
Federal Government’s approval

 

Available information shows that the Federal Government, through Department of Petroleum Resources (DPR), approved 13 out of 35 firms, which have shown expression of interest, in 2028.

 

The companies, spread across Lagos, Ogun, Edo, Delta, Imo and other states, include Eko Petrochemical and Refinery and Petrolex Refinery Limited.
Out of 13 firms, six, it was gathered, had moved to site to begin preparation for their plants, albeit slowly.

Part of the measures the firms have put in place, New Telegraph’s findings reveal, include acquisition of an expanse of land for the project and conducting ecological studies, among others.

According to the immediate past  Group Managing Director, Nigerian National Petroleum Exploration ( NNPC), Mr Maikanti Baru, the decision of the government to approve 13 out 35 firms, which have shown expression of interest and submitted relevant documents, was in fulfillment of President Muhammad Buhari’s plans to increase local content.

Baru also said the approval of modular refineries by government would help in boosting consumption, reduce smuggling of the products, as well as create jobs for inhabitants of Niger Delta region.

Prior to this period, the Federal Government had put in place plans to deepen activities in the downstream sub-sector.

Part of the plans include allowing more groups in the sub-sector. Of note is the Independent Petroleum Marketers Association of Nigeria ( IPMAN), a group with members as many as 2,000.

All these were done in order toimprove supply of fuel across the country and further reduce scarcity to the barest minimum.

Onslaught against fake operators

Stakeholders, including the Federal Government, are working to sanitise the energy sector.

The Nigerian Navy has deactivated hundreds of illegal refineries in the Niger Delta region.

Not done yet, the Navy combine forces with the Army to patrol the oil producing areas in the region, with a view to curb oil theft and other untoward practices.

 

Also, the Nigeria Extractive Industries Transparency Initiative( NEITI), in its recent report, condemned the operation of illegal refineries in the areas, as well as advocating for peace, unity and seamless operation in the region.

Further investigation

The Federal Government had also set up a joint task force years ago to check and also curb criminal activities in the oil states of Niger Delta.

Led by high ranking officers, the JTF is saddled with the responsibility of mounting surveillance around states such as Delta, Edo, Bayelsa and Rivers, among others.
The aim is to put an end to criminal practices such.as oil theft, bunkering, pipeline vandalism, illegal refining and others.

 

This newspaper, during a recent invitation by JTF, confirmed that illegal refineries were built in strategic areas in the region.

 

The refineries, it was gathered, were small warehouses, built around creek areas to process barrels of crude oil into products such petrol, diesel and kerosene. The JTF destroyed many facilities built to store products during the patrol.

Last line

Considering the role modular refineries will play in the country such as boosting petroleum product supply and checking the activities of illegal refiners and oil theft, it is expedient for those who have been issued licences for the project to expedite action and get them running.

 

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