Modular refineries as panacea for petroleum products challenges, illegal refining

*Modular-refinery.

Oscarline Onwuemenyi

11 March 2017, Sweetcrude, Abuja – The Nigerian government has said it plans to make illegal oil refining in the Niger Delta region a thing of the past, following the Federal Government’s plan to liberalise participation in its proposed establishment of modular refineries.

The Vice President, Prof Yemi Osibanjo, who noted this during his ongoing tour of oil communities in the region, promised that federal government would establish modular refineries in the Niger Delta to drive its development strategy for the region. 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.

Also, speaking recently in an interview with the media, the Coordinator of the Presidential Amnesty Programme and Special Adviser to the President on Niger Delta Affairs, Brig-Gen. Paul Boroh stressed that setting up of the modular refineries would open up the sector for inclusive participation by thousands of youths who would otherwise be involved in illegal refining and oil bunkering.

This, he noted, would go a long way in dousing the sense 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.

He explained that the development of modular refineries in the Niger Delta and across the country would lead to job creation, availability of petroleum products at affordable rates and reduction in environmental pollution occasioned by illegal oil refining activities.

Boroh said: “Besides bringing job opportunities close to the people of the region, modular refineries will also bring the petroleum products close to Nigerians at a competitive price. Illegal refining activities currently taking place in the creeks and environs are alarming. These have led to pipeline vandalism, river and land pollution, environmental degradation, oil theft and loss of revenue to the Federal Government.

“The poorly refined products when sold and distributed will result in economic and health disasters such as vehicle breakdown and kerosene explosions, among others.”

The presidential aide called on the people of the region to support government’s plan and take advantage of the resultant investment and job opportunities. Boroh also called on stakeholders in the oil and gas sector to invest in the establishment of modular refineries as a solution to the persistent fuel scarcity bedevilling the country.

According to him, “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.”

Upon assumption of office in 2015, the President Muhammadu Buhari-led Federal government announced plans to issue 23 licences to establish modular mini-refineries to increase local refining capacity, sustainable supplies and to stop the importation of petroleum products into the country.

The Director, Department of Petroleum Resources (DPR), Mr. Mordecai Ladan in a telephone chat with our correspondent hinted that the announcement was part of President Buhari’s commitment to repositioning the petroleum industry to the glorious days of petroleum products availability.

According to him, the three licensing stages that must be sequentially and meticulously followed before a process plant can be commissioned for operation are a licence to establish, a licence to construct the plant, and a licence to operate the plant whether for a petroleum refinery, petrochemicals and gas processing plant.

The validity of the licence to establish a refinery or plant shall be for a period of two years after which it shall lapse.

It must be recalled, however, that the licensing of 18 private refineries by former President Olusegun Obasanjo in 2005 could not achieve any result, even as the licences eventually constituted themselves into the Association of Private Petroleum Refinery Owners of Nigeria, APPRON. President Buhari must have considered the mini plant option for now as a quick win to solving perennial product scarcity.

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. Modular refineries apply 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.

Mini refineries are 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 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 and so 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).

Complex or conventional refineries’ advantage over mini plants are the use of few staff per EDC, scale and operating efficiency is better, and has more volume and high-value products. Experts also believe that the economics of a topping unit mini refinery are not comparable to full conversion complex refinery.

Nigeria imports about one million tonnes of Premium Motor Spirit, popularly called petrol, monthly. With the on-going rehabilitation of the existing four refineries, the country expects to get 926,235.7 metric tonnes which are optimum capacity in one month. Even at optimum capacity, the country has a reported deficit of 73,764.3 metric tonnes in a month.

But with excess demand for gasoline and distillates in Nigeria, options for sustainable petroleum supply lie in refineries rehabilitation to meet installed capacity, upgrading existing process plants to meet the shortfall and investment in the development of more refineries.

More investments in process plants could have been sustained since the construction of the four refineries decades ago, but unfortunately, the government did not do that. Private investors like billionaire Alhaji Aliko Dangote is leading the way with a 650,000 b/d complex refinery in Lagos State. Other endowed Nigerians have expressed their desire to invest in both the conventional complex or modular mini-refineries.

