Greenfield Refineries: Funding, FG’s Approval Stall New Take-off Date


There are indications that the much-awaited three Greenfield Refineries billed for Lagos, Bayelsa and Kogi States, scheduled to come on stream by 2017 may not be realizable.

This, it was gathered, is because the construction earlier planned to begin this month has been put on hold due to the Nigerian National Petroleum Corporation’s (NNPC’s) inability to secure Federal Government’s approval to commence work.
THISDAY checks revaled that the NNPC, which is to provide 20 per cent of the amount budgeted for the project is still planning to put together a consortium for the purpose of raising the funds.

The NNPC and the China State Construction Engineering Corporation (CSCEC) Limited had in 2010 signed a Memorandum of Understanding (MoU) for the joint sourcing of funds for the construction of three new refineries and a petrochemical plant in Nigeria under a $28.5-billion provisional deal.

The project had been envisaged to increase Nigeria’s refining capacity to over one million barrels per day (bpd) from the current 445,000 bpd capacity and stem the flood of importation of refined products into the country.
The parties had fixed (this month as the new date for the commencement of construction, following the NNPC’s inability to meet the May 13, 2011 date.

Front End Engineering and Design (FEED), site preparation and infrastructure had been scheduled to start in February 2012 to be followed by construction works this month of July.

Under the agreement, the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, was to provide 80 per cent of the $11.3 billion budgeted for the project, while the NNPC will provide 20 per cent equity, to be diluted for private sector participation later.

However, a source familiar with the project told THISDAY yesterday that the project will no longer come on stream as earlier planned because the NNPC is still awaiting Federal Government’s approval to begin construction. The source said aside from the delay in securing government’s approval to begin construction, two other major challenges were the issue of funding and the delay by the National Refinery Special Task Force to submit the report of its findings on the traditional refineries, located in Warri, Kaduna and Port Harcourt.

Commenting on the project, the General Manager at the NNPC’s Group Public Affairs department, Mr. Fidel Pepple, told THISDAY that the Final Investment Decision (FID) had been completed and soil analysis revealed that the project is viable.
He explained that commencement of construction could not take-off as scheduled because the NNPC is still awaiting government’s approval.

On the issue of funding, Pepple confirmed that NNPC plans to float a consortium to enable it raise enough funds for the project.
He said: “The issue of funding is not a problem. What we are waiting for is federal government’s approval to commence construction, once that is done, we will put together a consortium to raise the funds, as the NNPC alone cannot do it”.

The initial plan was that each of the Greenfield Refineries would be able to process around 250,000 barrels of oil a day, but their combined capacity was later downsized to 400,000 barrels per day. Under the new arrangement, the capacities of the plants to be built in Kogi and Bayelsa were reduced to 100,000 barrels per day (bpd) each, while the one to be located in Lagos, will now have the capacity for 200,000 bpd.

THISDAY gathered that the capacities of the plants were downsized based on the new Detailed Feasibility Study (DFS) prepared by Wood Makenzie & Foster Will.

The NNPC had repeatedly stated that the new refineries, when completed, would help to eliminate the country’s current reliance on imported petroleum products and position it (NNPC) to engage profitably in the international trading of refined petroleum products.
The delay in its take-off is considered a major setback to Nigeria’s plan to increase her refining capacity to over one million barrels per day by 2017.