Oil Field Owners Urged to Lead Modular Refinery Construction

• Oil Field Owners Urged to Lead Modular Refinery Construction

To address the challenges facing modular refinery construction in Nigeria, industry stakeholders have urged indigenous exploration and production companies, which own producing oil fields, to drive the initiative.

Head, Energy Research Desk, Ecobank Plc, Mr. Dolapo Oni, said companies such as Seplat, Shoreline and Neconde should be leading modular refinery development. He noted that any investor, who wants to do modular refinery that would produce different forms of fuel, including aviation kerosene for the purpose of selling locally and for export, will face a big challenge if he is not a crude oil producer.

He said: “If you look at refineries that have been developed in Nigeria that are successful, it is only one – Niger Delta Petroleum Resources Limited (NDPR). They own the field and built their refinery on their field, process their own crude and produce diesel at the rate they sell,” adding that it is the only model that can work for us here.

Oni stressed the need to build refineries that can process crude from anywhere and any type of crude. He said: “You don’t just build refineries that can only process the Nigerian crude,” adding that: “If you are not able to get constant supply of crude, that becomes a challenge to the refinery.”

To him, one of the challenges facing the development of modular refineries in the country is sourcing for funds outside the country. He said Nigerian banks do not have much funds, and are already pressured by existing facilities to the oil and gas sector and cannot expand more.

According to him, only a few of the top banks can provide some lending to the oil and gas sector, and refinery funding will be a challenge locally.

“What it means in getting foreign funding is that you have to look at countries where refineries are gradually declining and they are looking to shift all that investments to somewhere else, countries like France and Italy.

“Also, you look at countries that can provide export credit. For example, you can buy from the United States and they will be able to fund it, so with that you can actually bring it and refine it in Nigeria and, over time, you can pay them back.

“But again, all these things, to some extent, require government’s guarantee as well. Government’s guarantee of crude feedstock was not for free because what some of them are asking is that they want government to guarantee them free crude not that they will not pay, but they will pay after the sale,” he said, adding that it can not work now.

“Government should be able to guarantee that we get the crude to your refinery, but you must pay for the crude when it comes to you,” he insisted.

He continued:“It will be a very big challenge because it means that products from the refineries have to be sold in dollars to foreign countries because you will pay back your funders in dollars.”

Oni said banks were always looking for money to support the industry, adding that they would want to lend if they have the money and as long as the risks could be mitigated. According to him, banks are constantly talking with some foreign banks to complement the opportunity for lending, and more importantly, with participants in the industry.

Ecobank, he said, had championed most of the modular refinery projects that had come up recently, adding it is talking to some of the foreign banks on how to raise money to assist them. “We look for possibilities of putting some money in them in terms of lending. We are trying our best and the best we can do is to talk to other foreign banks to see where we can get money for them,” he added.

On revoking the licences of non-performing modular refineries, the Chairman, Integrated Oil and Gas Limited, Capt. Emmanuel Ihenacho, said the Federal Government should jettison the idea and focus on how to revitalise those refineries for optimum performance.

He said the Department of Petroleum Resources (DPR) should be more concerned with how the operators start refining crude oil in the country and not clamping on them. DPR regulates the activities of the oil and gas industry.

According to him, the DPR was stating the obvious when it said only two out of the 48 modular refinery licensees were working, urging the DPR to temper justice with mercy over licensees whose refineries are yet to begin production.

Speaking at a stakeholders’ forum in Lagos, he said the issue of optimising crude oil processing is what the country needs now and not looking for scapegoats. Many firms have not been able to use their licences due to their inability to get funding from banks and other sources.

Iheanacho said: “It is not that many operators do not want to process crude oil, but they do not have the means to do it. The funds are not just there. The local banks are not ready to provide them facility. When an operator goes to the bank, the banks give excuses. Owning and operating a modular refinery can cost even up to $2billion excluding getting a land for the project and carrying out due process on the project. At a point, the loan seekers would get frustrated by the antics of the banks, and before you know it, the licensee would abandon the idea of operating the refinery.”

He said a modular refinery can be upgraded to suit the needs and the yearnings of its customers, adding that the refinery’s capacity can be upgraded to deliver 20,000 or 50,000 or even 100,000 barrels per day.

Iheanacho said modular refineries have unique features as evident by the ways and manners their sizes and capacities are configured to meet the needs of their operators at any given time.

DPR’s Deputy Director, Mr. Olumide Adeleke, said the government has given operators enough time to plan for the project, stressing that it is in the tradition of the agency to handle issues pertaining to the industry well. He said the government would not hesitate to carry out its oversight functions in the area of maintaining and promoting standards in the sector.