Fellow Nlders, I have been brainstorming for some time now about our oil subsidy and cabal-hijacked refineries issue. While brainstorming, the idea of SMSEs refineries struck me, What about giving out license out to small business and allow them run a small refinery as well as Promote them.
This should be possible because the process of refining Crude oil is more or less fractional distillation, the difference with this proposed method and the traditionally bigger ones is that it operates at a smaller scale compared to conventional ones which operates at industrial scale.
Fractional distillation as i was taught in elementary chemistry is separation of mixture of liquid by heating it to extract its constituent liquid at their various BP where they escape out.
If Illegal oil refiners can do it in the creeks of Niger Delta, why not allow legal business run such.
We can debate its feasibility and advantages here for a start.
Don't forget it will bring about decentralization of oil refining and could be a life-saver in war situations where main refineries can be targeted easily, also it could mean the beginning of practice that will allow small capital business grow into large scale refineries and and Nigeria could be a future Oil refining hub in Africa in the long run.
Some factors i thought of were power supply, location of business and availability of raw materials, skill requirement and safety regulations and guidelines amongst others.
Please i will like NLders to reason with me one this one, What are steps the can bring such practices to fruition?

Handing licence to SME's ought to be a right step in d right direction but in a country like ours where monitoring officers just collect there shut-up pay 4rm people dey are sent to monitor d quality of dia products and environment in which dis production takes place, substandard oil products will flood d whole market and also create greater risk of environmental hazards more dan it is now.

^^^I believe every business has its challenges and every of those challenges has a solution. A routine test carried out regularly and randomly shld deter pple from such practises as is the case with pure water business and boreholes, dont 4get pure water business has lots of similarities with this idea:it is a decentralised form of water resources ministry when u consider it products.
It has proven to be financially rewarding and it has taken lots of pressure off the more centralised water resource ministry.

OP, you have made very good points here. In fact, the FG has been considering this plan for some time already. All it takes is to have a strong monitoring system to ensure compliance to standards. It will also help provide employment and introduce competition which will further drive down prices. I hope we implement this soon with the planned subsidy removal in focus.

It will not work. If you listened to the debate, the petroleum minister stated that for a refinery to be commercially viable it must be able to refine at least 200,000 barrels per day, and that would cost about $4billion. A small refinery would not be able to cover its cost except the crude is sold at a highly subsidize price.

paragonpro:

It will not work. If you listened to the debate, the petroleum minister stated that for a refinery to be commercially viable it must be able to refine at least 200,000 barrels per day, and that would cost about $4billion. A small refinery would not be able to cover its cost except the crude is sold at a highly subsidize price.

Now that's totally wrong because many refineries with capacity lower than 100,000 bpd exist, illegal refiners in Niger Delta even use thanks with capacity less than 6barrel/day,
And they r making profits. If the gains are invested into it properly, i believe the sky is the limit.
As 4 the minister's point i consider it a ploy to drive her subsidy removal point home. She is not being honest at all so lets leave her claims and reasoning out of this as much as possible.

The guiding target here should be how to heat up as much crude as possible and collect its precipitate while keeping it safe and simple.

Those refineries you talked about are very crude, they are just huge drums with heat applied and the liquid component of the crude is distilled off. The gaseous and solid components as well as the residual oils are wasted and used to polute the environment.

At $100 per barrel of crude, there is no way such contraptions is viable. All of them run on stolen crude.

https://www.nairaland.com/nigeria?topic=828858.msg9800416#msg9800416
Above is a link that clearly states the case of a refinery whose capacity has increased to 1000bpd from a lower capacity.

Extract:

The Chief Executive Officer of Niger Delta Exploration and Production Plc, Dr. ‘Layi Adetona, said the refinery, which had an initial capacity of 1,000 barrels of crude per day, now produces 120,000 litres of diesel per day, using crude oil from the company's Ogbele Flow station.
Adetona said with the operating licence, the refinery, which was installed to initially promote self-sufficiency in the company's operations, would now contribute to Nigeria's energy production by selling surplus diesel to independent fuel marketers for local consumption.

“Several years ago, we had the problem of cost. We saw a situation where we were spending so much money to buy diesel for our operations and we thought there has to be a process whereby we can cut that cost by building a small refinery.

