The Nigerian government is set to revoke inactive licenses given to private operators to build refineries
| By Anayo Ezugwu | Jun 6, 2016 @ 01:00 GMT |
THE federal government is determined to revoke inactive licences given to private operators to build refineries in the country. Ibe Kachikwu, minister of state for petroleum resources, said that licences given between 2002 and 2014 to private operators to build refinery complexes in Nigeria will be reviewed and those that have remained inactive will be revoked.
The revocation will be part of the on-going efforts to sanitise Nigeria’s downstream petroleum sector with the government reviewing the status of the refinery licences. When the review is completed, those who crossed certain acceptable operational thresholds will be allowed to continue their operations while those who haven’t will be cancelled.
“The next stage of this is that we are going to look at all the licences that have been given out; some of them were given a window within which to build their refineries and we are going to revoke the ones that were not used. The reason they did not use the licences is that unless the price is right on the outer point, your economics cannot balance.
“So, no refinery investment in the world comes to a country where there is no liberalisation and it is not just Nigeria because if you don’t liberalise, nobody is going to invest in your refineries. So, that is why they did not, a lot of them thought it was nice to have licences but as soon as you move into the capital market and you do your analysis, you realise this,” Kachikwu said.
This is why the minister will henceforth require investors in refinery to show some levels of commitment to their plans as they submit their requests, adding that refining licences would no longer be issued discretionarily.
“The more the government gets out of some of this private sector businesses, the less you have discretionary allocations of this or that to people. We have advertised for three already; the co-located ones, but this time we are going to be very rigorous in giving out licenses. You are going to show us the kind of financial model already in place and guarantees that you have the funding to do it, but we will also be helping them by doing what we can, by making sure that they get products at the right prices,” Kachikwu said.
In March, the Department of Petroleum Resources, DPR, which is saddled with the task of issuing refining licences stated that there are 25 private refinery licences issued by it, out of which 21 are in the ‘Licence to Establish,’ LTE, category, while four are in the ‘Approval to Construct,’ ATC, category. DPR also noted that three of these are billed to construct conventional stick-build plants and 22 would construct modular units with a combined refining capacity of 1,429,000 barrels per day.
With the determination of the federal government to deregulate the downstream sector of the oil and gas industry, experts in the sector believed that building modular refineries will end the perennial fuel scarcity faced by the country. Modular mini refinery are process equipment manufactured in controlled conditions, fully assembled and tested prior to overseas shipment, and installed at client’s site in much less time than traditional construction requires.
Modular mini refineries may be in units from 4000 to 30,000bpd, though some are as low as 1000 bpd capacity. Lubricating oil, waxes and asphalt may not be produced in a modular mini refinery. Mini refineries are topping units or hydro skimming which viability depends on sites close to petroleum feedstock to reduce logistics and nearness to markets to reduce distribution costs.