RECENTLY,
President Muhammadu Buhari approved licenses to 65 Nigerian private firms to
construct private modular refineries in the country. The companies were
reportedly selected from about 285 applications that were screened for the
purpose.
Modular
refineries are mini-refineries with capacities ranging from 1,000 to 10,000
barrels per day, (bpd) which can be assembled and separated easily for enhanced
performance and efficiency.
The decision to
award licence to establish, which was taken within 10 days of his assuming
office in June, is reportedly connected with the desire to see the increase in
domestic refining capacity to meet local demand, thereby reducing huge import
bills for subsidy.
To construct
these modular refineries is usually very expensive at and for investors to get
their license they pass through very stringent requirement, What makes it
viable? Michael Ighofose, petroleum Engineer speaking on an NTA Good Morning
Nigeria said.
It is viable
because, looking back at the civil war, why don’t we ask what did the Biafrans
use as fuel? If you get your fuel and put it in a modular refinery make
whatever is available to Nigerians. This is the best step we should take now
that the price of oil is down, we can refine and sell to our neighbeouring
countries in dollars. We should as well encourage entrepreneurs to go into it
as it is a welcome concept that should be imbibed. A lot of people can come up
with different components and the advantage is we can easily move it to
different places. We don’t need long pipelines running from far places, it’s
going to be a short range stuff, and the product is available I think this is
the best idea, as we can see to other country and make some money
On the
difference between Modular refinery and existing ones, he said.
“Modular
refinery is like the big refinery but in a mature form. It can produce faster,
it can assemble faster, it is cost effective and within 30-60 days you start
refining and producing.
“At this present
time in Nigeria, where we are facing petroleum shortages, we need to invest in
modular refinery. The government of today has talked so much on unemployment,
on subsidy and these issues will continue to persist because we have failed to
look inwards. However, a new government has come, and he has found out that the
only way right now to enable Nigeria get out of this quagmire of petroleum
subsidy petroleum shortages in our filling stations is to invest on modular
refineries. One modular refinery can employ over 1,000 Nigerians (direct
labour, not indirect labour).
So if we
establish 10,000 capacities we are talking about over 100,000 Nigerians being
employed, and that will wipe off unemployment in the labour market instantly.
Secondly we are also saving our forest.
Why are we
exporting our crude oil to bring in one product -PMS. But if you refine one
barrel of Nigeria crude oil, you can get PMS, diesel, kerosene and so on. With
the introduction of modular refineries, the cost of petroleum in our filling
stations might just be as low as N25 per litre, and that is what we are looking
for.
In 2002, we
started awarding license to private investors to build modular refineries and
only one of them – the Niger Delta Refining and Petrochemical has taken off and
is producing diesel, What has changed between then and now?
You are right by
saying only one refinery is functional now and it produces diesel. What is
unique about diesel? It is deregulated You have to be clear about the benefits
of modular refineries. First, you have to consider the economies of scale.
Secondly petroleum is a pollutant, and you need to handle it with care and you
want to be sure you have a safe environment so as not to produce all kinds of
pollutants. Thirdly, depending on the configuration of the modular refinery 80%
of the products we have has to be produced if you configure the refinery such
that it delivers about 80% by value you are going to make profit.
“So, the
revenues that would come obviously will be lower to the refiner. Two things
could happen. One, he might incentivize the crude and then sell it to these
small refineries or you now need to deregulate those other products to these
refineries to be profitable. The commercial framework for refineries, whether
they are modular or not are quite clear as no one will invest in something and
get less revenue. So it’s a little bit more complex than is being painted. But
the key to refining profitability for a modular refinery is for example to
situate the refinery close to the field, the tariff used to put it in a
pipeline will no longer be needed. The challenge is to make sure that tariff
now forms the basis of the refiner’s margin and that is why modular refinery
can be profitable but you still need a commercial framework to make it work
because if you do not want to subsidize the price of crude for the refiner, you
need to have the full price to the refiner if he is to make money The success
of the Niger-Delta refinery is because it produces diesel, and diesel is not
regulated.
On what it takes
to set up a modular refinery Dr Okon an Industry expert said you don’t go into
getting a license when you have not done your economics, and that is the
problem we have. There needs to be a detailed economics, and see how that
product will fly. So, it’s not just about going to register a modular refinery,
one of the necessary things you need to do is a detailed economics. The
Biafrans fought war in this country and they never imported one barrel of
petrol from anywhere. So, it’s nothing new, it’s just an issue of being upright
and doing what we do best. Nigerian engineers are very smart and we have people
in this country that can put ‘heads’ together to get things done. We should be
able to tailor things in an international function with thorough diligence. The
modular refinery is something that is durable, and those who have the license
should be diligent to put the economies together. We should have a process
where we screen the number of people we give this license to and be sure they
are credible people that can deliver. We have what it takes to make things work
in our country we need a small amount of people to run these refineries and it
will be effective. It should as well be close to where we have the crude. There
should be standards and controls of the modular refineries and you cannot go
beyond the boundaries so as to prevent environmental pollution.
