By Adewole Kehinde
The news was all over the media last week that the Federation Account will get Zero Allocation from the Nigerian National Petroleum Corporation, NNPC.
The quick intervention of the Corporation’s spokesman, Dr. Kennie Obateru, that the letter of the NNPC to the Accountant General of the Federation is not a reflection of the overall financial performance of the Corporation was a welcome development.
It is no longer news that the NNPC, the sole importer of fuel, is absorbing the difference between the cost at which it purchases the fuel and sells it to wholesalers and retailers.
Also, Statistics shows that subsidies have cost Nigeria N10 trillion between 2006-2018 – more than the Health, Education or Defence budgets
In the face of the present economic challenges in Nigeria and the apparent global stance on oil production, there is an urgent need to overhaul the Nigerian Oil and Gas sector even as it remains a major source of revenue generation for the nation.
To this end, there have been various initiatives at diversifying the sources of income to redress the current economic downturn without neglecting the sector that produces the largest volume of income.
In overhauling the Nigerian Oil and Gas sector, it is necessary to revisit the processes by which crude oil is refined and more particularly by addressing the issue of modular refineries.
Crude oil in its natural state has little practical use, but when it is refined we can end up with Petrol, Diesel, Jet Fuel, Liquid Petroleum Gas, Gas Oil, Heating Oil and residues such as bitumen.
Through refining, by-products for lubricants most importantly for petrochemicals can be obtained and considering the high demand for refined products, the increased agitation for more efficient modalities for refining crude oil is justified.
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.
It is manufactured in controlled conditions, fully assembled and tested prior to overseas shipment, and installed at a client’s site in much less time than a traditional refinery.
Constructing a modular refinery in Nigeria requires a design capacity not exceeding thirty thousand barrels per day (30,000BPD). If the plant capacity exceeds 30,000BPD, the plant must be upgraded to a full conventional refinery.
Despite the reasons advanced in support of the establishment of modular refineries in Nigeria, it must be emphasized that it cannot take the place of traditional refineries.
Modular refineries can only supplement the conventional refineries and in Nigeria with its peculiarities of low maintenance culture, relative insecurity and the dearth of funds, it will do the country great good to focus its attention in this direction whilst sorting out the never-ending challenges of managing regular refineries.
The process for establishing a petroleum refinery in Nigeria is regulated by the Department of Petroleum Resources (DPR) through Policies and Regulations made by the Ministry of Petroleum Resources.
The regulatory procedure is laid out in compliance with Regulations (2) and (3) of the Petroleum Refining Regulations made under Section 9 of the Petroleum Act.9
An application for licence to construct or operate a refinery is made to the Minister of Petroleum Resources. The Applicant is required to accompany the application with not less than three copies of a detailed study of the project and the prescribed fees under the regulation which is non- refundable.
The Minister in the exercise of his discretion may grant the application if the Applicant has complied with the prescribed terms and conditions listed in the regulations. An applicant who intends to modify or enlarge an existing refinery with a view to increasing the capacity of the refinery must submit an application to the Minister.
The application will be considered after the non-refundable prescribed fee is paid. The approval of the Minister must be in writing. For example, if the Applicant intends to enlarge the plant capacity beyond 30,000BPD, the plant shall be upgraded from a modular refinery to a full conventional refinery; otherwise the Minister may refuse the application.
It will be recalled that on the 24th of November, 2020 President Muhammadu Buhari welcomed the launch of the Waltersmith Modular Refinery, in Ibigwe, Imo State and the groundbreaking for the second phase.
The first phase of the Waltersmith plant has 5,000 barrels per day of capacity. The second phase increases this to 50,000 bpd. The facility is close to the Ibigwe flow station.
Buhari, in a virtual ceremony, said progress in Nigeria’s refining sector would eliminate imports and increase local availability. The President had named modular refineries as one of the four elements in the government’s refinery roadmap, launched in 2018.
“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,” he said.
“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.”
Buhari also spoke in support of the Nigerian Content Development and Monitoring Board (NCDMB), which bought a 30% stake in the plant in 2018.
The involvement of the NCDMBD “is novel in concept and superb in delivery”, he said.
At the launch, President Buhari instructed the Ministry of Petroleum Resources, Department of Petroleum Resources (DPR) and Nigerian National Petroleum Corp. (NNPC) to provide all necessary support in securing oil and condensate feedstock for the second phase.
In attendance at the ceremony was NNPC’s Group Managing Director, Mele Kyari, NCDMB’s Executive Secretary Simbi Wabote and Waltersmith Chairman Abdulrazaq Isa.
Commercial operations began on November 3 as the refinery hit its full first phase capacity in early December. Crude will come from Waltersmith’s own marginal field, Ibigwe.
Seplat Petroleum is considering working with Waltersmith on potential processing.
The company will built the second phase in two parts. One is a 25,000 bpd standalone condensate refinery. The company aims to complete this by 2023. The second part will be another 20,000 bpd crude processing plant.
Waltersmith has plans beyond refining, though, with a potential move into petrochemicals and power.
If we can have about 100 modular refineries in the country, Nigeria would not have any business importing oil as modular refineries would help Nigeria stop exporting its resources without adding value to them.
There is no doubt that modular refineries will stop fuel importation as well as reducing pump price.
Adewole Kehinde is the Publisher of Swift Reporters and Abuja Chamber of Commerce & Industry Energy Policy Fellow and can be reached via 081662408436, 08123608662
