• Saturday, July 13, 2024
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44% of Nigeria’s modular refining licences expired in last two years


Efforts to drive the growth of refineries through private investment in Nigeria has been underway but Africa’s biggest crude oil producer still has some hiccups to clear in order to have refineries that are capable of producing at full potential.

The Department of Petroleum Resources’ (DPR) refinery update of April 2018, the latest report on the regulator’s website on the matter shows 45 licences have been issued for the establishment of refineries.

Thirty-nine licences were issued for the establishment of modular refineries and six for conventional ones. The first modular refinery licence was issued in 2007 to Amakpe International Refinery Inc., but has long expired without renewal.

Of 39 licences issued for modular refineries, only two happened earlier than 2015 – the rest were issued as from 2015. Seventeen licenses to establish (LTE) have expired in the last four years, which represents 44 percent of the total. Fifteen licenses are active and another seven out of the 39 can still break ground.

A modular refinery is a prefabricated processing plant that has been constructed on skid mounted surfaces, with each structure containing a portion of the entire refining process plant connected together by interstitial piping to form an easily manageable process. Some experts say due to its manageability it is better suited for the Nigerian environment.

“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.”

However, Waltersmith Petroman Oil Limited, operator of Ibigwe field located in Oil Mining Lease (OML) 16, has indicated it is already working on the development of an additional 25,000 barrel a day (bd) modular refinery few months after it commenced work on a 5,000bd modular refinery.

Nigeria has been producing crude oil for the past 50 years but very little has happened in terms of value addition.

Experts say this is really a missed opportunity because refining should form part of the benefits a country gets from producing crude oil. The derivatives of crude oil are so many. From refined products to petrochemical products that can then impact other sectors of the economy.

“Our strategy is to take crude oil that we produce, put the plants very close to the source of the crude oil, refine it and distribute it within our area of operation. This will eliminate most of the bottlenecks,” Abdulrazaq Isa, chairman, chief executive officer of Waltersmith Petroman Oil Ltd told BusinesDay in an earlier interview.

“The profit margins are small; transportation cost must be efficiently managed.”
The licences to establish modular refineries are often obtained by exploration and production companies. But with falling revenue from crude oil sales and general apathy from foreign investors to invest in Nigeria, funding tends to dry up.

Industrial sabotage, crude oil theft, illegal refining operations, pipeline vandalism and piracy present significant challenges in Nigeria’s oil and gas industry. 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.