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Stakeholders seek new refineries

By Roseline Okere and Sulaimon Salau
27 May 2015   |   2:25 am
As the current scarcity of Premium Motor Spirit (PMS) lingers, stakeholders in the Nigerian oil and gas sector believed that the establishment of new refineries and the deregulation of the downstream sector is the only way out.

Refiney---Copy• Facilities operating at zero capacity

As the current scarcity of Premium Motor Spirit (PMS) lingers, stakeholders in the Nigerian oil and gas sector believed that the establishment of new refineries and the deregulation of the downstream sector is the only way out.

Regrettably, the present combined output of petroleum product from the four existing refineries has continued to fall short of the total national demand.

Specifically, the Nigerian National Petroleum Corporation (NNPC) four refineries, two in Port Harcourt (PHRC), and one each in Kaduna (KRPC) and Warri (WRPC) with combined installed capacity of 445,000 barrels per day (bpd) are almost producing at zero capacity.

According to the latest report of the Organisation of Petroleum Exporting Countries (OPEC) on output of refined petroleum products in member countries, Nigeria is only able to produce 30,400 barrels per of gasoline product.

It added that the country produces 15,800 bpd of kerosene; 18,400 bpd of distillates and 20,700 bpd of residuals.

It put Nigeria’s output of petroleum products by country at 89,000 bpd, which is far less that the total capacity of 445,000 bpd.

Despite the billions of naira, which the country spends on Turn Around Maintenance (TAM) of the country’s refineries, capacity utilisation has continued to be on the downward swing.

For instance, the Central Bank of Nigeria (CBN) in its February 2015 monthly report said that the deliveries to the refineries for domestic consumption remained at 0.45 million barrels per day or 12.6 million barrels during the review month under review.

Also the refineries recorded zero production in the last three months of last year, making them unable to contribute to the country’s PMS consumption.

This is far lower than the allocation of crude oil for domestic refining of 0.45 mbd or 41.4 million barrels during the third quarter of last year.

But the respective average capacity utilization during the month of October 2014 was 0.00 per cent, 0.00 per cent and 1.42 per cent for KRPC, PHRC and WRPC respectively.

Also, average capacity utilization during the month of November 2014 was 0.00 per cent, 0.00 per cent and 0.76 per cent for KRPC, PHRC and WRPC respectively.

The refineries managed to record an average capacity utilization 4.19 per cent, 19.24 per cent and 0.00 per for KRPC, PHRC and WRPC respectively in December last year.

The country’s refineries have long been operating well below installed capacity as they are in different states of disrepair, which has made the country to depend on importation and burden of subsidy payment to marketers.

Though NNPC claimed that the refineries were now making huge profits, with PHRC recording a net profit, but The Guardian gathered that none of the refineries are presenting operating.

Head, Engineering and Standard Division, Department of Petroleum Resources (DPR) Alfred Ohiani, recently raised hope on the issue, noting the Original Equipment Manufacturers, OEM of modular refinery that have met all the conditions in the local content acts can be engaged in setting up some of these refineries.

He also stated that the establishment of the refineries at the small scale is particularly apt but not restricted to marginal field operators alone.

“It is also available for some of the pre-qualified vendors who have provided financing packages along the package design of modular refineries’’.

While defending the efforts of the government in getting the refineries to work, he noted that most of the companies that had been given licenses were unable to commence operation because they could not fulfill the financial obligations required to float a modular refinery.

“Within the last few years government had given level playing field for all interested investors who are ready to establish local refineries in the country. It is these opportunities that got Dangote Refineries on board. Most of the investors issued licenses by the government have not really conducted their visibility study on how to make it work. Despite these constraints, the government has not given up on the modular refinery initiatives.

“Finance has been a major challenge for the investors, but in most meeting we have engaged the financial operators to engage the investors, within the past few years when the local content initiative was introduced, it has given opportunities for these two parties to work together, there has been huge development recorded but we are still encouraging them to really consolidate their efforts.

He further explained that investors must also conduct detailed feasibility studies; identification of technology application; source of funding; application and licensing, capacity range of a module of between 1,800 and 30,000 ‘’plant location must be at the discretion of investors and feedstock choice must be typical Niger Delta light sweet crude oil with good sulphur content of 0.2.

He said the DPR has reduced the licensing fee from $1 million to $50,000 for establishment of the modular refineries in the country.

Director of Operation, Amexum Corps, Jacob Obajimo, said ‘’Most of the refineries issued license could not come onboard because there were no fixed stock such as raw materials, available for them to work with.

He added, ‘’The Marginal Field operators in the country don’t have sufficient crude oil to serve the needs of the small scale refineries. In such case no reasonable investor can operates under these conditions.

‘’Therefore to get the local refineries to work effectively the Federal Government must be serious about the passage of the Petroleum Industry Bill, PIB which would give opportunities for availability of the products for the local market. Operators need guiding rule that would encourage full scale productions of the refineries.

Another investor, Managing Director, Dansaki Petroleum, Ade Afolabi, Also stated that ‘’The inconsistency of government policies and lack of financial supports by local financial institutions are some of the basic challenges facing the operators.

He however urged the incoming government to initiate sustainable regulatory framework that would encourage the local investors to fully participate in the scheme.