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Kachikwu: Lack of Access to Finance Hampering Construction of 33 Private Refineries



modular refineries
  • Kachikwu: Lack of Access to Finance Hampering Construction of 33 Private Refineries

The difficulties faced by private investors in accessing finance to complete detailed engineering analysis and commence construction work after obtaining the approval to construct (ATC) is the major challenge that hampers the execution of majority of the 33 private refineries licenced by the federal government.

Investigation revealed that while some of the refineries are still at the detailed engineering design stage, others have been given approval to construct (ATC) by the Department of Petroleum Resources (DPR) but could not proceed with the projects as a result of paucity of funds.

This is coming as the United States Government, through the US Trade and Development Agency (USTDA), has provided a take-off grant for the Eko Petrochem and Refining Company Limited, a private Nigerian refinery and petrochemical company being promoted by Integrated Oil and Gas Company Limited at the Tomaro Industrial Park Free Trade Zone in Amuwo Odofin Local Government Area of Lagos State.

There are three levels of approval for setting up private greenfield or modular refineries in Nigeria – License to Establish (LTE), Approval to Construct (ATC), and Licence to Operate (LTO).

Of all the 33 private refineries that were given Licence to Establish (LTE), only the 1,000 barrels per day refinery operated by the Niger Delta Petroleum Resources in Ogbelle in Rivers State has come on stream.

The refinery currently processes crude oil from the flow station operated by the Niger Delta Exploration and Production (NDEP) Company into diesel.

Most of the other investors have not kicked off the construction works as a result of difficulties in accessing funding.

But the United States Government at the weekend came to the rescue of the Eko Petrochem and Refining Company Limited located in the newly created Tomaro Island Free Trade Zone of Lagos, as USTDA has offered a grant to finance the completion of the detailed analysis of supporting technologies and engineering for the implementation of the 20,000 barrels per day refinery.

Speaking on the island at the weekend, the US Ambassador to Nigeria, Mr. Stuart Symington, urged Nigerians to invest in Nigeria so as to have the right to complain when things are not going right.

Symington also noted that the administration of President Muhammadu Buhari believes in private sector investments.

“He (Captain Emmanuel Ihenacho) is investing at the time with a government that believes profoundly in the power of individual citizen and entrepreneur. He is doing it at a time with government that believes that Nigeria can do what can be done anywhere in the world,” Symington said.

In his remarks, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who identified lack of access to funding as the major challenge of the 33 licensed refineries, added that the seed money provided by USTDA for the Eko Refinery is an indication that the refinery has a potential partner that could finance the project.

Kachikwu, who was represented by his Senior Technical Adviser, Mr. Rabiu Suleiman, also stated that the USTDA gesture has demonstrated the seriousness of the Chairman of Integrated Oil and Gas Limited, Captain Emmanuel Ihenacho in implementing the refinery project.

“I remember when we summoned all those licensed to build private refineries – about 33 of them today, to meet with the minister; the chairman of this organisation (refinery) was very conspicuous and very visible, especially when the threat of cancellation of licenses was mentioned. You can see the passion; you can see the commitment; you can see the determination to make this project a reality. And his voice was very loud, saying ‘please, don’t attempt to do that,’ promising that the challenges can easily be overcome,” Kachikwu said.

“Most of those who have been licenced to establish refineries in Nigeria have two major challenges. One is financing. We all know that it is very difficult to raise funding and therefore, when you hear that the USTDA is extending its hands of fellowship and support in providing initial seed money required to go beyond the detailed engineering design, that also shows that behind him – the visionary of this project, there is a potential partner that is likely to support and to provide the required finances to establish this particular project. And for him to be able to bring down to this island, a representative of the US – our own US President, that is, the Ambassador himself, to this island, is another demonstration of commitment and determination to do what is ever is necessary to see that this project takes place,” Kachikwu added.

He promised to do whatever he can to support the project to meet his expectations and save his job, having made a commitment to resign if Nigeria does not become self-sufficient in petroleum products by 2019.

In his speech, the Chairman of Integrated Oil and Gas Limited, Ihenacho, who is also the Chairman of the refinery, noted that the US Government, acting through the USTDA, has accelerated the process of the planned development of the refinery.

According to him, the “grant is to specifically use to finance the completion of the detailed analysis of supporting technologies and engineering for the implementation of the 20,000 barrels per day crude oil refinery.”

Ihenacho added that by delivering the over $797,343.00 grant, USTDA has demonstrated its commitment to infrastructure development and economic growth of Nigeria, especially in the areas of export technologies and services that promote the country’s refining capacity.

In his speech, the Acting Director of USTDA, Mr. Thomas Hardy, said the refinery project would provide an excellent opportunity for US businesses to export technologies and services to boost Nigeria’s refining capacity.

“We are proud to support this new project, which will lead to infrastructure development and economic growth in Nigeria,” Hardy said.

Also speaking at the grant-signing ceremony, the Project Director of Eko Petrochem and Refining Company Limited, Mr. Gordon Paton, stated that his 25 years of experience working in Africa, primarily in oil field construction, has equipped him for the assignment.

The Managing Director of Nigeria Export Processing Zones Authority (NEPZA), Hon. Emmanuel Jime, who declared Tomaro Island a FTZ at the ceremony based on the approval of President Muhammadu Buhari, said the move was to make Nigeria an attractive destination for investments.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Egbin Decries N388B NBET Debt, Idle Capacity



Egbin-Power-Plant - Investors King

Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.

The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.

The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.

The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.

Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.

The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.

Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.

“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.

“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”

He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.

Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.

“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.

“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.

“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”

He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.

He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?

“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”

Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.

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Crude Oil

Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases



U.S. Crude Oil - Investors King

Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.

Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.

Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

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Crude Oil

Oil Price Rises To $74.70 Despite Delta Variant



Oil prices - Investors King

Oil price inched higher on Tuesday despite the fast spreading COVID-19 Delta variant. Brent crude oil, against which Nigerian oil is priced gained, $0.20 or 0.27 percent to $74.70 per barrel on Tuesday at 12:05 am Nigerian time.

Delta variant is spreading in China, the world’s largest importer of crude oil, forcing crude oil investors to start cutting down on their oil demand projections.

The Delta variant is still spreading and China has started to clamp down on teapots, so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.

Strong U.S. demand and expectations of tight supplies have helped crude oil to recover from a 7 percent slump recorded last Monday to mark their first gains in two to three weeks last week.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production through the rest of the year.

There is seemingly a battle within the energy complex between the prevailing supply deficit engineered by OPEC+ and the threat of the COVID-19 Delta variant in regions with low vaccination rates,” said StoneX analyst Kevin Solomon.

The slow take-up of vaccinations will continue to limit some upside in oil demand in those regions, and there will be intermittent spells in the recovery in the coming months.

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