Speaking in an interview with Sweetcrude, the Chairman, Integrated Oil and Gas Limited, Capt. Emmanuel Iheanacho said the Federal Government should provide an enabling environment for entrepreneurs to establish modular refineries, so as to meet the nation’s refining capacity.

Iheanacho, who is a promoter of a 20,000 barrels modular refinery located in Lagos spoke against the backdrop of government’s frequent importation of refined petroleum products into the country. The support, according to him, includes policy framework that will compel financial institutions to make funds available to indigenous players that intend to build refineries.

Iheanacho appealed to Federal Government to support indigenous oil companies which are striving to grow the oil and gas sector, adding that government should also support local companies with funding. “We are in absolute support of growing indigenous capacity in every facet of our oil and gas industry. This is because the local companies are paying their taxes, reinvesting their capital and creating enormous job opportunities for the larger community,” he stated.

He pointed out that with such encouragement, Nigeria’s participation in the industry would rise significantly in line with government’s aspirations with the Nigerian Content Act.

“Financial support is one major area we need government’s help if government realises 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. The government should make provision for financing because it is a 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,” he said.

Iheanacho also explained that if the government could assist the operators to secure finance, it would go a long way to assist them to realise 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.

He added that the 20,000 barrel per day (b/d) refinery was coming at a period when stakeholders have faulted the move by the government to co-locate refineries and rather advised them to give support to holders of modular refinery licenses. According to him, the Tomaro refinery sited on a 90-hectare land in Amuwo Odofin Local council area was expected to begin production with Automated Gas Oil (AGO) known as diesel, Dual Purpose Kerosene (DPK), export quality aviation fuel, Naphtha and fuel oil.

He said that the plant would be upgraded to produce Premium Motor Spirit (PMS) also known as petrol, as operations progressed. According to him, the facility is designed as a one-stop shop to comprise refinery plant, storage facility, flour mill, ship repair yard, a helipad for aviation operations to offshore platforms and resort centres. He said the project would also create massive employment for the teeming youths of the country.

Meanwhile, the latest announcement by the government has drawn praise from stakeholders across the country. In an interview with our correspondent, the National Secretary of Independent Petroleum Marketers Association of Nigeria (IPMAN), Alhaji Danladi Pasali, said that modular refineries would put a stop to continued fuel importation in the country and bring about a way out of fuel scarcity in Nigeria.

He, however, noted that Public-Private Partnership was imperative for adequate refining as well as the distribution of Premium Motor Spirit (PMS). “Even if all the refineries in Nigeria are refining to full capacity, there will still be fuel shortage because demand is so high. So the government will always import unless there are modular refineries owned by individuals, then fuel would be surplus,” Pasali said.

The IPMAN scribe called for total decentralisation of refineries with the collaboration of the private sector for guaranteed petroleum accessibility. He further urged the Federal Government to support efforts made to liberalise the petroleum sector for a stable petrol-economy.

On his own part, an environmentalist and a local refinery operator, Mr Roland Kiente, has lauded the proposed liberalisation of modular refineries to drive development in the Niger Delta region.
Kiente, who operates an artisanal refinery in Bayelsa State, noted that the policy if implemented would transform the economic fortunes of the oil bearing communities in the Niger Delta. “Those of us currently doing the business are pleased with the proposed plans by the federal government, we have been advocating for it for long and I have been very vocal in calling on the government to come down to our level and assist.

“Our advice, however, is that government should not politicise it, they should identify those who are already in the business and leverage on their expertise as well as enhance their capacities. Those with some kind of experience will be easier to train for the pilot scheme and we shall be more than willing to work with the government to showcase our skills before now they had branded us illegal.”

According to him, “What we are doing is source crude and refine, it is those who sell the crude to us that do the illegality and that has been denting the image of the vocation of local refining, we are driven by entrepreneur instinct to survive. There is a big misconception, the artisanal refiners just like the big refineries buy crude from people who get it from illegal sources, so when the government comes in, everything will be formalised.

“With the government involvement the revenue will be paid into government coffers rather than individuals who break pipelines to steal crude, it is those persons that are illegal not we that refine and sell,” Kiente said.

In his own reaction, Mr Kenedy West, Special Assistant to Bayelsa Governor on Niger Delta Youth Matters noted that the modular refinery concept was a novel concept that could transform the Niger Delta region.

