Why Private Refineries Fail to Take Off

Fri, Jul 10, 2015
By publisher

Energy Briefs


THE Department of Petroleum Resources, DPR, has attributed the failure of private investors to build refineries in the country to lack of crude oil and absence of funding. The agency said most of the investors licensed in 2003, were not satisfied with the federal government’s position that they would buy the country’s crude oil at the international market price.

At a special session of a recent roundtable organised in Lagos by NewsDirect Newspaper, Alphonsus Mudei, DPR’s deputy director in charge of downstream, said out of the 18 investors licensed by the federal government, only one established private refinery in the country. Mudei said even the successful private refinery built at Ogbele in Rivers State by the Niger Delta Petroleum Resources Limited is not known to most Nigerians because it processes only 1,000 barrels per day into diesel to power the company’s operations.

According to him, the company succeeded in building the refinery because it produces its own crude oil from the Ogbele oilfield. Mudei stated that the 17 other investors told the federal government that they could not secure funding, while the position of government that they would buy the country’s crude at international market price would not guarantee good returns on investment, given the fact that they would sell the refined product at stipulated official price.

“They said that they were finding it difficult to secure crude oil as a raw material and are also concerned by the fact that the crude is going to be sold to them at international market price. So, given this scenario, they said that they did not have the crude and the money. They were looking for incentives from the government to be able to build private refineries but that is somehow strange because they came forward as investors, who are willing to go into the business. So, for them to come and say they wanted assurance of crude before they can go into it was strange,” he said.

Mudei said even though the government gave approval for the investors to source Nigerian crude at international market price, the investors insisted that they did not have the money and requested for sovereign guarantee from the federal government to enable them access funding from international lending institutions.

“Of course, that is not something the DPR or the ministry of petroleum resources can handle. It is something that another arm of government will have to handle. What we did was to forward their request to the appropriate quarters. But our main concern was to make sure that the licenses were useful. There is a time limit for each license. When each of them lapsed and nobody came for renewal, the issue died.”

Mudei said lack of crude and funding were the factors that hampered the establishment of the 17 private refineries. He, however, noted that a few others such as the Amakpe Refinery proposed in Akwa Ibom State progressed beyond Licenses to Approve, LTC, stage before it encountered political problems. He said the investors wanted to relocate it from Akwa Ibom to another state but did not succeed. “So, this is actually what happened to those 18 refineries licensed in 2003.”

—  Jul 20, 2015 @ 01:00 GMT