The Quest for Local Refining


Enyeribe Anyanwu writes that the federal government should encourage investors in modular refineries, given the huge benefits, including reducing capital flight to fuel importation, meeting local demand and foreign exchange earnings through exports

Since its inception, the present administration has been working hard towards getting Nigeria to refine its crude for local consumption and possibly exportation. Beyond this economic calculation, the government is equally miffed by the country’s despicable and shameful status as a major crude producer and a net importer of refined petroleum products. Owing to the inability to refine its crude, the nation’s socio-economic life continues to suffer perennial disruptions induced by incessant fuel crisis.

In its efforts to change this ugly scenario, the government recognizes that it cannot go it alone. Hence it has enlisted the private sector as the driving force in this charge. Things could not have been any other way considering the hundreds of billions of dollars the previous governments had frittered away in their corruption-prone efforts to repair the nation’s four refineries they had criminally allowed to decay over the years.

To the government and Nigerian people, therefore, the private sector remains the last hope. Even, the boasting by the government to end fuel importation by 2019 is hinged on the efforts by the private sector especially the 650,000pbd Dangote refinery that is nearing completion.

Refining and petroleum industry experts have often harped on the need for government to encourage other investors who have picked up the gauntlet of venturing into crude refining. They maintain that even with the efforts to revamp the nation’s jinxed refineries and the expectations from the Dangote refinery when it comes on stream, Nigeria may not effectively end fuel importation let alone have its name stamped on the world map of crude oil refining and petroleum products exporting nations.

Other investors who have shown considerable interest and demonstrated in concrete terms their desire to assist government to achieve this desired goal should, therefore, be encouraged. Government’s pronouncements of desire to see private refineries spring up in the country should be backed by concrete actions. It is in the light of this that government should take modular refinery projects serious. This it must do by providing enabling environment for entrepreneurs who have decided to establish modular refineries as a way of meeting the nation’s refining capacity. Stringent conditions and unnecessary regulatory bottlenecks should be reviewed and made more investment friendly.

Capt. Emmanuel Ihenacho, Chairman, Integrated Oil and Gas Limited, a frontline promoter of modular refineries in the country sees modular refineries as holding the key to the nation’s attainment of refining capacity. Ihenacho, whose petroleum products marketing company is promoting a 20,000bpd modular refinery in Tomaro Island, Lagos wants the government to demonstrate its support for investors in petroleum products refining. He said the support could come in form of a policy framework that will compel financial institutions to make fund available to indigenous players that intend to build refineries.

“Financial support is one major area we need government’s help, if government realizes that there is need to have a lot of the small-scale refineries to turn around the economy. We can now start exporting refined products than we are currently importing. Government should make provision for financing because it is key requirement to do 20,000 barrels per day. It requires an investment of over $100 million. We need government to assist modular refinery operators. We are not asking to be given grants and handout but to be assisted in the process of being able to secure financing in major finance institutions,” said the former Interior minister.

Ihenacho, who is eager to see an end to fuel importation and its resultant capital flight, explained that if government could assist the operators to secure finance, it would go a long way to assist them realize some of the benefits that would drive the country’s economic growth. According to him, his $116 million proposed refinery would be a reference point in Nigeria when completed and appealed to government to support holders of modular refinery licenses.
Integrated Oil & Gas modular refinery is expected to begin production with Automated Gas Oil (AGO) known as diesel, Dual Purpose Kerosene (DPK), export quality aviation fuel, Naphta and fuel oil. The plant would later be upgraded to produce Premium Motor Spirit (PMS) -petrol. According to Ihenacho, the facility is designed as a one-stop shop that comprises refinery plant, storage facility and other projects that would create massive employment for the teeming youths of the country.

With private refineries as the only hope of achieving the desired refining capacity and the role modular refineries can play in this regard, government should handle with caution its planned withdrawal of refinery licences which, according to it, have remained idle since they were issued. It should rather evaluate the challenges that have hindered the utilization of these licences with the view to proffering solutions. The Department of Petroleum Resources (DPR) should critically take a look at the licensees, identify the serious ones for necessary encouragement, bearing in mind that these licenses were issued in a bid to reduce the huge capital flight to fuel importation, meet local demands and earn foreign exchange through export.

– Anyanwu is the media/corporate relations manager of Integrated Oil & Gas Limited