He noted that “It a strong answer to eliminate unsafe illegal refineries which are dangerous to our environment, to the people doing it and our economy so the modular refinery is a perfect solution to the dangers of what our people are doing.

“Legitimising it to make room for small investors who may not have the capital to build big refineries can build smaller refineries, the benefits are so enormous benefits amongst which is increasing the local refining capacity. It will organise the local refineries operators into companies and encourage the people of the Niger Delta to invest in the local refining according to the level of their capital under a controlled and regulated framework

“It is a wonderful idea that we support but it involves lot and we all have to work together to achieve success from it, definitely there is a role in it for various stakeholders,” West said.

Mr Alagoa Morris, an Environmentalist also applauded the federal government for acceding to the yearnings of the people but called for the establishment of standards to protect the environment. He advocated for baseline Environmental Impact Assessment studies by experts and putting in place safety measures prior to the establishment of the refineries to ensure they run in an environmentally sustainable manner.

“It is thumbs up to the federal government and we want the refineries to be driven by the Niger Delta people, they should be organised into cooperatives with ownership of shares and incorporation of real companies.

“Government should set the standards and enforce it as well as establish formal channels where the operators of the refineries should buy crude officially to check the menace of oil theft, let it be run by the people. The refineries will definitely provide job opportunities and help in tackling the security challenges in the region,” Morris said.

Mr Ramsey Mukoro, an Ex-Militant leader, who spoke in favour of the proposed modular refineries noted that it would provide jobs for the teeming youths in oil communities. He said that when young minds are meaningfully engaged, they would direct their youthful energies to productive ventures.

The Bayelsa Government has also expressed its support to the Federal Government’s proposed liberalisation of modular refineries to drive the economic development of the Niger Delta region.

The Special Adviser to Bayelsa Governor on Oil and Gas, Mr Felix Ayah, in a statement in Yenagoa commended the move by the Federal Government, saying it would boost the economy. He said that the decision of the Federal Government to allow indigenes of the Niger Delta region to open and operate modular refineries would boost the economic profile of the people.

Ayah explained that the decision, when implemented, would ameliorate the plights and sufferings of the people who have suffered the adverse impacts of oil exploration without economic benefits in the past.

Ayah urged the Niger Delta people irrespective of their political affiliation to maintain peace, work together and play by the rules to benefit from the laudable government programmes. He noted that after about 60 years of the discovery of crude oil, the South-South region had contributed immensely to the growth and development of the country.

He observed that the renewed interest of the Federal Government to harness the resources found in the Niger Delta for the economic benefit of the people was a clear departure from the past.

The special adviser expressed optimism that the planned modular refineries would empower more Niger Delta people and reduce the spate of conflicts with oil firms and increase oil production.
According to him, the modular refineries will also curb the menace of pipeline vandalism and other social crimes and ills currently ravaging in the region.

He added that the planned direct sale of crude to modular refineries would reduce the incessant breaking of the pipes in the region.

The militant group, Niger Delta Revolutionary Crusaders, NRDC, has also come out in support of government’s plan to establish modular refineries in the Niger Delta region.

The group criticised the razing of 80 illegal refineries across Bayelsa, Delta and Rivers states by soldiers of the Joint Task Force, despite recent assurances by the Acting President, Prof. Yemi Osinbajo, that the Federal Government would establish modular refineries to engage Niger Delta youths involved in the business.

The militant group, in a statement by its spokesperson, W. O. I. Izon-Ebi, said that the Joint Task Force in the Niger Delta, JTF, codenamed ‘Operation Restore Hope’, was not helping the peace-building process in the region with its actions.

The statement said: “NDRC condemns in strong terms the burning of illegal refineries in the Niger Delta at this time of finding and building a lasting peace process. We believed the Acting President, Prof. Yemi Osinbajo when he promised that the Federal Government will assist the illegal refining operators by establishing modular refineries in line with international best practices.

“We had thought and advised that the illegal refineries should have been sealed, rather than burnt. The burning of illegal refineries is not doing the Niger Delta any good. Instead, it is polluting the entire eco-system; that is the main reason the people of Port Harcourt and some other parts of the Niger Delta are experiencing soot. This unprofessional act of the Army is not helping the peace-building process and the dream of the Federal Government and the tireless efforts of the Acting President.”

About the Author