A university don, Chris Akhabue has put the blame on the delay in the take off of modular refineries in the country on the fear of licensees’ operating at a loss due to government subsidy on petroleum products and the high cost of crude and equipments.
Akhabue, a Chemical Engineer and Associate Professor of Chemical Engineering at the University of Benin, Benin City also said that the over 50 licences issued by the now defunct Department of Petroleum Resources, DPR, went out at a time Nigeria was experiencing fuel scarcity.
He said with the heavy subsidy on fuel among other petroleum products, by the Federal Government, which has made it readily available, it is obvious that those who went for modular refinery licenses do not see why they should go ahead with their investment, at this time.
” It depends on what they want to produce like gas oil, diesel, PMS, Aviation fuel. The profit margin for modular refineries is pretty small when compared with bigger refineries. For example, the Dangote refinery due to come stream next year has a planned output capacity that will meet the country’s entire needs. In such a case, where will the small modular refineries fit in?”.
“The profit margin is very marginal. Many of them did not do proper feasibility studies before they went for licences. Another factor is the high cost of importing equipments for these refineries. Even if they are going to create jobs, they will need to operate to make profit”.
Indications however are that as at May 2021, the defunct DPR had 40 refineries with no active refinery license/approval. It’s license status report indicated that as at May 2021, a total of 68 refineries license and approval had been granted, out of which 40 are inactive.
A further breakdown of the number of license and approval granted by categories are;
*8 License to Establish(LTE)
*25 not active License to Establish(LTE)
*19 Approval to Construct/Relocation (ATC/R)
*15 not active ATC/R and
*1 License to Operate active license/approval.
According to the petroleum regulatory agency, the Dangote refinery, an integrated refinery and petrochemical project under construction in the Lekki Free Zone, Lagos, is above 80.3 percent complete. Expected to process 650,000 barrels per day (bpd) it will be Africa’s biggest oil refinery and the world’s biggest single-train facility, upon completion.
In November last year, President Muhammadu Buhari welcomed the launch of the first phase of one of these modular refineries, the Waltersmith modular refinery, in Ibigwe, Imo State, and the groundbreaking for its second phase. The facility located close to the Ibigwe flow station has a first phase with 5,000 barrels per day of capacity while the second phase increases this to 50,000 bpd.
Buhari, in a virtual ceremony, said progress in Nigeria’s refining sector would eliminate imports and increase local availability. “There is increased momentum in the other three focus areas under the roadmap covering the rehabilitation of existing refineries, co-location of new refineries, and construction of greenfield refineries”.
”The realization of the refinery roadmap will ultimately lead us to becoming a net exporter of petroleum products not only to our neighbouring countries but to the worldwide market. This modular refinery is the largest commissioned modular refinery in the country today”, he said.
In Edo state, two modular refineries are under construction namely Duport Modular Refinery and the Edo Modular Refinery. The 2500 barrels per modular refinery being established at Egbokor, Edo State by Duport Midstream Company Limited is in partnership with the Nigerian Content Development and Monitoring Board (NCDMB) and is expected to be ready for commissioning this quarter.
The Executive Secretary of the NCDMB, Engr. Simbi Kesiye Wabote during a visit to the project site to assess the progress of work on the fabrication of the tank farms, civil works, pipeline installation and other site preparation works, reportly confirmed that the project had reached 80 percent completion. He said the modules for the 2 Megawatts power plant and the control room were being fabricated and assembled in Lagos for delivery to the site.
It was gathered that the modular refinery is part of the Duport Energy Park, conceived to include a 30 million standard cubic feet per day gas processing facility and a power plant. NCDMB’s partnership with the Duport Energy Park was approved in June 2020 by the Board’s Governing Council chaired by the Minister of State for Petroleum Resources, Chief Timipre Sylva. The project is being supported under NCDMB’s commercial ventures programme, which is also in sync with the agency’s vision to serve as a catalyst for the industrialisation of the Nigerian oil and gas industry and its linkage sectors.
NCDMB sources say it has been exploring ways through which it can build modular refineries to refine products locally. First it partnered with Waltesmith Modular Refinery in Imo State, refining 5000 barrels of crude per day. Azikel Modular Refinery in Bayelsa State is the second and Duport project is the third project.
Chairman of Duport Midstream Company, Dr. Akintoye Akindele was also quoted as hinting that the project would be the first integrated energy park, with a scalable and environmentally friendly modular refinery, power generation and distribution plant. He added that the Duport Energy Park is one of the series of the Board’s partnerships to contribute to the implementation of the Modular Refinery aspect of the Federal Government’s Refining Roadmap.
The Edo Modular Refinery, being developed by Edo Refinery and Petrochemical Company Limited (ERPC) at Ologbo, is also said to be ready for operations as it is now ready to receive crude oil, to process and deliver products, having done the pre-commissioning with the defunct Department of Petroleum Resources (DPR) which certified the refinery ready for production. What is said to be left is the finalization of the crude oil sale contract.
However, Prof Akhabue is of the view that for more modular refineries to come on stream, the government must as a deliberate policy, facilitate the sale of crude at very reduced rates, to operators, outside the international standard prices, while at the sale time, granting them tax holidays. #