As for the Remnant of the refining process, I believe they can be accumulated and sold to petrochemical co. for further processing.

You are not even looking at my core argument that at international crude prices, small refineries are not viable.

You do not need to argue further, just whip out your calculator and do the maths.
A 1000BPD refinery would need $100,000 dollars worth of crude, which comes to about N16,000,000 in naira. Now a barrel equals 168liters. Refining 1000barrels would at best give you 60 % of prime products of petrol, diesel and kerosine, the rest being gas and residue which cost considerably less. So 168,000liters can at best give 100,800liters. Even if you sell all products at N140 you can get only N14,112,000. The remaining gas would require more expensive equipment to process and the price of gas is very cheap, same for residues, they are sold as waste products. So you are that a small refinery would struggle to make profit on $100 crude prices, and we have not even considered the cost of the refinery itself along with other costs like land, administrative and even maintenance costs.

paragonpro:

You are not even looking at my core argument that at international crude prices, small refineries are not viable.

You do not need to argue further, just whip out your calculator and do the maths.
A 1000BPD refinery would need $100,000 dollars worth of crude, which comes to about N16,000,000 in naira. Now a barrel equals 168liters. Refining 1000barrels would at best give you 60 % of prime products of petrol, diesel and kerosine, the rest being gas and residue which cost considerably less. So 168,000liters can at best give 100,800liters. Even if you sell all products at N140 you can get only N14,112,000. The remaining gas would require more expensive equipment to process and the price of gas is very cheap, same for residues, they are sold as waste products. So you are that a small refinery would struggle to make profit on $100 crude prices, and we have not even considered the cost of the refinery itself along with other costs like land, administrative and even maintenance costs.

To buttress your point, the OP have forgotten that refineries must run a high level of QA which must certify them in terms of minimum acceptable greenhouse gas emission, environmental impact assessment, fire control and loads of HSE issues to deal with.
Refineries can NEVER be a Small and Medium Enterprise  thing.

Its not the same like cooking gin and kai kai

OP, your idea is good as inviting untimely death to your own people.

This is the most stupid idea i've ever come across. Don't just wake up and spit out ideas; try to make calculations and thorough analysis.

@22Martints,
Stop being so dismissive, there is nothing wrong with putting forward an idea and asking others to debate its merit. Unfortunately, I also think its not going to work based on the financial and environmental implications that have been raised. I am not an expert in this, but I do think that some form of medium scale "refineries" can be viable with proper monitoring system.

to get value out of your crude you have to do fractionation. PH refinery has that problem as only the crude distillation unit works most of the time. Fractionation helps to extracting more products(petrol) from the crude. without it you just waste crude which is what most of those illegal refineries are doing and they can afford it because the crude is "free"(stolen).

sheyguy:

Now that's totally wrong because many refineries with capacity lower than 100,000 bpd exist, illegal refiners in Niger Delta even use thanks with capacity less than 6barrel/day,
And they r making profits. If the gains are invested into it properly, i believe the sky is the limit.
As 4 the minister's point i consider it a ploy to drive her subsidy removal point home. She is not being honest at all so lets leave her claims and reasoning out of this as much as possible.

The guiding target here should be how to heat up as much crude as possible and collect its precipitate while keeping it safe and simple.

@sheyguy. Illegal refineries dont buy crude oil that they refine they got their crude oil from bonkery thats while they are making profit at the expense of oil company and Nigerians in general

Posters, I really want appreciate all ur efforts thus far as i believe no one is above learning or mistakes. The idea is still being debated.
Pls i will like to know, how much does the federal govt sell crude to our local refinery? I thought they give the 445,000 barrel meant for local refineries out at $0/barrel because it is targetted at local consumption.
I am asking to be sure because every poster seem to be going by the assumption that every barrel of our crude oil goes out or is sold at global crude oil price of around $100barrel.

dustydee or whatever you call yourself, stop talking trash when you know nothing about refinery operations. you are very ignorant about the reference you made and that is the Port Harcourt refinery. For some time now the FCC Plant of the refinery has been on steam and for that period, the refinery has been on profit making billions of naira for Nigeria. You only know about CDU process of the refinery and that is what is puffing your head. Let me tell you those who ought to know are aware of the refinery politics. Most of the best quality AGO in the Nigerian market is sourced from the Port Harcourt refinery, so also is PMS and DPK. I can tell you the last time PHRC imported products. The only problem is the power plant and I know that after the TAM of next year, we shall have a brand new refinery. Already the Storage tanks are being filled with real LPG and not the Propane that is being imported and sold to people.

