Experts skeptical modular refineries can refine 10% of Nigeria’s crude output

Modular refineries have been described as a cost effective and timely option in comparison with medium and large scale refineries as Nigeria continues in its quest to put an end to the importation of refined petroleum products. With the country hoping to refine at least 10 percent of its total crude production and stop importation of refined petroleum products by 2019, the need for modular refineries continues to grow stronger.

Modular refineries are 500 – 20,000 barrels per day capacity refineries whose parts or equipment are constructed in modules and as a result can be easily moved around. This is a key advantage of modular refineries over conventional (medium and large scale refineries), which are built on sites.

Simbi Wabote, executive secretary of National Content Development Monitoring Board (NCDMB) recently expressed the belief “that at least 10 percent of Nigeria’s oil production should be refined using modular refineries,” but experts who spoke to business a.m. expressed doubt over this position.

A total of thirty-eight (38) licenses have been issued for modular refineries developers with varying levels of commitments, but Rabiu Suleiman, senior technical adviser to the minister of petroleum resources, refining and downstream infrastructure said in April that ten out of the thirty-eight entrepreneurs have secured their “permit to construct.”

“The country’s aspiration that 10 percent which is roughly 170,000 to 190,000 barrels per day of crude oil would be refined by modular refineries means that all the modular refineries developers who have been issued licenses should be showing significant progress in the construction of these modular refineries,” Israel Bamidele, an energy lawyer said in a phone interview with business a.m.

Also, the hope that Nigeria would put an end to the importation of petrol by 2019 has been described as “unrealistic” because of the delay Dangote refinery with 650,000 barrels per day capacity is facing till 2020 or later, as well as the slow pace with which modular refiners are approaching their projects, another expert said.

These smaller refineries have an edge over conventional refineries especially concerning cost. Refineries tend to be hugely capital intensive, with cost running up to millions of dollars in construction and maintenance, but modular refineries are “cheaper.”

Chijioke Nwaozuzu, an energy scholar and deputy director at Emerald Institute for Energy and Petroleum Economics, Policy and Strategic studies said that “the capital outlay for any 100,000 barrels per day is about $1.5 billion while a 24,000 barrels per day modular refinery is roughly $250 million.”

“It is easier to access funds for the modular refining modules through US Ex-IM Bank,” he continued.

On the support and enabling environment government is providing for the growth of modular refineries in Nigeria, Ibe Kachikwu, minister of state for petroleum resources said that modular refineries developers receive customs duty waivers on imported modular refinery equipment, components and machinery.

However, modular refineries might not effectively wean Nigeria from its dependence on petrol importation as most focus more on the production of diesel, kerosene and other refined petroleum products than petrol. For example, the 5,000 barrels per day modular refinery by Waltersmith Refining and Petrochemical Co. Ltd is expected to produce 300,000 litres of diesel daily and half a million litres of other petroleum products like naphtha, kerosene, and heavy fuel oil.

The federal government has also reiterated its commitment to revamping the four refineries several times but combined capacity utilization is still below 20 percent and plans to privatize or attract investment into the refineries are yet to materialize.

Recommendations

The country has been advised not just to set realistic deadlines concerning its refined petroleum products importation but to also adopt and implement proper frameworks that would ensure Nigeria becomes self- sufficient in meeting its people’s energy needs.