THURSDAY, 04 AUGUST 2011 00:00 OLUSOLA BELLO ENERGY, EDITOR

Allison-Madueke
The days of importation of refined petroleum products into the country may have been numbered, as the Federal Government recently unveiled an all-encompassing strategy currently adopted to pull up the nation’s refining capacity to over one million barrels per day.

Deziani Allison-Madueke, minister of Petroleum Resources, who spoke on the strategies at the official opening of the Society for Petroleum Engineers’ (SPE) yearly conference and exhibition tagged NAICE, in Abuja recently, said, the nation’s refining capacity would receive significant boost in the next three years, with the coming up of three new refineries and the Turn Around Maintenance (TAM) of the four traditional ones.

The good thing about this is that the Federal Government team would be leaving for the United Kingdom sometime next week to discuss the detailed feasibility study which was completed last July on the three Green Refineries to be located in Lagos, Bayelsa and Kogi States. After this, the financiers and the contractors will also examine the feasibility study and then the investors would be able to determine appropriately the type and configuration of the Greenfield refineries.

This, perhaps, is an indication of the seriousness the government attaches to the realisation of these projects. The Nigerian National Petroleum Corporation (NNPC) last year signed a Memorandum of Understanding (MoU) with CSCEC for the construction of additional three Greenfield Refineries and a Petrochemical plant in Nigeria.

Under the terms of the agreement, 80 percent of the project cost was meant to be funded with a term loan provided by China Export Credit Insurance Corporation (SINOSURE) and a consortium of Chinese banks led by the Industrial and Commercial Bank of China, the world’s largest bank. The projects will cost about $28 billion.

This means that it is not entirely government project and the possibility of it being abandoned half way once they start is very remote With the coming up of the three new refineries and the turn around maintenance (TAM) of the traditional refineries, the nation’s refining capacity would receive significant boost in the next three years. Especially when the TAM is being handled by the companies that first built them to ensure that this time, the facilities will actually give us the result that we desire in this country and take us to 95 percent capacity utilisation in all our traditional refineries.

With a 24-month mandate to fix the old refineries, the Nigerian National Petroleum Corporation (NNPC) has already embarked on consultation to ensure that the TAM takes off next year, and is expected to take off with Port Harcourt Refinery.

The group managing director of NNPC, Austen Oniwon, also supported the minister‘s view when he said: “We are starting with Port Harcourt refinery, and we have engaged JDP of Japan, which is partnering with Tecnimont of Italy and they are currently in talks, with the hope that by the third quarter of next year they will move into Port Harcourt refinery and commence rehabilitation.

It is not just the Turn Around Maintenance; it is the full rehabilitation of the refineries.” He clearly stated that the refineries have no limited capacity, linking the past challenges to imbalance on one of the units. He, therefore, noted that the needed expansion design has been done by the licensor of the unit, adding that “there is not going to be a major change in configuration of the facility, the plant is still the same.

The most important comment on the lips of Nigerians today is that the government should begin to address the issue of refined products. It should take pragmatic steps to remove this national shame brought on us with our inability to refine own product despite four refineries.”

http://www.businessdayonline.com/NG/index.php/oil/25502-govts-target-of-one-million-bpd-refining-capacity-by-2014-reality-or-myth-

We shall see.

Lagos and Bayelsa refineries are supposed to have capacity of 300K barrels/day, Kogi 150K.

Really hope this happens.

Perhaps this business model where the FG has a small role is the best way going forward?

The operational mode of the new refineries, it was gathered, would be different from that of the existing ones.

The federal government would have no shares or financial contributions to make in the construction and management of the plants as the entire project would be executed with loans sourced by NNPC and the Chinese firm.

The refineries are to be managed by CSCEC consortium upon completion until the full recovery of the loan used on the project. Both Oando Plc and AP Plc, who are among the investors in the refinery project, explained that their foray into refining was informed by the need to bridge the supply gap in the local petroleum product market that is likely to result from the 7 per cent GDP growth that Nigeria is projected to enjoy.

According to the Chief Executive Officer of Oando Refinery and Terminals, Ayo Ajose-Adeogun, the Lekki refinery project has the advantage of proximity to source of crude oil and the market.

The China State Construction Engineering Corporation (CSCEC) recently extended by one year, a Memorandum of Understanding (MoU) it signed last year with the Nigerian National Petroleum Corporation for the construction of the three Greenfield Refineries and a Petrochemical plant in Nigeria.

http://allafrica.com/stories/201108012105.html

I like this. Only thing the government provides is a loan. Looks like Chinese, Oando and AP will be the ones running these refineries. Good.

BTW, Gbawe, you mentioned earlier that you didn't think that Femi Otedola was qualified to run a refinery. Does him teaming up with the Chinese to execute this change your mind a bit?

So, a combined capacity (Lagos, Bayelsa, Kogi, Warri, Kaduna, PH) will take us to around 1 million barrels of refining capacity.

Does anyone know how much we presntly consume per day?

The economics (profits) of refinning are not that great, so I assume there something other than profit in it for the Chinese. Maybe it's their way of having a big presence in the Nigerian oil economy, since the Western big boys (Shell, Chevron etc) appear to have exploration on lock down. Also, having a refinnery here will secure a nice little supply line of refined products to China.

How this will work for a private investor remains a mystery. Will the govt maintain petrol subsidy in the long run, in which case the subsidy will go to operators of private refineries (massive opportunity for corruption), or will they remove subsidy all together, and allow refiners to squeeze millions of motorists by charging 120, may be 150 naira per litre?

It seems inevitable that this petrol price honeymoon tha we've enjoyed for decades will  come to an end in the not distant future.

edo.girl:

The economics (profits) of refinning are not that great, so I assume there something other than profit in it for the Chinese.

Hold on now. Reference for this? I thought refining oil was crazy profitable.

Hrm, looks like you are right:

http://www.dundee.ac.uk/cepmlp/car/html/CAR10_ARTICLE34.PDF

http://www.reuters.com/article/2009/11/25/us-usa-refining-closures-analysis-idUSTRE5AN50V20091125

Interesting.

Nigerians no longer believe in themselves, we just believe we can not make it, if its only the shipping cost, landing costs at the port and all other associated costs of importing refined prtroleum products, wat wld be d need for subsidy, lets first see the TAM take off successfully and the new refineries come up

I'd always had the impression that oil refining is massively profitable. For most other businesses, most of the profit is made in being the guy who makes the finished product rather than the raw ingredient (you want to be the guy who sells chocolate rather than the cocoa farmer, for example.) Now while I didn't expect refining to be more profitable than extracting crude, I thought it'd be a good business because it is "finished producty" (to abuse the English language a bit.)

You learn something new every day, I guess.