The federal government will soon issue a new policy to compel operating oil companies in the country to refine 50 per cent of their crude oil production.
The policy will first allow them to refine 20 per cent of their crude oil production and later advance to 50 per cent in the next five years.
Minister of state ror petroleum resources Ibe Kachikwu who made the disclosure when he performed the groundbreaking of a 5,000 barrels of crude oil per day (bopd) modular refinery being developed by Waltersmith Refining and Petrochemical Company at Ibigwe field, Ohaji Egbema Local Government Area, Imo State, expressed excitement that several investors were developing greenfield refineries, that would culminate in about 1,500,000 barrels of oil per day, bopd being refined in Nigeria in a few years, making the country the crude processing hub of West Africa and in control of some part of the East Africa market.
He said, “there is the Dangote Refinery in Lagos with the bumper capacity of 650,000 barrels; the Niger-Nigeria refinery that will refine up to 100,000 barrels; the AGIP one which is a 150,000 barrels refinery that will be located in Bayelsa State and the one led by a Chinese consortium that we are finalizing, which would do a co-location. We have two co-location refineries possibilities, each of them promising 100,000 barrels
The minister also informed that 10 of the 38 licensed modular refineries had made appreciable progress in the development of their projects and the first one is expected to deliver products between December 2018/January 2019. “From modular refineries, we will be able to process about 200,000 barrels of crude and put them into the system.”
He also hinted that the Federal Government would soon announce a policy to require operating companies to refine locally at least 20 per cent of the crude oil they produce, with the percentage graduating to 50 per cent in the next five years. “We have no option or we will consistently stay in the abyss of lack of processing while we export all the raw materials.”
Commenting on the Waltersmith project, Kachikwu explained that the job is being executed with 30 per cent equity financing by the Nigerian Content Development and Monitoring Board (NCDMB) and additional $35 million debt facility from the African Finance Corporation AFC). It is expected to commence production in December 2020.
The minister explained that the Federal Government’s policy on modular refineries is an integral part of the 14-point agenda for reducing militancy in the Niger Delta region. The plan according to him is to set up modular refineries in oil producing communities and use them to create jobs and absorb the militants. “We would take some of the good skills sets they have, polish them and put them into the system.”
He said the Federal Government was engender the establishment of modular refineries through the financing model being managed by the NCDMB and had also granted free custom duty charges and other waivers to enable the investors bring in their equipment.
Kachikwu assured that Government remained committed to completing the revamp of the nation’s four refineries located in Port Harcourt, Warri and Kaduna by 2019, with a target to process about 500,000 barrels of crude oil daily. He regretted that continued importation of refined petroleum products was costing the nation huge sums of money, describing it as a waste of foreign exchange and deprivation of citizens’ jobs.
In his address, the Executive Secretary, NCDMB, Engr. Simbi Wabote explained that the Board’s decision to invest in the Waltersmith’s modular refinery “is in line with our vision ‘to be a catalyst for the industrialization of the Nigerian oil and gas industry and its linkage sectors’. We stand with the desire of the Federal Government to give effect to the recent pronouncements on the establishment of modular refineries.”
He added that initiatives and partnerships like Waltersmith’s were needed to increase Nigerian Content in the oil and gas sector to 70 percent within the next 10 years. “Beyond our interventions in the local supply chain for in-country capacity utilization, we have broadened our focus to include in-country resource utilization.”
The Executive Secretary confirmed that the Board would consider more proposals in line with its published guidelines, stressing that the capacity of such modular refineries have to be in the range of 1,000bpd to 5,000bpd.
He also confirmed that subsequent modular refineries that would be supported by the Board would have 70 percent of its components fabricated in-country.
He clarified that the contractor for the Waltersmith project was permitted to fabricate some of the components in Houston Texas, United States because this was the first time such a project would be executed in Nigeria.
In his welcome address, Chairman of Waltersmith Refining and Petrochemical Company, Mr. Abdulrazaq Isa, explained that the project was “conceptualized in 2011 to mitigate the frequent outage of the third-party export Trans Niger Pipeline (TNP) and optimize the full value of our produced crude through in-country refining and providing products for the domestic market.”
He said the refinery would contribute about 271 million litres of refined products, including diesel, kerosene, HPFO and Naphta, annually to the Nigerian economy, thereby serve as import substitution for meeting domestic demand for petroleum products, create direct and indirect employment as well as reduce the demand for foreign exchange to import refined products.
The MD added that the company had developed plans to increase the capacity of the modular refinery to 30,000 bopd, to process additional products, including petrol (PMS) and Jet Fuel. “We have already executed an MOU with PCC of China towards the installation of the additional capacity within three years, after the startup of the 5,000 bopd modular refinery.”