@sheyguy, the truth of the matter is that for sometime now, NNPC buys Crude at prevailing international market price for local refining. Formerly, Crude was allocated to the refineries for local refining. as the refineries became epileptic, much of the allocated crude was sent overseas for refining and brought back as imported product, but the procedure has been been discontinued. Warri refinery is currently the best producing refinery due to the fact that the FCC has been on steam for a very long time. Refinery problem is political in nature as the government interferes with its operations.

triaophant:

dustydee or whatever you call yourself, stop talking trash when you know nothing about refinery operations. you are very ignorant about the reference you made and that is the Port Harcourt refinery. For some time now the FCC Plant of the refinery has been on steam and for that period, the refinery has been on profit making billions of naira for Nigeria. You only know about CDU process of the refinery and that is what is puffing your head. Let me tell you those who ought to know are aware of the refinery politics. Most of the best quality AGO in the Nigerian market is sourced from the Port Harcourt refinery, so also is PMS and DPK. I can tell you the last time PHRC imported products. The only problem is the power plant and I know that after the TAM of next year, we shall have a brand new refinery. Already the Storage tanks are being filled with real LPG and not the Propane that is being imported and sold to people.

Guy stick to the issue. I know for a fact that because of the problem with PPU, the FCC couldn't run after it was repaired. But my point is without FCC those local refineries will not optimize yield. Thanks for letting Nairalanders know you work in the refinery(you actually sound like an operator with your uncouth comment). Happy new year.

@Triaophant
i know the NNPC has resorted to importing fuel, what i really need is now is whether govt sells crude to NNPC at $100/barrel, i heard they get 445,000 (445k barrel is the total capacity of local refinery put together in full operation.) barrel/daily for minimal cost.
They info seems to be one big secret and is hard to confirm from any reliable source for now.
I tried NNPC site, they av good info but i cant find this particular info.

paragonpro:

You are not even looking at my core argument that at international crude prices, small refineries are not viable.

You do not need to argue further, just whip out your calculator and do the maths.
A 1000BPD refinery would need $100,000 dollars worth of crude, which comes to about N16,000,000 in naira. Now a barrel equals 168liters. Refining 1000barrels would at best give you 60 % of prime products of petrol, diesel and kerosine, the rest being gas and residue which cost considerably less. So 168,000liters can at best give 100,800liters. Even if you sell all products at N140 you can get only N14,112,000. The remaining gas would require more expensive equipment to process and the price of gas is very cheap, same for residues, they are sold as waste products. So you are that a small refinery would struggle to make profit on $100 crude prices, and we have not even considered the cost of the refinery itself along with other costs like land, administrative and even maintenance costs.

It doesn't even matter whether it's 1,000 / 10,000 / 100,000, the calculation will remain the same because of the main fact that 40% gas and residue (per your calculation) cannot be refined, better yet, they need further machinery to process them. In addition to your analysis, same gas and residue to larger corps at a competitive price which adds to the profits of the small refinery. My own take is that the cost of oil per barrel is too high both for a large and small refinery.

manny4life:



It doesn't even matter whether it's 1,000 / 10,000 / 100,000, the calculation will remain the same because of the main fact that 40% gas and residue (per your calculation) cannot be refined, better yet, they need further machinery to process them. In addition to your analysis, same gas and residue to larger corps at a competitive price which adds to the profits of the small refinery. My own take is that the cost of oil per barrel is too high both for a large and small refinery.

