wesley80: Safe to assume the 20 or so companies that scrambled for refining licences in anticipation of total deregulation of the downstream sector did so cos somewhere in Texazzpete's grandma thot me logic, they all desire lesser profit. Come to think of it, Shell, Total, Mobil et al are involved in numerous biz lines in Ngr just like they are in other countries aroun the world cos of the super profit they make. Not so, genius?

The Federal Government’s Memorandum of Understanding (MoU) with a U.S.-Nigerian joint venture to build six modular refineries with a combined capacity of 180,000 barrels a day is raising doubts among analysts who question the nature of the deal.

The joint venture group (comprising Vulcan Energy Corp. and Petroleum Refining and Strategic Reserve Ltd.,) signed a $4.5 billion deal to build the refineries in collaboration with state- owned Nigerian National Petroleum Corporation (NNPC), Trade and Investment Minister Olusegun Aganga, said in a statement released two weeks ago.

Two of the refineries are expected to be completed within a year.

The lack of clarity on the deal and the relative opaqueness about the companies involved is, however, giving analysts cause for pause.

“The contract awarded to an unknown ‘Vulcan group’ worth $4.5 billion is raising a few eyebrows,” Bismark Rewane, chief executive officer of Lagos-based Financial Derivatives Co. said in a July 4 presentation at the Lagos Business School.

“Cronyism has replaced corporates in both the upstream and downstream sectors. There is a strong link between cronyism and political patronage.”

The Department of Petroleum Resources (DPR) has in the past 10 years given out licences to 18 companies to build private refineries in Nigeria. None of the companies have so far managed to build a functional refinery in the country.

“The whole deal is just too opaque and too often these MoUs are signed with no concrete steps to actualise them,” Kayode Akindele, partner at 46 Parallels, a Lagos based investment firm, said.

“Unfortunately, what we seem to have is a piecemeal policy where MoUs are signed at will with a variety of parties whose ability and willingness to execute is often called into doubt.”

The statement from the trade and investment minister left out important details about the transaction, such as the expected financing source for the project, the capacity of the companies involved to undertake such a project, the environmental impact on local communities, and the effect of the non passage of the Petroleum Industry Bill (PIB) on the project.

The delay in the new petroleum law has kept out at least $40 billion in investments, Rolake Akinkugbe, London-based energy analyst at Ecobank Research, said in a note on May 15.

If all the listed hurdles are somehow overcome, there still remains the sticky issue of how the refineries are expected to break even in a non deregulated downstream petroleum industry environment.

Shell Petroleum Development Company’s (SPDC) executive director, Malcolm Brinded, recently said building a refinery in Nigeria does not make good business sense.

“In today’s world, not looking at the past but where we are today, there is surplus of refinery capacity which essentially means many refineries in the world run at a loss, which also means one can get refined products back again and pay very little for it to be refined,” he said.

The likely impact of the global refinery over capacity means that major investors or financiers may find it difficult to fund new Greenfield refineries, because they would be competing against older refineries that can survive on low margins.

Nigeria’s existing refineries have a total capacity of 445,000 barrels per day, but are running at less than three-quarters of that capacity, mostly due to graft and mismanagement.

eGuerrilla: FG, Vulcan $4.5bn refinery deal raises doubts


The lack of clarity on the deal and the relative opaqueness about the companies involved is, however, giving analysts cause for pause.

“The contract awarded to an unknown ‘Vulcan group’ worth $4.5 billion is raising a few eyebrows,” Bismark Rewane, chief executive officer of Lagos-based Financial Derivatives Co. said in a July 4 presentation at the Lagos Business School.

“Cronyism has replaced corporates in both the upstream and downstream sectors. There is a strong link between cronyism and political patronage.”

The Department of Petroleum Resources (DPR) has in the past 10 years given out licences to 18 companies to build private refineries in Nigeria. None of the companies have so far managed to build a functional refinery in the country.

Source

The fact remains that a clandestine and incongruous partnership, rushed through without transparency, and excluding the best operators Nigeria would have no problems attracting, is not what the 7th largest producer of crude in the world, and its people, deserve. You don't possess gold worth millions many want to pay millions for only to insist you want to deal with those who operate in thousands. Nonsense.

TRADE and Investment Minister, Olusegun Aganga, early this month signed a tripartite Memorandum of Understanding (MoU) for the construction of six modular refineries in the country. Other signatories represented Vulcan Petroleum Resources Limited (an American firm that does not bear the more familiar tag of Inc.) and Petroleum Refining and Strategic Reserve Limited, a Nigerian company. The combined refining capacity of the proposed refineries is 180,000 barrels of crude oil per day, which represents six-sevenths of the capacity of one of the two refineries in Port Harcourt.

The assurance by Aganga that due diligence had been carried out on the project raises a few issues that warrant a wholesale review of the entire project. Firstly, the three parties to the MoU do not have any known track record in refinery-related projects. The involvement of the Ministry of Trade and Investment is inappropriate because neither the Petroleum Ministry nor the Nigeria National Petroleum Corporation (NNPC) is expected to outsource construction of refineries, as it were, from another Nigerian ministry. Secondly, the average cost of the proposed refineries is a swanky N116.2 billion ($750 million). Is that price tag in line with industry standard? Thirdly, it is proposed to fabricate and test-run the refineries abroad. They will subsequently be dismantled, shipped down and reassembled where crude oil pipelines exist, but at yet to be determined sites. The promoters have apparently not given any thought to the local content law in the petroleum sector or the possible effect of the impending Petroleum Industry Act.

