Within the next 18 months Nigeria could have 60,000 barrel per day modular refinery in Kolo Creek, Bayelsa State that will help to keep the value from crude oil in country, if the promoters of Rehoboth Refinery succeeds in securing Federal Government’s guarantees and incentives.
As crude oil prices struggle to leave the floor, analysts say Nigeria should look to increase the value of the commodity rather than a strategy of drilling for more oil. It also has the prospects to add more value to the economy cutting the cost of fuel importation, reducing subsidies, checking militancy by creating jobs and shoring up oil producing states’ revenue.
Nigerian banks, of whom loans to the oil and gas sector constitute about 40 percent of their bad loan portfolio, are unwilling to lend to projects in the sector. This impedes the ability of investors in the sector to obtain loans to finance projects and the promoters of Rehoboth Refinery are not exempted.
Elaborating on the nature of these guarantees and incentives that can help the refinery get off the ground, Joe Attueyi said: “If you are buying equipment from the US, the US Exim bank will fund the purchase of the project on a debt basis provided you are buying from a US manufacturer but they need a local bank guarantee. Today, there is no local bank that can provide this guarantee so you are caught in rock and a hard place.
“Our view is that only the Federal Government, using one of its numerous agencies either the local content board, Bank of Industry or Central Bank of Nigeria (CBN) scheme can break that logjam.”
On October 19, the Bayelsa State government and Rehoboth Refinery signed a memorandum of understanding on the construction of a 60,000 bpd modular refinery in Kolo Creek, Bayelsa state, at the cost of $120 million 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 the project,” said Kemela Okara, Bayelsa State’s Commissioner for Trade, Industry & Investment at the official MoU signing ceremony in Lagos.
Rehoboth Refinery has done the two seasons’ environmental impact assessment and secured approval from all the regulatory bodies and the state government has facilitated their getting certificate of occupancy for the land.
In 2008, the Department of Petroleum Resources (DPR) issued Rehoboth Refinery a 12,000 bpd License To Establish (LTE) but the company has ambition to scale to 60,000 bpd and the process of acquiring final approvals now rests upon securing guarantees and incentives that will give comfort to its financiers.
“So we started with a first phase of 12,000 bpd which was the initial license we have established, that will take about $120m, we have raised the equity side of it, the debt portion is about 60 percent of that value. We have indicative offers for that debt but it needs certain guarantees, it needs certain incentives from the Federal Government,” 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. To check communal unrest, the promoters of the refinery are offering local communities stake in the project.
ISAAC ANYAOGU
