RECENTLY, President Muhammadu Buhari approved licenses to 65 Nigerian private firms to construct private modular refineries in the country. The companies were reportedly selected from about 285 applications that were screened for the purpose.
Modular refineries are mini-refineries with capacities ranging from 1,000 to 10,000 barrels per day, (bpd) which can be assembled and separated easily for enhanced performance and efficiency.
The decision to award licence to establish, which was taken within 10 days of his assuming office in June, is reportedly connected with the desire to see the increase in domestic refining capacity to meet local demand, thereby reducing huge import bills for subsidy.
To construct these modular refineries is usually very expensive at and for investors to get their license they pass through very stringent requirement, What makes it viable? Michael Ighofose, petroleum Engineer speaking on an NTA Good Morning Nigeria said.
It is viable because, looking back at the civil war, why don’t we ask what did the Biafrans use as fuel? If you get your fuel and put it in a modular refinery make whatever is available to Nigerians. This is the best step we should take now that the price of oil is down, we can refine and sell to our neighbeouring countries in dollars. We should as well encourage entrepreneurs to go into it as it is a welcome concept that should be imbibed. A lot of people can come up with different components and the advantage is we can easily move it to different places. We don’t need long pipelines running from far places, it’s going to be a short range stuff, and the product is available I think this is the best idea, as we can see to other country and make some money
On the difference between Modular refinery and existing ones, he said.
“Modular refinery is like the big refinery but in a mature form. It can produce faster, it can assemble faster, it is cost effective and within 30-60 days you start refining and producing.
“At this present time in Nigeria, where we are facing petroleum shortages, we need to invest in modular refinery. The government of today has talked so much on unemployment, on subsidy and these issues will continue to persist because we have failed to look inwards. However, a new government has come, and he has found out that the only way right now to enable Nigeria get out of this quagmire of petroleum subsidy petroleum shortages in our filling stations is to invest on modular refineries. One modular refinery can employ over 1,000 Nigerians (direct labour, not indirect labour).
So if we establish 10,000 capacities we are talking about over 100,000 Nigerians being employed, and that will wipe off unemployment in the labour market instantly. Secondly we are also saving our forest.
Why are we exporting our crude oil to bring in one product -PMS. But if you refine one barrel of Nigeria crude oil, you can get PMS, diesel, kerosene and so on. With the introduction of modular refineries, the cost of petroleum in our filling stations might just be as low as N25 per litre, and that is what we are looking for.
In 2002, we started awarding license to private investors to build modular refineries and only one of them – the Niger Delta Refining and Petrochemical has taken off and is producing diesel, What has changed between then and now?
You are right by saying only one refinery is functional now and it produces diesel. What is unique about diesel? It is deregulated You have to be clear about the benefits of modular refineries. First, you have to consider the economies of scale. Secondly petroleum is a pollutant, and you need to handle it with care and you want to be sure you have a safe environment so as not to produce all kinds of pollutants. Thirdly, depending on the configuration of the modular refinery 80% of the products we have has to be produced if you configure the refinery such that it delivers about 80% by value you are going to make profit.
“So, the revenues that would come obviously will be lower to the refiner. Two things could happen. One, he might incentivize the crude and then sell it to these small refineries or you now need to deregulate those other products to these refineries to be profitable. The commercial framework for refineries, whether they are modular or not are quite clear as no one will invest in something and get less revenue. So it’s a little bit more complex than is being painted. But the key to refining profitability for a modular refinery is for example to situate the refinery close to the field, the tariff used to put it in a pipeline will no longer be needed. The challenge is to make sure that tariff now forms the basis of the refiner’s margin and that is why modular refinery can be profitable but you still need a commercial framework to make it work because if you do not want to subsidize the price of crude for the refiner, you need to have the full price to the refiner if he is to make money The success of the Niger-Delta refinery is because it produces diesel, and diesel is not regulated.
On what it takes to set up a modular refinery Dr Okon an Industry expert said you don’t go into getting a license when you have not done your economics, and that is the problem we have. There needs to be a detailed economics, and see how that product will fly. So, it’s not just about going to register a modular refinery, one of the necessary things you need to do is a detailed economics. The Biafrans fought war in this country and they never imported one barrel of petrol from anywhere. So, it’s nothing new, it’s just an issue of being upright and doing what we do best. Nigerian engineers are very smart and we have people in this country that can put ‘heads’ together to get things done. We should be able to tailor things in an international function with thorough diligence. The modular refinery is something that is durable, and those who have the license should be diligent to put the economies together. We should have a process where we screen the number of people we give this license to and be sure they are credible people that can deliver. We have what it takes to make things work in our country we need a small amount of people to run these refineries and it will be effective. It should as well be close to where we have the crude. There should be standards and controls of the modular refineries and you cannot go beyond the boundaries so as to prevent environmental pollution.
