Oil producing states who are often clamouring for resource control and increased derivation from the proceeds of crude oil produced in their states, can deliver greater value for their people by investing in modular refinery.
This is in no way suggesting that their demands are not valid. In a true Federalism, each state controls resources found in their domain and contributes to the common purse for the development of the country.
However, a few of oil producing states in Nigeria are supporting initiatives to construct modular refineries in their respective states so that value obtained from crude oil found in their regions can help grow their revenues and create employment for their people.
In August this year, Yemi Osinbajo, Nigeria’s then acting president told members of the Edwin Clark-led Pan Niger Delta Forum (PANDEF) that each of the Niger Delta states would host two modular refineries to replace illegal ones under the Federal Government’s new vision for developing the region. Investors say provision of guarantees and incentives will help achieve the goal faster.
Akwa Ibom, Delta and Bayelsa are supporting modular refining ventures by local investors. The construction of a $50m modular refinery is in progress in Akwa Ibom state. Delta’s 20,000 bpd modular refinery is being planned and the $120 million Rehoboth’s 60,000 bpd capacity modular refinery supported by the Bayelsa State Government is roaring to take off. Conservative estimates put these three projects at over $200m.
According to the terms, Rehoboth Refinery will construct a 60,000 bpd modular refinery in Kolo creek in Bayelsa state at the cost of $120m within the next 18 months. The state is taking 10 percent stake for its support which includes partnership in securing land and investment drive.
“Our fundamental role is to enable private sector investors do what they do best and the effort which Rehoboth Refinery has made in the last couple of years and the milestones they have achieved in this modular refinery project, we thought it fit that we should signal our own commitment to what they are trying to achieve by signing a Memorandum of Understanding (MoU) to see this project come to light,” said Kemela Okara, Bayelsa State’s commissioner for Trade, Industry & Investment at the official MoU signing ceremony in Lagos recently.
This provides a model for other states to build upon. The private sector is best equipped to run businesses hence state governments who are still poorly adept at governing, should take stakes in these assets on behalf of their people and get out of the way of the private sector.
Federal Government’s effort at eradicating militancy in the Niger Delta would be much easier if it empowers the states by providing guarantees and assurances for private investors partnering with the state government to establish modular refineries.
Joe Attueyi, CEO of Rehoboth Refinery said there is no local bank that can provide guarantee for loans to kick start modular refineries running into millions of dollars. Hence they are counting on foreign development banks like US and China Exim banks among others but they require Federal Government guarantees.
“Our view is that only the Federal Government really, using one of its numerous agencies either the local content board, Bank of Industry, Central Bank of Nigeria (CBN) scheme that can break that logjam, that fundamentally are what incentives are,” said Attueyi.
Analysts say the construction of these modular refineries will create value for even the Federal Government, cutting the cost of fuel importation, reducing subsidies, checking militancy by creating jobs and shoring up oil producing states’ revenue.
“These states add little value to the oil consequent upon its production, this projects (construction of these refineries) seeks to change that and its impactful in the value it adds to the economy,” said Bekuochi Nwawudu, managing partner of CBO Capital Partners, a financial adviser to the Rehoboth Refinery project.
ISAAC ANYAOGU
