FG licenses 23 modular refineries

The Federal Government has concluded plans to issue 23licences to establish modular mini refineriesto increase local refining capacity, sustainable supplies and to stop importationof petroleum products into the country.

refineryThe Director, Department of Petroleum Resources (DPR), Mr. Mordecai Danteni Ladanin a telephone chat last Wednesdayhinted that it was part of President Muhammadu Buhari’s commitment to reposition the petroleum industry to the glorious days ofpetroleum products availability.

According to him,the three licensing stages that must be sequentially and meticulously followed before a process plant can be commissioned for operation are: a licence to establish, a licence to construct the plant, and a licence to operate the plant whether for a petroleum refinery, petrochemicals and gas processing plant.

The validity of the licence to establish a refinery or plant shall be for a period of two years after which it shall lapse.The licensing of 18 private refineries by former President Olusegun Obasanjo in 2005 could not achieve any result as they eventually constituted themselves into the Association of Private Petroleum Refinery Owners of Nigeria.

President Buhari must have considered the mini plant option for now as a quick win to solving perennial product scarcity. Modular mini refinery are process equipment manufactured in controlled conditions, fully assembled and tested prior to overseas shipment, and installed at client’s site in much less time than traditional construction requires.

Modular mini refineries may be in units from 4000 to 30,000bpd, though some are as low as 1000 bpd capacity. Lubricating oil, waxes and asphalt may not be produced in a modular mini refinery.Mini refineries are topping units or hydro skimming which viability depends on sites close to petroleum feedstock to reduce logistics and nearness to markets to reduce distribution costs.

Government incentives and generous conditions from credit agencies are required for a profitable investment. Mini refineries advantages are that they are skid mounted and so faster to construct from 12 to 18 months and so improves engineering quality.

They are flexible to meet demand changes so more modules can easily be added. The negative is that you have more staff per Effective Distillation Capacity (EDC). Complex refineries advantages over mini plants are fewer staff per EDC, scale and operating efficiency is better, and has more volume and high value products.

Experts believe that the economics of a topping unit mini refinery are not comparable to full conversion complex refinery. Liquid fossil fuel process plants management has been the bane of Nigeria for the past two decades as our four refineries were run down. With the confusions and effusions over petroleum products availability, all sorts of heuristics of problem solving have been proffered; some on subsidy, others on refineries.

One remembersthis horrendous moment around March 2015 with election frenzy and acute fuel scarcity. Most Nigerians in bewilderment constituted themselves in search parties and laid siege at petrol stations for drops of PMS from any benevolent petroleum marketer. Reason was that there was no refining capacity locally.

As Nigerians laid siege at filling stations for fuel, some privileged petroleum resources managers busied themselves in heteroecism on the people sharing monies of products not imported. An alleged non-delivery of a multi-million dollar booty separated very intimate, capricious, superintendent racketeer and a subordinate that together had been fellow travellers.

The subordinate who was slapped for bringing another set of fictive documents for endorsement had a threatof sack that was not executed before President Buhari was sworn in. Nigeria imports about one million tons of PMS monthly. Now that we are rehabilitating the existing four refineries can we get 926,235.7 metric tons which is optimum capacity in one month?

Even at optimum capacity we have a deficit of 73,764.3 metric tons in a month. But with excess demand for gasoline and distillates in Nigeria options for sustainable suppliesalso lie in refineries rehabilitation to meet installed capacity, upgrading existing process plants to meet shortfall, partners coming in to invest in the existing refineries.

For rehabilitation let us examine the evolution of our existing refineries: Port Harcourt 1 was constructed by Shell-BP in 1965 at a cost of 12 million pounds. It had a capacity of 38,000 barrels per day (bpd). Capacity was upgraded or debottlenecked from 38,000 to 60,000 bpd in 1971 and taken over by the Federal Government.

The Federal Government in 1974engageda Houston Texas based petroleum consultancy firm for a feasibility study on how to increase supply. In November 1975, contract for the construction of Warri Refinery and Petrochemical Company was awarded to Snamprogetti SPA of Milan Italy for 100,000 bpd at the cost of $478 million. It was for a 30-month period and was commissioned in September 1978.

Kaduna Refinery and Petrochemical Company contractwas awarded to Chiyoda Engineering and Construction Company of Japan at a cost of $525 million in 1976 for 100,000bpd (refining in two streams of 50,000 for fuels and 50,000bpd for lubes, wax andasphalt) with a completion period of 36 months and was commissioned in 1980.

The 1974 feasibility was updated to meet new products demand. Warri was upgraded or debottlenecked from 100,000 to 125,000 bpd while Kaduna fuel plant was increased from 50,000 to 60,000 bpd in 1985. Port Harcourt 2 was also designed for 150,000 bpd and awarded to a consortium of JGC Corporation, Marubeni Corporation (both Japanese) and Spibatignolbs of France in October 1985 at a cost of $850 million for 36 months completion and commissioned in 1989.

It is worthy of note that between 1991 and 1992, the new Port Harcourt plant exported products and made $280 million for government. Exports however stopped later because of local demand increases coupled with the fact that Kaduna and Warri productions had dropped.

More investments in process plantswould have been sustained but unfortunately we did not do that. Private investor like Aliko Dangote is leading the way with a 400,000 bpd complex refinery in Ondo State. Other endowed Nigerians must follow whether with conventional complex or modular mini refineries.

We have been assured that refinery licencees may not have feedstock problems as somemarginal field beneficiaries in the past have beenmere speculators in the industry. Information has it that a lot of the marginal field beneficiaries have no business in petroleum. If the marginal field beneficiaries are refining we may not have been entangled in product scarcity. We hope with President Buhari better days are coming.