Operators of modular refineries are going through a significant setback as they encounter resistance from the Nigerian Nationwide Petroleum Firm (NNPC) in a bid to safe different crude oil provides.
Nigeria’s place as Africa’s largest oil producer ought to logically confer the advantages of ample provide to its native refiners. Nonetheless, the truth is starkly totally different.
Leaked memos and intensive interviews with business insiders confirmed the state-owned firm is foot-dragging on approvals for modular refineries to hunt different crude oil provides.
Modular refineries are simplified refineries with considerably much less capital funding than historically full-scale refineries.
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Insiders mentioned the pink tape is a loss of life knell for modular refineries struggling to outlive amid funding drought, as overseas traders withhold their cash on account of an absence of assured crude oil provide.
A leaked memo seen by BusinessDay confirmed AIPCC Vitality Restricted, house owners and operators of the Edo Refinery and Petrochemicals Firm Restricted (ERPCL), has confronted vital operational hurdles as a result of persistent lack of crude oil provide regardless of being a completely practical 1,000 barrels per stream day crude oil refinery situated in Ologbo, Edo State.
The corporate has current crude oil provide agreements with Seplat and ND Western since 2022, however bureaucratic bottlenecks have prevented the refinery from accessing the much-needed useful resource.
ERPCL’s letter addressed to Mele Kyari, group chief govt officer of NNPC, alleged the corporate has been in fixed communication, sending letters and having conferences with the NNPC since 2021.
“On 18th August 2021, our crew led by our chairman, met with you and your high administration crew to debate our intention to purchase crude oil from NNPC and we instantly wrote to the NNPC, searching for crude provide,” the letter dated 22 July 2024 mentioned.
It added, “In July 2022, the representatives of NNPC (from HQ Abuja and NPDC Benin) visited our facility for web site inspection and to substantiate the mechanical completion of the Edo refinery. In September 2022, we had been invited for a business negotiation assembly with the NNPC Head of phrases, after which we despatched a follow-up letter figuring out the oil fields from which we are able to offtake crude oil.
“In March 2022, we additionally wrote to the Ministry of Petroleum Sources, informing it of our refinery standing, future initiatives and our challenges of lack of crude oil provide to our refinery. We had additionally written to and had a gathering with the NNPC Exploration and Manufacturing Restricted (NEPL) between November 2022 and March 2023, indicating our extreme want for crude oil provide from oil fields the place NEPL has fairness stakes.”
ERPCL famous that regardless of these correspondences and communications with NNPC over the previous three years on the problems of crude oil provide, it has succeeded.
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ERPCL additionally has a Crude Oil Provide Settlement with ND Western to elevate crude oil from the Ughelli Pumping Station (UPS) owned by NEPL and operated by Shoreline.
“We’ve got held a number of conferences with Shoreline and Heritage Oil and indicated our readiness to make modifications wanted to offtake crude oil from the UPS however no progress has been made until date,” ERPCL.
The house owners of ERPCL search Kyari intervention as group CEO of NNPC for NUIMS to provide incidence to the Seplat-ERPCL settlement to allow Edo refinery to begin lifting crude oil from Oil Mining License 53.
Additionally they need Kyari’s intervention for NEPL and shoreline to permit Edo refinery to begin lifting ND Western’s crude oil from the Ughelli pumping station.
Nigeria presently boasts 25 licensed modular refineries. 5 are operational, producing diesel, kerosene, black oil, and naphtha.
OPAC and Aradel have the very best capacities among the many 5 working refineries at 11,000 and 10,000 bpd respectively, whereas Duport has the bottom at 2,500 bpd. Edo Refinery and Waltersmith fall in between, with capacities of 1,000 and 5,000 bpd, respectively.
About 10 are in numerous phases of completion, whereas the others have solely acquired licences to ascertain. The remaining stays stalled as a result of unavailability of crude and different points.
The CEO of one other modular refinery, who pleaded anonymity, acknowledged that modular operators had raised issues severally prior to now that some mafias within the oil sector had been bent on stopping in-country refining of crude oil for the manufacturing of Premium Motor Spirit, popularly known as petrol however acquired no constructive suggestions, stressing that the chairman of Dangote Petroleum Refinery simply re-echoed it final month.
“No modular refinery has acquired a barrel from NNPC regardless of engagement since 2020,” he mentioned.
Eche Idoko, the publicity secretary of Crude Oil Refinery Homeowners Affiliation of Nigeria (CORAN), suggested the federal authorities to deal with indigenous refiners proper, provided that overseas investments are not flowing into the sector.
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“Within the final eight years, no main overseas investments had been recorded,” Idoko mentioned.
He famous that 5 CORAN members have accomplished their refineries.
“The others are having a significant problem. This problem is that the people who find themselves speculated to finance them haven’t disbursed financing for building as a result of they need some degree of assure,” he mentioned.
“A assure that in the event that they end the refinery, they will get feedstock, which, after all, is crude oil,” Idoko mentioned.
Trade specialists say the financial influence of this insufficient provide is profound.
BusinessDay findings confirmed that agriculture and manufacturing, which rely closely on diesel and different refined merchandise, endure from excessive operational prices on account of exorbitant gas costs.
The Nationwide Bureau of Statistics (NBS) reported a 20 p.c enhance in meals costs over the previous 12 months, a pattern immediately linked to excessive diesel prices pushed by inadequate native refining capability.
Furthermore, the excessive price of diesel, which peaked at N1,800 per litre early this 12 months, locations a heavy burden on logistics and transportation, additional driving up the price of items and companies. The approaching of the Dangote Petroleum Refinery pressured the worth to N1,200/litre in April.
Final Monday, the Federal Government Council (FCE) authorised a proposal by President Bola Tinubu directing the NNPC to promote crude oil to Dangote Petroleum Refinery and different modular refineries in naira.
Idoko believes this transfer will enhance home refining capability and in the end scale back gas costs for shoppers. Nonetheless, he emphasised the necessity for concrete actions to again up the announcement.
“Regulatory our bodies want to offer detailed tips for the coverage’s implementation,” Idoko mentioned.