What are the
issues that we need to worry about in terms of the environmental implications
in going about with such a large number of modular refineries?
It calls for
serious concern, especially in the Niger-Delta area where there are serious
environmental considerations. Not every state in the Niger-Delta can
accommodate these modular refineries. You have to consider the construction
logistics, use of crude oil supply, land availability access to work force, and
energy. So considering all the critical factors that need to be put in place,
it may not be possible to have those numbers of modular refineries Those
licences can come together, and form some kind of alliance to boost their
volumes so that we can enjoy some economics of scale.
Establishing 65
refineries in the Niger-Delta alone will cause serious environmental problem
except those people have a serious technology to manage the extraction that
will come from it, For instance right now, the Niger-Deltans are suffering
serious environmental pollution and establishing 65 refineries in the
Niger-Delta alone will cause a serious damage. These people that are awarded
the license must indicate how they want to establish these modular plants on
shore, off shore, floating or non-floating ones so that Nigerians will know
that by 6 months time, so and so numbers of modular refineries have been
established. Also, we still need to get the existing refineries working.
So in
establishing modular refineries we need to put into consideration the economics
of scale environmental pollution, we should run the economics properly we
should be able to get the financing as it is a sound project proposal. There is
nothing unique about refining petroleum in Nigeria we just have to get the
commercial framework right. So the government being the guarantor poses
business risk and we need to be very careful with that. The economic basis of
modular refineries has to be clear for sustainability the commercial framework
needs to be right
According to the
Registrar/Chief Executive Officer, Institute of Business Development (IBD) Paul
Ikele in an interview with (Nation Newspapers) he said the establishment of
modular refineries is a better option in an environment like Nigeria where
petroleum product scarcity is perennial If private investors are allowed to
build and operate modular refineries with newer technologies, it would rest the
controversy over whether or not to remove subsidy. Ikele also said that if only
petroleum products are available to Nigerians on sustainable basis that the
issue of payment of subsidy would not arise.
The IBD
registrar pointed out that the technology used in building the existing
refineries are obsolete demanding so much for maintenance which Nigeria can
ill-afford given the current economic downturn occasioned by the crisis in the
international oil market. let’s look at modular or mini-refineries with newer
technologies that can assist the existing refineries whose maintenance demand
so much due to obsolete technology.
“Setting up modular
refineries is a sustainable option as it will encourage proper investment in
refinery operation and in the run, it will minimise crude oil theft and
operation of illegal refineries.
Apart from the
economic viability establishing of modular refineries in Nigeria will without
doubt, have multiplier effect on our economy, It will ensure optional use of
our resources, create job and income opportunities and reduce our dependency on
import for petroleum product.
With modular
refinery progress in scientific knowledge is advanced.
Modular refinery
will enhance development and profitability to NNPC refinery operations, and
training critical manpower for NCOMB (Nigerian Content Development and Monitoring
Board).
But first what
is a modular refinery? A refinery is a building or a mass of machinery, used in
producing refined products such as sugar, oil, or metals. In other words, any
product which needs to be transformed from its original form to its final stage
must pass through this process to be
useful.
Oil refining is
the process that takes us from crude oil to refined or finished products
through an oil refinery such as high-octane motor fuel (gasoline/petrol) diesel
oil, liquefied petroleum gases (LPG), jet aircraft fuel, kerosene and heating
fuel oils, lubricating oils, asphalt and PMS.
An oil refinery
is considered an essential part of the downstream side of the petroleum
industry.
Refineries come
in various sizes. This range from small topping and reforming refineries to
sophisticated complex refineries but in all, they perform three major function
which are; separation, conversion and treatment.
Operating a
refinery is an uphill task and needs lot of investment. This is why modular
refinery has come to stay.
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.
The modular
refinery is also known as mini-refineries. In a layman point of view, it is an
indigenous way or form of refining crude oil. The modular refineries is very
essential in a country like Nigeria where the economy is unstable.
Researchers
believe that Modular refineries will enhance institutional capability, gain
full insight, and fill the gap in training indigenous capacity in process and
equipment designs, fabrication, installation and operation of gas, refining and
petrochemical plants.
They maintain
that it will also address the issue of illegal refineries. All the government
needs to do is to turn the refineries into legal refineries. To make this to
happen, the government needs to design a strategy and policy to set up an
energy bank to provide financing taxable at low interest rate, and sell crude
oil to them at subsidized price. If this happens, then oil bunkering will
become a waste of time as it will become unprofitable and nobody ever enjoys
engaging on unprofitable business.
Source: By
Naija247news
.jpg)
.jpg)
0 Comments