Aganga also explained that constructing the refineries is a major step towards actualising the National Industrial Revolution Plan (NIRP) with particular regard to creating jobs and generating wealth in contrast to the practice of exporting raw materials and jobs to Western countries. But that rationalisation rings hollow because just 20 months earlier, Aganga as Minister of Finance, removed the ban placed on importation of textiles, furniture and other products. Despite protests in well-meaning quarters, the Jonathan administration has not reversed that action. Industries that use local raw materials together with imported complementary inputs, and employ labour to manufacture those products, have been left in the cold. It may be recalled that the import prohibition list was drawn up in 2003 to selectively resurrect sectors of the economy in accordance with the pristine import substitution industrialisation policy, which the NIRP being espoused by the minister probably mimics.

The modular refineries will be constructed with funds obtained from abroad. As a matter of fact, intending foreign investors have given the Jonathan administration expressions of interest totalling N6 trillion for likely investments in various economic sectors that would be spread over several years. However, the points to note are, firstly, that these expressions of interest are practically castles in the air. Secondly, the pledged amount is not loose change or idle funds but anticipated cheap bank credit lines that attract competitive international rates. Thirdly, failure by Nigerian banks to finance national industrialisation through extensive private sector projects with similarly competitively priced credit lines is attributable to the non-conversion of Federation Account oil proceeds to realised naira revenue via deposit money banks. In the process, amount of bank credit missed by the private sector and lost to the economy every year exceeds six times the pledged foreign direct investment amounts. Thus the federal executive arm of government should embrace sound fiscal and monetary practices as the precondition for the country to move forward economically, politically and socially. The current unutilised installed manufacturing capacity rate of about 55 per cent, which has not improved since President Goodluck Jonathan took office, is evidence that this administration, like its predecessors, has not approached the NIRP objectives in the right manner.

As regards petroleum refineries, the NNPC in 2002 granted 18 firms licences to construct private refineries. But 10 years on, no construction work has begun on any refinery. The obvious lesson is for government to overlook petroleum industry outsiders and take necessary steps to encourage companies within the petroleum sector to build refineries. To this end, it is imperative to revisit an earlier NNPC proposal calling on its six joint-venture companies to refine 50 per cent of their crude output by 2006. Therefore, the much anticipated Petroleum Industry Act or an adjunct enactment should set down graduated levels of crude oil output for oil producing companies to refine locally within a firm time frame. To address the usual concerns about so-called unattractive domestic prices of refined petroleum products, such refineries (wherever the various oil companies choose to site them on commercial grounds) should be accorded the status of export processing zone industries. Refined products for domestic consumption should be purchased at going international prices while the refineries arrange to export any surplus products. That way the refineries will be insulated from any problems of price deregulation and fuel subsidy, which should be left to the Nigerian people and the National Assembly to tackle as deemed fit.

There are important advantages to this option. For instance, the refineries will be owned, built and run by committed experts. The NIRP will receive concrete expression as direct and indirect jobs will be created, and associated chemical industries will spring up on Nigerian soil. Secondly, upon acceptance at long last by the federal executive arm of sound fiscal and monetary practices, the Nigerian oil companies, which took over marginal oil fields from the oil majors will access cheap bank credit domestically, and individually or jointly with other minnows, take steps toward vertical integration by establishing refineries that will not be plagued by the problems which aborted the 18 licensed private refineries and which the planned modular refineries will most probably be unable to deal with.

wesley80: You mean they only 'raised doubts'? Lol. I thought Vulcan was some phoney company hiding under Paul Allen and your investigative prowess was supposed to bring that all out to the fore? So now we have Rewane expressing doubts over inadequate info and you feel vindicated? Surely when success eludes the lame even a dirge would sound like a victory song!
I believe the problem here is a lack of basic understanding of what this project entails. To help you out, just find out what a 'modular refinery' actually means before you come running your mouths and shouting eureka over your obvious foolishness.

wesley80: ^No, you regale us with proof of their endless failures before inundating us with incurable pessimism.

wesley80:
This entire write up looks extremely mischievous to me and was obviously written in bad faith. There's a whole lot about the Vulcan group online that are positive and encouraging. In any case, its not like they r being paid to build a refinery, its purely a private venture with govt support and its not like GEJ was under any sort of pressure to build new refineries b4 he entered into this agreement.
The tale of bleeding dogs and contempt for blacks and Nigerians looks like a poorly done hatchet job to me.

TheOtherview:
Where is Wesley 80 at?

Where are the Damn refineries?

oyb:


reincarnated as a ' gej till 2019' tanbot

hercules07:
Gbawe and others have time sha, this is a trusted and tested method of siphoning money, the guys are just after their government's contribution, once they collect that that is the end of everything.

The prophet of our time.

dalhatuLY:
I stay in the same estate as Jim Mansfield and his dog before she passed away.
He left his staff and some policemen on their payroll still owed over 9 months in salaries and allowances.
The police left a while back and are now puzzled because the staff staying in the apartment have been fighting themselves over the property within the house....obviously they want to beat each other to selling things in the house.
Jim even tampered with the NEPA prepaid metre in order not to pay...they enjoyed NEPA free for quite a while.
I currently have in my possession a name card of one of their employees here called Michael Esiso (Project Director). The company name on it is Vulcan Energy International (Member of the Vulcan Energy Group, New York, USA). The website reference on the name card is www.vulcancapital.com

So its not malice but information to share with unsuspecting Nigerians so they will not be caught with their pants down.