FG Not Meeting Modular Refineries’ Crude Requirements, Says Operators

Posted on September 15, 2023

Following several failed attempts to resolve pending issues, CORAN, crude oil refinery operators has confirmed that the volume of crude oil required for the production of refined petroleum products by modular refineries is not being met by the Federal Government.

It was also gathered that all functional modular refineries in Nigeria are currently refining below capacity and making losses on a daily basis.

Modular refineries are simplified refineries requiring significantly less capital investment than traditional full-scale refineries.

The initial process, or Crude Distillation Unit, allows for simple distillation of crude oil into low octane naphtha, diesel, kerosene and residual fuel oil.

In Nigeria, modular refineries are crude oil processing facilities with capacities of up to 30,000 barrels per day, and are being built as part of plans to curb oil theft and promote peace in the oil-producing region of Niger Delta.

Nigeria’s full-scale refineries in Port Harcourt, Warri and Kaduna, under the management of the Nigerian National Petroleum Company Limited, have all been dormant for ages, despite several assurances by the government to fix the plants.

Oil marketers and other players in the mid and downstream oil sectors have repeatedly called on the Federal Government to give the required support to operators of modular refineries, in a bid to cut down Nigeria’s high dependence on imported petroleum products.

One of such support is for the government, through its Nigerian Upstream Petroleum Regulatory Commission (NUPRC), to release adequate volumes of crude oil for modular refineries to produce refined petroleum products in-country.

Although the NUPRC recently argued that it was meeting the crude oil supply requirements of modular refineries, operators of the plants told our correspondent that this was not true.

Asked if the NUPRC was meeting the crude oil supply requirements of modular refineries, as it recently claimed, the Deputy Chairman, the Crude Oil Refinery Owners Association of Nigeria, Mrs. Dolapo Kotun, said this was not so.

CORAN is a registered association of modular and conventional refinery companies in Nigeria.

“Unfortunately and sadly, this (NUPRC’s claim) is not so. Even though discussions have been ongoing for a while, no template or framework/process for supply and delivery has been given to our members who are in operations, having long since reached mechanical completion and final inspection,” Kotun stated.

Mid last month, the NUPRC claimed that it was meeting the crude oil requirement of modular refineries after some industry operators criticized the commission for not supplying crude to the plants.

“Contrary to insinuations from some operators in the refinery business in Nigeria that the continued failure to supply local refineries with crude oil is capable of destroying members’ investment and stifling growth in the sector, the NUPRC said it has delivered 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023,” the commission had stated in a statement released to the public.

It said only refineries that complied with the relevant requirements of Section 109 of the Petroleum Industry Act, 2021 were entitled to crude supply.

“Between January 2019 and August 2021, the period before the PIA came into effect; 1,726,049 barrels of oil were supplied to two refineries that met the requirements of the law at the time.

“The two refineries are operated by Walter Smith and NDPR. The post-PIA supplies were made to Walter Smith, NDPR and OPAC refineries.

“The commission recently granted approval for Millennium Oil and Gas Limited to supply by trucking 60,000 barrels of crude oil at the rate of 20,000 barrels per month for three months to OPAC and Duport refineries in Edo State,” the NUPRC said in its statement.

But the CORAN official, who is the Executive Director, Operations, Ikwe-Onna Refinery Ltd, and Chairperson, Downstream, Women in Energy, Oil and Gas, countered the NUPRC, as she told our correspondent that even some volumes of guaranteed crude had not been given to modular refineries.

“The modular refineries that are operational are yet to receive a drop of the 60 percent feedstock guaranteed at ATC (Approval to Construct) license issuance.

“All (modular refineries) are refining below capacity and making losses on a daily basis, as the only feedstock currently available to them are what those that have marginal fields are producing, or what they can buy from indigenous companies around them that have marginal fields,” Kotun stated.

With clear emphasis, CORAN has insisted that NUPRC is not telling the whole truth and that no such transactions or supplies of crude were engaged in by the companies mentioned by NUPRC.

This position put forward by CORAN leaves the issue at the foot of the government and its agency, NUPRC as they are being urged to do what is needful to save the industry

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