Thank you for seeing my core argument, that in today'sworld

sheyguy:

@Triaophant
i know the NNPC has resorted to importing fuel, what i really need is now is whether govt sells crude to NNPC at $100/barrel, i heard they get 445,000 (445k barrel is the total capacity of local refinery put together in full operation.) barrel/daily for minimal cost.
They info seems to be one big secret and is hard to confirm from any reliable source for now.
I tried NNPC site, they av good info but i cant find this particular info.

sheyguy, i hope you are not suggesting that FG should give free crude to any refinery, public or private, the whold essence of deregulation is that the FG gets out of the way, allows private enterprises to run the business, hence they will source for crude in the open market, the FG needs to stand aside and concentrate on monitoring, ensuring compliance to tghe various rules and regulations,

The çoncept of blanket subsidy for all must be done away with,

It can be and perhaps is desirable but the challenges are enormous. The key here is that green refining is horrendously expensive thus cannot be easily scaled. What you will likely have in this case are plants that offer partial fractionalisation to perhaps extract one or two products. This is very wasteful and in commercial terms not viable. It was one of the arguments on the 'Channels Forum' - why the products we import are very expensive. The truth is if you extract the vast spectrum of gases, liquids and sludges the cheap ones balance out the expensive ones and you can accommodate a fair price. Small scale plant technologies cannot do this. The second thing is regulation and monitoring. The more the plants, the diverse their products, the more difficult it is to supervise and once you have confidence issues the businesses collapses. Microfinance banks face this challenge. They are so many that supervising them is difficult. That's why they frequently run aground and most serious businessmen have lower confidence in them.

If subsidy remains, the SMEs should enjoy the same benefits as NNPC (interms of procuring crude oil).
If subsidy is removed, then the SMEs should be allowed to sell at international prices. My guess is this will inevitably bring profits which cover the initial cash outflow of N16,000,000.
There's still the possibility of forward and backward integration of SMEs. That should also cover the issue of fractionation since there can b SMEs specialised in that aspect.

If subsidy remains, the SMEs should enjoy the same benefits as NNPC (interms of procuring crude oil).
If subsidy is removed, then the SMEs should be allowed to sell at international prices. My guess is this will inevitably bring profits which cover the initial cash outflow of N16,000,000.
There's still the possibility of forward and backward integration of SMEs. That should also cover the issue of fractionation since there can b SMEs specialised in that aspect.

D militants used this means to generate fuel during their heydays. The substance(n how many fractiöns?) they got was only marginally effective n will constitute poison to engines even in d short run. THIS POST SHOULDN'T HAVE MADE FRONT PAGE. U can't process crude oil like we do palm oil.  4 consolatn, we already have an indigenous technology- 4 making garri.

I.Oludayo:

D militants used this means to generate fuel during their heydays. The substance(n how many fractiöns?) they got was only marginally effective n will constitute poison to engines even in d short run. THIS POST SHOULDN'T HAVE MADE FRONT PAGE. U can't process crude oil like we do palm oil.  4 consolatn, we already have an indigenous technology- 4 making garri.

Gbam.
Post closes thread.

at least, the youths of this country are discussing something benefitial ,

which we should be doing, not discussing which tribe is better and which should be annihilated

we need more intelligent debates on this thread and i disagree that this shouldnt have made the front page,

^^
thanks alot 4 that . . . . . Very well said.

paragonpro:

You are not even looking at my core argument that at international crude prices, small refineries are not viable.

You do not need to argue further, just whip out your calculator and do the maths.
A 1000BPD refinery would need $100,000 dollars worth of crude, which comes to about N16,000,000 in naira. Now a barrel equals 168liters. Refining 1000barrels would at best give you 60 % of prime products of petrol, diesel and kerosine, . . . .

paragonpro ur argument is highly flawed because of the bold part. From my findings crude oil from oil wells are not directly sold at global oil prices of $100 as claimed but go at a lower rate that leaves profit margin for those who choose to refine themselves. and as a matter of fact they get more volume of products thereby leaving the refiners with processing gain as against ur 60% assumption. don't forget the commons u claimed as less profitable can be aggregated and processed centrally or sold out to Co like The Eleme Petrochemical plant who already run on profits.

this link gives a breakdown of crude oil by products:
http://www.txoga.org/articles/308/1/WHAT-A-BARREL-OF-CRUDE-OIL-MAKES

For more clue u can go through this, quite long though:
http://www.cp-africa.com/2011/12/24/fuel-subsidy-how-the-real-cost-of-nigerian-petrol-shows-that-there-is-no-fuel-subsidy/