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Modular refineries and Nigeria’s economy

By Kayode Adeoye   |   05 October 2016   |   2:10 am
Oil Refinery

Oil Refinery

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. Due to its manageability, it is better suited for the emerging economic realities and peculiarities of Nigeria.

The medium of refining crude oil in the developed countries may not always suit third world countries like Nigeria. The fundamental development differences in socio-economic infrastructure and maintenance psychology demands that a more suitable approach be adopted by countries like Nigeria, to align with their stage of societal evolution and political uniqueness.

History has shown in Nigeria that large-scale, full-service power plants are difficult to maintain and often function at the level of small-scale modular plants in spite of their size and heavy output potential.

The Port Harcourt, Warri and Kaduna refineries have been almost non-functional due to a poor maintenance culture and a profound difficulty for Nigeria to sustain the industrial ethics needed for large-scale refining. Although the refineries in question have since started working at less than half of their installed capacities, a lot more needs to be done to bring the production to optimal levels as well as encourage the establishment of modular refineries to make Nigeria self-sufficient at meeting local demand.

The key advantages of a modular refinery lie in its size, cost differential and flexibility. It is constructed in a controlled environment and properly tested before being shipped out. It is relatively easier to fabricate and erect. Also, when an area becomes unsuitable for business, it can be disassembled and reassembled faster.

For areas with non-cohesive geopolitics like Nigeria, modular plants can be scattered throughout the country to serve the needs of the various regions of the country. The maintenance cost is low considering that it processes 2,000 barrels per day, BPD to 150,000 BPD of mainly light sweet crude, routine turnaround maintenance and on stream inspections would require less personnel and downtime.

Modular plants are easier to secure because of the reduced surface area and perimeter, issues of internal monitoring of equipments and external acts of sabotage can be better policed given the smaller area of operation and in a situation where one plant suffers a downtime, the other smaller plants scattered all over the country can still be operational. The impact on the environment is nothing compared to a large scale refinery.

Environmental pollution and regulation can best be controlled with small-scale plants in countries that do not have the required capacity to manage the huge amount of pollution prevalent with large-scale refining. While a full conversion plant can cost anywhere from $2 billion to $9 billion, the same cannot be used to spread the risk potential and build various modular refineries all over the country to cater to the needs of each geopolitical zone.

Finally, while it may take several years to build a large refinery, modular plants can be put to service in a matter of months for far less!

Unlike modular refineries, large-scale refineries are not easy to maintain and require stringent quality control to ensure longevity. Global standards stipulate that process equipment be opened, cleaned and inspected at least, every five years and an on stream mechanical integrity programme implemented and documented.

While some refineries in the United States of America were built in the 1920’s and still fully functional, Nigeria’s oldest refinery was built in 1965, and is producing at less than installed capacity because the requisite industrial ethics are absent and such level of operation does not suit a society like Nigeria.

Due to the lackadaisical culture of maintenance, the likelihood and consequence of failure of having such huge process capacities cannot be overemphasised. In the event that all the country’s refining rely on a few giant plants, once those facilities suffer a mishap, the country is immediately thrown into socio-economic shock.

However, if there are numerous small-scale plants, then the risk is spread and environmental and economic impacts reduced. The Nigerian model is the most extreme in all the third world countries in evaluating the problems that a huge refinery can encounter. Due to the dependence extensive interconnected piping, large-scale plants in Nigeria will find it very difficult to stay in business if the pipelines remained unprotected.

Given the stratified nature of the Nigerian population in terms of ethnic tensions, it may be advisable for regional refining to be considered where indigenous modular plants are operated and overseen by indigenes of the region for their own economic benefit. In this case, if they blow it up, then they are really hurting themselves as opposed to seeing the facility as a symbol of government or multinational domination.

Small scale modular plants will yield more economic benefits and return on investment than their large-scale counterparts and with a proper government incentive, imports will be reduced to zero and export of refined crude oil to neighboring countries will be promoted, the Naira will be further strengthened, the problem of fuel scarcity which the country experiences will be finally rested. One of several ways of boosting Nigeria’s economy is for Nigerians, including marginal field operators whose crude export terminals have been vandalised, to embrace modular refineries!

. Adeoye is an energy expert in Lagos.

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