Nigeria and its national oil company, Nigerian National Petroleum Company Limited (NNPC), are not ready for the rash of modular oil refineries seeking to fill the massive void in local supply of petroleum products, according to investigations by BusinessDay.
Several of the promoters of the modular refineries have chronicled their tales of woes in their engagement with NNPC with some waiting for up to a year and not able to commence operation.
Modular refineries are crude oil processing facilities with capacities of up to 30,000 barrels per day (bpd), and are being built as part of plans to curb oil theft and promote peace in the country’s main oil-producing region.
“Nearly all of Nigeria’s requirement for petroleum products is imported, representing a major drain on the country’s depleting foreign reserves but rather than this sparking an aggressive push by NNPC’s senior managers to support the promoters of local refineries, there is as yet no rule or protocol at NNPC for the transition,” an owner of a modular refinery told BusinessDay.
NNPC has taken a 20 percent stake in the Dangote refinery in Lekki, Lagos and signed a crude oil supply deal with owners of the 600,000bpd plant, but operators of modular refineries say they have waited endlessly for attention from the NNPC.
Sources say some of the modular refineries have waited for more than a year to receive crude from NNPC and in the process, their plants are rotting away as they surmount one hurdle to another including a plethora of regulatory approvals they must get from the authorities.
Last month, the promoters of modular refineries under the aegis of Oil Refiners Association of Nigeria (CORAN) met with chiefs of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to vent their anger and frustration.
The owners of the modular refineries listed their major challenges as lack of access to feedstock, lack of access to foreign exchange (it costs about $40 milliin to set up a 10,000bpd reformer unit that can produce PMS), high cost of licence renewal fees, unusual difficulties in clearing their equipment at the seaports, difficulties in accessing the duty waiver for modular refineries as approved by the president as well as the absence of rules on crude oil transaction currency.
To mitigate their problems, they pleaded that the Central Bank of Nigeria and NNPC should extend all incentives and assistance given to Dangote refinery to them.
CORAN members, led by Emmanuel Iheanacho, their Board of Trustee’s chairman, made the appeal during their visit to the leadership of the NMDPRA in Abuja.
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They urged the NNPC, NMDPRA and Nigerian Upstream Petroleum Regulatory Commission to engage with the licenced modular refineries in order to develop an appropriate commercial model that would guarantee reliable feedstock.
According to a statement by CORAN made available to BusinessDay, the meeting with the regulator which was in a bid to interact with all relevant regulatory agencies was chaired by Francis Ogaree, NMDPRA’s executive director, hydrocarbons processing plants, installation and transportation infrastructure.
Olusegun Ilori, secretary of CORAN, who presented CORAN’s position, appealed to the authority to ensure that all incentives that were given to Dangote refinery are also extended to other refineries.
CORAN also stated that NMDPRA’s renewal fee for modular refinery licence guidelines is revisited and possibly reduced by way of 50 percent waiver.
They suggested that such review should be on the company-by-company assessment, and granted to only companies with credible challenges.
CORAN further suggested that annual monitoring of modular refineries be carried out by the authority to ensure compliance with government policies.
The association requested that the NNPC should consider taking equity or grant loans to modular refineries via the provision of reformer/other requirement units to ensure adequate production of PMS based on agreed offtake conditions.
They equally suggested that the issuance of the import duty waivers for modular refinery equipment be done by the Federal Ministry of Finance after due certification of the equipment that qualified for waiver was done by the Ministry of Petroleum Resources.
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