Mini-refineries as model for meeting Nigeria, South Sudan oil demands

The importance of petroleum refinery especially for a country like Nigeria, which is heavily endowed with crude oil, cannot be over-emphasized. In fact, its significance lays in the ability to boost industrialization, growth and development of the country. According to industrial standards, the economic viability of a refinery is dependent on the interaction of three key elements; which are the types of crude oil used, the complexity of refining equipment and the desired type/quality of produce. Overtime, the nations’ three most prominent refineries situated in: Rivers, Delta and Kaduna have fallen below standard in meeting the oil refining needs of the nation despite the abundant of crude oil in the country.

The story hitherto, has always been that of undulating performance and function within the capacity of “up today and collapse tomorrow”. As a result, Nigeria has to rely on 90 per cent importation of its refined oil demands for domestic consumptions.

But not many people are aware of the existence of the ever functioning Ogbele Mini Refinery located in Ogbele, Ahoada East Local Government Area of Rivers State with a nameplate capacity of 1,000bopd, 90per cent capacity utilization 540bpd production of diesel which is about 85,860 litres and a total refining output of 97.9m litres (Over 88m litres sold) since commissioned in 2010 till date.

Ogbele Plant sits on a small footprint of (204m2); half a football field with the best grade diesel in the country today produced from the plant, recorded no losses; no flares, off gas used for energy, operated by two personnel in 12 hourly shift, plant operated by NDPR Personnel and over 89per cent of diesel produced sold to the domestic market. The plant is maintained by technicians and with occasional outsourced services; the Equipment Packager was by Chemex Incorporated United State of America and 40per cent Turn Down Ratio of plant possible.

In recognition of the success of the Ogbele Mini Refinery, NileDelta (a JV company of NDPR and NILEPET) was mandated to replicate the model by constructing a 5,000bpd Mini refinery with a potential to meet 15per cent of demand for diesel in South Sudan.

Speaking on the highlights of running a mini refinery from the company’s experience at a forum organised by the Nigerian Academy of Engineering recently in Lagos, the Managing Director of Niger/Delta Exploration and Production PLC, Dr. Layi Fatona said the project has proven to be a good investment as it has enhanced the diversity of revenue base, ensure zero product loss since commissioning – five years on while validating the concept of modular refineries in Nigeria.

Fatona said if such could be replicated across the Delta region, it would make refined products more widely available commercially and stand potentially as a solution to illegal crude thieving and bunkering

Making a case for modular refinery in the country, he notes that it is a cost effective supply option for investors especially when diesel is the lightest yield.

“The relatively low capital cost, flexibility and short payback period make it distinctively attractive. For the independent producer, participating in a modular refining project improves cash-flows, ensures crude oil production is sufficiently optimized and delivers value beyond the traditional oil production business model.

For the downstream marketers seeking to hedge against foreign exchange exposure, domesticate fuel supply and build local capacity, the modular refinery is a winning strategy.

“In our thrust to address the persistent shortage, steady growth in local demand of petroleum products and the company’s own refinery growth strategy, we took the strategic decision to expand the Ogbele Refinery capacity tenfold, with an additional 10,000barrel per day of processing capacity and increased product mix”, he said.

He canvassed deep interest in such investment. In 2016, he said, Nigeria was second largest importer of United States aviation fuel in the world with an imports account for 100 per cent of aviation fuel used in Nigeria due to inability of existing refineries to produce the fuel.

He said West Africa consumes over 1billion litres of aviation fuel annually and imports account for over 80 per cent of the volume, which he states, Nigeria could be producing. To boost the attractiveness of the sector, he recommends effective regulations and reforms as a key driver for growth within the refining sector and full deregulation of the downstream sector.

With the continuous increase in demand which experts foresee to rise right through to the year 2040; yet, refining capacity continues to lag behind, importation continues to be the major source of meeting the local shortfall in Nigeria. Statistics show that the present aggregate for Nigerian demand for petroleum products is approximately 55-60million litres per day, made up of; 35-40million litres of PMS; 8million litres of HHKero; 1.5million litres of ATKero; 9-12million litres of Diesel. This presents a clear opportunity for modular and full-scale refineries.

The development of electric cars and renewable sources are not foreseen to alter this for Africa going by Africa and Nigeria tardiness in responding to the wave of innovation going-on in that sector across the world.

Bearing his minds on this development with The Guardian, the Economic Community of West African States’ Regional Advisor for African Refiners Association (ARA), Tony Ogbuigwe, said if no new refining capacity is added, and if existing plants don’t ramp up, supply to Africa and consequently growth and industrial activity can be disrupted for a variety of reasons chief among is unavailability of products from Europe and Asia, disruption in sea transportation, a major refinery in Europe or Asia goes into unplanned shutdown due to some climate challenge as happened recently in the United States of America. This, he pointed out could bring a threat to energy security events everywhere.

However, he explained that things have changed as officially there is no more subsidy on petroleum products coupled with the fact that PPPRA now functions more as a price monitoring and intelligence agency.

He added that Government has stated its support for public sector involvement in refining while the drastic drop in crude oil price has made refineries now attractive.

“The foreseen full-scale refinery projects is visible with Dangote Refinery project with the capacity for 650,000. This might, however not be ready till about the year 2020. NNPC has announced plans to rehabilitate the existing four refineries.

And also stated intentions to collocate new refineries next to the existing refineries. Hence modular refineries are seen as quick solution to bridging the supply/demand gap, rather than continued importation”.

“A modular refinery is a processing plant that has been constructed entirely on skid mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping the components link together to form an easily manageable process”, he explained.