Nigeria needs to quickly engage in massive investments in in-country refining through setting up of modular refineries at certain locations, as well as new petrochemicals plants, to diversify its economy from the present oil glut, said Godwin Igwe, director, Centre for Refining, Gas and Petrochemicals, Institute of Petroleum Studies (CGRP-IPS).
The two areas, also referred to as the R&P (refining and petrochemical) industry, have contributed immensely to push up the GDP of other oil resource-rich countries such as: 4.6 percent to GDP of Bahrain; Kuwait 10.6 percent; Saudi Arabia 11 percent; UAE 18 percent; Qatar 25 percent, and Oman 53.2 percent.
Igwe said: “Based on our economic analysis, it is feasible to generate a net cash return, on a 10-year projection and net present value (NPV @ 10%) of N101, 528,540 with internal rate of return of 46.35 percent, and a payout time of 1.18 years.
“This then translates to profit-to-investment ratio of 362.9 percent for the installation of a modular refinery processing 16,000 barrels per day (bpd) with a barrel of crude oil output of 20 percent diesel, 20 percent kerosene, 40 percent gasoline, 10 percent naphtha, and 10 percent residue.
“Similar profitability indicators were obtained for NPV and profit-to-investment ratios at 15 percent, 20 percent, and 25 percent.”
Igwe, a professor of chemical engineering and a World Bank McNamara Scholar, said: A modular refinery will help Nigeria to: support and improve the operations of existing refineries; save foreign exchange in such services currently done abroad; contribute to the Nigerian content programme of the Federal Government; contribute to research and development in the downstream sector and contribute to human capital development in the oil and gas sector.
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“All these could be achieved through a deliberate strategy to build, operate, commission a modular refinery in Nigeria, to train, grow the refining and petrochemicals industry as the sure path to diversifying the country’s revenue stream, and growth in other sectors. Modular refineries can particularly be useful where there is a need to adapt rapidly to meet local demand. Modular refineries have relatively low capital cost, with speed and ease of construction being key advantages.
“With modular refineries, you can produce unit modules from 4,000 bpd up to 30,000 bpd primary distillation capacity. More could be added together with debottlenecking to create a refinery of 100,000 bpd or more, should demand dictate. Modular/pilot plants provide a middle stage data and process conditions between engineering software predictive evaluation and the implementation in a commercial plant. It is this vacuum that is to be filled by modular/pilot initiative, which is designed to acquire and install pilot plants to provide full support for the refineries,” said Igwe in what he titled, ‘Modular Refineries Now: A Pathway for Nigeria.’
He said “in general, refineries require full technical support in the following broad areas: laboratory and technical services can be provided easily, engineering services (especially using ASPEN Engineering Suites, etc) for performance evaluation, predictive studies and comprehensive site or specific process units/equipment studies.”
Among many other advantages of the 50 reasons he advanced why Nigeria should consider modular refineries, the CGRP-IPS director posited that: “As more countries are discovering oil, our exports will begin to drop at some stage… Therefore, to provide employment, we have to turn the ‘illegal refineries’ into “legal refineries.”
To make this to happen, we need to design a strategy and policy to set up an energy bank to provide financing, taxable at low interest rate. Sell crude oil to them at subsidised price. If you legalise, then you stop bunkering because it becomes unprofitable for their sponsors. They will become proud “owners” of a business, and kerosene, petrol (gasoline), diesel, will be everywhere, satisfying the demand in the country.”
Meanwhile, an oil and gas conference in Port Harcourt in August 2014, had advocated for Nigeria’s economy diversification, stating that: “natural resource-rich countries have been diversifying and transforming their economies, using the hydrocarbon value chain for wealth creation like the Saudi Arabia Basic Industries Corporation (SABIC). It focuses on manufacturing, using oil by-products as feedstock. It is a Holding Company, with investment in Joint Ventures with oil majors (SADAF). It is not an operator and does not have 100 percent ownership. The structure ensures commercial operations and commercial viability of its business arrangement across the world.”
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