What are the issues that we need to worry about in terms of the environmental implications in going about with such a large number of modular refineries?
It calls for serious concern, especially in the Niger-Delta area where there are serious environmental considerations. Not every state in the Niger-Delta can accommodate these modular refineries. You have to consider the construction logistics, use of crude oil supply, land availability access to work force, and energy. So considering all the critical factors that need to be put in place, it may not be possible to have those numbers of modular refineries Those licences can come together, and form some kind of alliance to boost their volumes so that we can enjoy some economics of scale.
Establishing 65 refineries in the Niger-Delta alone will cause serious environmental problem except those people have a serious technology to manage the extraction that will come from it, For instance right now, the Niger-Deltans are suffering serious environmental pollution and establishing 65 refineries in the Niger-Delta alone will cause a serious damage. These people that are awarded the license must indicate how they want to establish these modular plants on shore, off shore, floating or non-floating ones so that Nigerians will know that by 6 months time, so and so numbers of modular refineries have been established. Also, we still need to get the existing refineries working.
So in establishing modular refineries we need to put into consideration the economics of scale environmental pollution, we should run the economics properly we should be able to get the financing as it is a sound project proposal. There is nothing unique about refining petroleum in Nigeria we just have to get the commercial framework right. So the government being the guarantor poses business risk and we need to be very careful with that. The economic basis of modular refineries has to be clear for sustainability the commercial framework needs to be right
According to the Registrar/Chief Executive Officer, Institute of Business Development (IBD) Paul Ikele in an interview with (Nation Newspapers) he said the establishment of modular refineries is a better option in an environment like Nigeria where petroleum product scarcity is perennial If private investors are allowed to build and operate modular refineries with newer technologies, it would rest the controversy over whether or not to remove subsidy. Ikele also said that if only petroleum products are available to Nigerians on sustainable basis that the issue of payment of subsidy would not arise.
The IBD registrar pointed out that the technology used in building the existing refineries are obsolete demanding so much for maintenance which Nigeria can ill-afford given the current economic downturn occasioned by the crisis in the international oil market. let’s look at modular or mini-refineries with newer technologies that can assist the existing refineries whose maintenance demand so much due to obsolete technology.
“Setting up modular refineries is a sustainable option as it will encourage proper investment in refinery operation and in the run, it will minimise crude oil theft and operation of illegal refineries.
Apart from the economic viability establishing of modular refineries in Nigeria will without doubt, have multiplier effect on our economy, It will ensure optional use of our resources, create job and income opportunities and reduce our dependency on import for petroleum product.
With modular refinery progress in scientific knowledge is advanced.
Modular refinery will enhance development and profitability to NNPC refinery operations, and training critical manpower for NCOMB (Nigerian Content Development and Monitoring Board).
But first what is a modular refinery? A refinery is a building or a mass of machinery, used in producing refined products such as sugar, oil, or metals. In other words, any product which needs to be transformed from its original form to its final stage must  pass through this process to be useful.
Oil refining is the process that takes us from crude oil to refined or finished products through an oil refinery such as high-octane motor fuel (gasoline/petrol) diesel oil, liquefied petroleum gases (LPG), jet aircraft fuel, kerosene and heating fuel oils, lubricating oils, asphalt and PMS.
An oil refinery is considered an essential part of the downstream side of the petroleum industry.
Refineries come in various sizes. This range from small topping and reforming refineries to sophisticated complex refineries but in all, they perform three major function which are; separation, conversion and treatment.
Operating a refinery is an uphill task and needs lot of investment. This is why modular refinery has come to stay.
A modular refinery is a processing plant that has been constructed entirely on skid mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping, the components link together to form an easily manageable process.
The modular refinery is also known as mini-refineries. In a layman point of view, it is an indigenous way or form of refining crude oil. The modular refineries is very essential in a country like Nigeria where the economy is unstable.
Researchers believe that Modular refineries will enhance institutional capability, gain full insight, and fill the gap in training indigenous capacity in process and equipment designs, fabrication, installation and operation of gas, refining and petrochemical plants.
They maintain that it will also address the issue of illegal refineries. All the government needs to do is to turn the refineries into legal refineries. To make this to happen, the government needs to design a strategy and policy to set up an energy bank to provide financing taxable at low interest rate, and sell crude oil to them at subsidized price. If this happens, then oil bunkering will become a waste of time as it will become unprofitable and nobody ever enjoys engaging on unprofitable business.
Source: By Naija247news


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