By Folake Ogunleye
The establishment of 10 modular refineries promised by the Federal Government will end long fuel scarcity in Nigeria. The proposed refining capacities of the 10 licensed refineries stands at 300,000 barrels. These refineries if adequately maintained will help to increase Nigeria’s refining capacity above 1 million barrels per day ( mbpd) on completion of the Dangote refinery with 600,000bpd capacity.
A modular refinery is a processing plant 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.
Modular refineries in Nigeria will increase local refining capacity, sustain supply and reduce the importation of petroleum products into the country. Consequently, the pressure on our foreign reserves will be drastically reduced, while the value of the Naira will ultimately receive a huge boost.
Modular refineries process equipment manufactured in controlled conditions, fully assembled and tested prior to overseas shipment, and installed at client’s site in much less time than traditional construction requires. These may be in units from 4000 to 30,000bpd, though some are as low as 1000 b/d capacity. Lubricating oil, waxes and asphalt may not be produced in a modular mini refinery.
Vice President Yemi Osinbajo had promised support not the Federal Government for unemployed Nigerians in working for the 10 modular refineries located in five out of the nine states in the Niger Delta region; namely Akwa Ibom, Cross River, Delta, Edo and Imo states. According to him, youths involved in the illegal refining of crude oil would be employed in the modular refineries to be established by the government in the region.
This, he noted, would go a long way in dousing the tension of marginalisation that was fuelling agitation in the area. He added that ex-agitators and other unemployed youths in the region would be encouraged to engage in the setting up of the proposed refineries.
Two out of the refineries (Akwa Ibom), and OPAC Refinery (Delta State) – have their mini-refineries modules already fabricated, assembled and containerized overseas, ready for shipment to Nigeria for installation.
The total proposed refining capacities of the 10 licensed refineries stands at 300,000 barrels.
Advanced stage of development for the modular refineries means that the projects have passed the Licence to Establish (LTE) stage, while some have the Authority to Construct (ATC) licence or close to having it because they have met some critical requirements in the licensed stage.
There are three stages in the process of refinery establishment; Licence to Establish (LTE), Authority to Construct (ATC) and Licence to Operate (LTO).
Mini refineries have topping units or hydro skimming which viability depends on sites close to petroleum feedstock to reduce logistics and nearness to markets to reduce distribution costs. Government’s incentives and generous conditions from credit agencies are required for a profitable investment. One advantage of mini-refineries is that they are skid-mounted and so faster to construct from 12 to 18 months. It improves engineering quality. They are flexible to meet demand changes so more modules can easily be added. The negative is that you have more staff per Effective Distillation Capacity (EDC).
The Federal Government will fully deregulate pricing of all petroleum products which refining for local consumption will be a risky undertaking.
The chances of making money are significantly higher for large capacity plants, as they are able to spread the cost of the infrastructure required to receive crude oil, refine it and dispose of the products. Over the years, most closure of refineries especially in Europe was of small and medium sized refineries as they were unable to compete price wise. The combined installed capacity of the existing refineries in Nigeria is 445,000 barrels per day (bpd). Current aggregate national demand is put at about 600,000 bpd equivalent.
The major challenges to the refineries includes inadequate maintenance and funding to most of the investors, and the primary reason holding further progress of the refinery projects. Hence, Vice President Osinbajo directed the Federal Ministry of Petroleum Resources to keep providing the necessary support and creating the enabling environment for positive investments in modular refineries by engaging key government agencies.
The agencies include the Niger Delta Development Commission, NDDC, Nigerian Content Development & Monitoring Board, NCDMB, and financial institutions, including the International Finance Corporation, African Export-Import Bank (Afreximbank), Nigerian Sovereign Investment Authority, Bank of Industry, among others.