Fuel importation: Modular refineries to the rescue?

By Nathan Nwakamma

The announcement on Feb. 13, 2017, by Prof. Yemi Osinbajo, as Acting President, that the government would use modular refineries to drive rapid development of the oil-rich Niger Delta received applause from stakeholders.

However, current developments around the fuel subsidy burden put at N2 trillion annually on public finances in the post Petroleum Industry Act 2021 has made increased domestic refining capacity to meet domestic consumption become imperative.

According to the Organisation of Petroleum Exporting Countries (OPEC), Nigeria exported $27.73 billion worth of oil and gas cargo in 2020.

Also OPEC data indicates that within the same year, refined petroleum products imports stood at $71.28 billion, a deficit of $43.5 billion.

Figures from the National Bureau of Statistics indicate that the country spent N2.52 trillion importing petrol in the first nine months of 2021, up from N2.2 trillion in the corresponding period of 2020.

The concept of using modular refineries is seen by experts as a multi-pronged approach to tackle oil theft, create jobs and absorb operators of local refineries in the creeks of the Niger Delta region.

Modular refineries will complement output from existing refineries equipped to process 440,000 barrels per day (bpd), the 650,000 bpd Dangote refinery expected to come on stream this year as well as other private refineries under construction.

Oil theft, pipeline vandalism and illegal refining of petroleum products in the Niger Delta region have assumed worrisome dimension,  following revelation from Nigerian National Petroleum Company (NNPC) that the country loses between 150,000 and 200,000 barrels of crude daily to oil thieves.

The announcement of the policy on modular refineries was widely welcomed and seen as an olive branch to artisanal refinery operators who largely sourced crude illegally from pipelines that crisscrossed the region.

Although operators of illegal refineries in Bayelsa yearned for establishment of the refineries by government, the policy was being fine-tuned to pave way for the licensing of modular refineries.

However, the expectation that illegal refineries would upgrade into modular refineries has not happened because the operators expected the process to be fully underwritten by the government.

Mr Udengs Eradiri, a youth leader and former President of Ijaw Youths Council (IYC) who had advocated the absorption of youths involved in artisanal refineries, also known in local parlance as ‘kpoo fire’ into modular refineries, noted that the operators were filling a vacuum.

According to Eradiri, the unavailability of refined products through formal distribution channels in the Niger Delta region and beyond was a factor that created the space for kpoo fire to thrive.

On the ongoing war against illegal refineries by Gov. Nyesom Wike of Rivers, Eradiri advocated a carrot and stick approach to the war, as crude force alone cannot wipe out the practice.

The youth leader observed that forcing the operators out of business without alternative livelihood sources could create another layer of crisis in the region, adding that the skill of the youths could be harnessed to provide the manpower in upcoming modular refineries.

On the upgrading of the skills of artisanal refinery operators, Mr Patrick Obah, a Director at the Nigerian Content Development and Monitoring Board (NCDMB), said at a recent forum that efforts to integrate the artisanal refinery operators have not yielded desired results yet

“We at the NCDMB were involved in talks to bring the local operators together and we have been working with Bayelsa Government and not much has happened in that direction.

“As part of our Nigerian Content Development mandate, we are actively involved in skills development programmes at various levels to ensure that technical skills required in the oil and gas sector were readily available,” Obah said.

The News Agency of Nigeria (NAN) checks indicate that the NCDMB as part of its mandate to grow Nigerian content from around 35 per cent to 70 per cent by 2027 has been working to catalyse the local capacity in modular refineries as a policy to deepen the participation of Nigerians in the oil and gas sector.

NCDMB had on Feb 3, 2021 announced that construction of a 2,000 bpd modular refinery in Brass, Bayelsa was under way.

NAN checks indicate that the modular refinery is the fourth supported by the NCDMB under the Federal Government’s plan to use modular refineries to drive the development of the Niger Delta region and grow domestic refining capacity.

Mr Simbi Wabote, Executive Secretary of NCDMB, at a forum where he was honoured in September 2021, as local content icon revealed that the board had injected equity capital funds in three other modular refineries with the Waltersmith 5,000 bpd modular refinery at Ibigwe, Imo already operational.

Others are the 12,000 bpd Hydroskimming modular refinery being constructed by Azikel Petroleum Limited at Obunagha, Gbarain, Bayelsa and the 2,500 bpd modular refinery being developed by Duport Midstream Company as part of its Energy Park in Egbokor, Edo.

Wabote in his remarks, at the launching of the construction of the modular refinery at Brass in Bayelsa, listed the various elements of the Energy Park project to include a 2,000 barrels per day modular refinery, power plant, and jetty.

He added that the project will serve as catalysts for infrastructural development and spur of economic activities in Bayelsa.

He explained that the board decided to partner Atlantic International Refinery and Petrochemical Ltd to develop the Energy Park in line with its mandate of catalysing oil and gas activities.

He re-emphasised that the Atlantic Modular Refinery is the fourth in the series of the board’s partnerships to contribute to the implementation of the modular refinery aspect of the Federal Government’s Refining Roadmap.

“With the recent inauguration of the Waltersmith Refinery, we have proven that the concept is doable with the right dedication and partnership models.

“Our focus now is to ensure the completion of the remaining three modular refineries under construction,” the executive secretary said.

On the location of the Atlantic Modular Refinery, Wabote noted that the maritime terrain was challenging.

He said: “We believe that with the capability of our partner, and especially the support of our stakeholders in the community, the state, and the nation at large, we will come back soon to commission the project”.

With sustained commitment, modular refineries, no doubt, will save the country the embarrassment of fuel scarcity as well as reduce the burden of huge foreign currency to import refined petroleum products