Nigeria’s planned modular refining capacity has shrunk thanks to licencees who got licences to establish but failed to go beyond the first stage of the process.
Refinery licensing for both conventional and modular types happens in three stages. Sector’s regulator, the Department of Petroleum Resources (DPR) first awards a licence to establish with 24 months validity. Then comes the approval to construct (ATC) and the final stage in the process is the approval to operate (ATO).
A total of 633, 000 barrels per day refining capacity were lost to the inability of the promoters of these projects to make them take off. The lost planned capacity nearly equals Aliko Dangote’s 650, 000 bpd refinery under construction. Out of 45 refining licences issued by the DPR as contained in the agency’s refinery update as of April 2018, 39 were for modular refineries.
“The objective of modular refinery is to ensure that the big capital requirement, which seems to be the major reason why refineries are not established, is overcome by building small size refineries,” said Rabiu Suleiman, senior technical adviser to Nigeria’s petroleum minister on refineries and downstream infrastructure, in a recent interview with the Guardian, Nigeria.
Experts say industrial sabotage, crude oil theft, illegal refining operations, pipeline vandalism and piracy present significant challenges in Nigeria’s oil and gas industry. And that modular refinery investors can be swayed by the security condition of the country as investors would, more often than not, desire an environment, where their investment is not only safe but also secure.
According data obtained from DPR’s website, the companies whose licences to establish expired in 2017 got them in 2015. They included, Kaiji Resources Ltd., Eko Petrochem & Refining Company, Hi Rev Oil Ltd, Frao Oil Nigeria Ltd, Epic Refinery & Petrochemical Industries Ltd, Masters Energy Oil & Gas Ltd, Cross Country Oil & Gas Ltd, Grifon Energy Limited and Sifax Oil & Gas Company Ltd.
Others are, Capital Oil & Gas Industries Limited, All Grace Energy Ltd, Green Energy International Ltd, Fresh Energy Ltd, Chyzob Oil & Gas Ltd, Aiteo Energy Resources Ltd and Associated Worldwide Company Ltd. Only Amakpe International Refinery Inc. got its refining licence early than 2015, which was in 2007.
“Building a petroleum refinery, whether conventional or modular is capital intensive. So, funding is likely the major challenge preventing companies who got licence to establish but failed to break ground before their licences expired” Bode Lukan, chief executive officer of Bodeni Energy Ltd. said. “Uncertainty of government policy is another factor.”
Although Nigeria is a leading producer of crude oil and gas, the country has remained the only oil producer that relies completely on the importation of refined petroleum products to meet local need.
This has given rise to economic challenges, infrastructure shortfall, unemployment, budget deficit as well as poverty, especially as government struggles to pay subsidy on over 55 million litres of premium motor spirit (PMS) also called petrol consumed daily, a system fraught with high-level corruption.