Government to revoke licences of idle private refineries
• Licensees lament financial straits, seek intervention
• Nigeria to invest N5.9tr in upstream sector
The Federal Government has concluded plans to withdraw licences of private refineries which have not been able to produce petroleum products after many years of their acquisition from the Department of Petroleum Resources (DPR).
About 25 of the affected 32 licences may be withdrawn by the regulator, as they have exceeded the two-year grace given them by the agency to commence the production of petroleum products. Out of these refineries, with anticipated capacity to process over 1.352 million barrels of crude oil, only Dangote Refinery has started work .
The Guardian had last month reported that expiring licences were threatening the local refining agenda of government.
To bring to fruition the aspiration, the DPR had already granted over 27 Licences to Establish (LTE) and five Approvals to Construct (ATC) refineries in Nigeria to qualified companies.
Specifically, the Minister of State for Petroleum Resources, Ibe Kachikwu has directed the DPR to ensure the withdrawal of the expired licences without further delay.
Kachikwu, who gave the order on the sidelines of the ongoing Offshore Technology Conference (OTC) in Texas, United States, said the Federal Government was willing to provide an enabling environment that allows for the thriving of private refineries nationwide.
Already, the regulator has begun an inventory of the licensed facilities and would announce the withdrawal in the next couple of months.
The validity of the licence to establish a hydrocarbon process plant, according to DPR guidelines, is two years.
One of the 26 LTE holders, according to the agency, Dangote Oil Refinery Company (DORC), has progressed beyond the refinery development project to the equipment fabrication stage. The facility, due for commissioning next year, will add 500,000 barrels per stream day (BPSD) to domestic refining capacity.
The minister added that reforms were ongoing to reposition the nation for self-sufficiency in production and exportation of petroleum products.
Kachikwu said the measure would minimise the pressure on demand for foreign exchange for importation purposes.
He restated government’s continued resolve to build a strong collaboration with the World Bank on the Global Gas Flaring Reduction Energy and Extractive Global Practices (GGFR).
The national deadline for gas flare-out remains year 2020 while the target for the global initiative is 2030.
He disclosed that his ministry had unveiled the National Gas Flare Commercialisation Programme to unleash a gas revolution that would lead to improved power generation, full-scale industrialisation and Liquefied Petroleum Gas (cooking gas) penetration at the grassroots.
The DPR Director, Mordecai Danteni Ladan, noted:
“We are currently taking inventory of the whole licensed refineries. Some of them are at different stages of project execution. We will definitely call a press briefing when we are done with the exercise and announce the ones that have been affected.”
Reacting to the needs of licence revocation, the Secretary, Association of Private Refineries Licensees, Eche Stephen Idoko, admitted that though the first set of LTEs was granted around June 2015, the licensees have been facing liquidity challenges which can hardly be accessed locally owing to a number of encumbrances.
His words: “ I will need to add that like all other major sectors, the refinery licensees have had difficult challenges with advancing their project (especially against the backdrop that all transactions pertaining to the projects are done in foreign currency.
“Accessing funds for investment from financial institutions have been very difficult, and the Nigerian banks are not solvent enough or do not have enough confidence in the midstream sector to invest. We have approached the DPR, CBN and even the Ministry of Finance for some type of intervention either by way of guaranty, or floating of special bonds for the refining projects but we are yet to get a response from them.”
He continued: “A meeting was scheduled to hold between the modular refinery licence holders and the Minister of Petroleum shortly before his trip to the United States. The meeting was called by the DPR but was put off at the last minute, and we are waiting for a new date to be communicated to us. We are hoping that if that meeting holds, we will be able to discuss more with the minister in this regard.”
Meanwhile, the Nigerian National Petroleum Corporation (NNPC) has unveiled plans to rise about $16.5 billion (N5.9 trillion) for the development of the nation’s upstream sector in the next five years.
Kachikwu, who made disclosure also at the meeting, said the sustainable funding of joint ventures (JVs) would lead to an increase in national production from the current 2.2 million barrels per day (mbpd) to 2.5 million bpd by 2019.
Speaking at the panel session, organised by the Petroleum Technology Association of Nigeria (PETAN), the minister revealed that the Federal Executive Council (FEC) had approved the ministry’s proposal for the payment of JV cash calls.