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Modular Refinery: FG, Firm Eye May 2020 Delivery Timeline

All things being equal, Nigeria may have its first standard modular refinery up and running within the next five months.

Industry-based reports have shown that the world would continue to use fossil fuels for a while to meet its energy demands and supplies.

This therefore indicates that Nigeria which still relies substantially on imported fuel to run its economy would remain attractive to refinery investors such as the Dangote Group and Waltersmith Petroman – two firms who are currently keen on refinery investment in the country.

The Dangote Group’s decision to build a 650,000 barrels a day (bd) refinery in the Lagos area has been applauded, and even described repeatedly as a win-win for Nigeria with its potential to turn the country from a huge importer to a net exporter of refined petrol.

Dangote’s massive refining project may not come on stream immediately due to its scale, however for Waltersmith Petroman which is building a 30,000bd modular refinery, an off-the-shelf solution to back the country’s desire to wean itself of imported petrol, its completion is possibly a touching distance going by its recent disclosure.

As was revealed recently to the country’s Minister of State for Petroleum Resources, Mr. Timipre Sylva during his visit to the Waltersmith modular refinery located in the Ohaji/Egbema area of Imo State, the refinery has attained a 90 per cent completion status and should be ready to begin operations in May 2020.

Why modular refining
Based on Nigeria’s huge population of about 200 million people, it would have normally made sense for huge refineries like that of Dangote and the three decrepit refineries owned by the Nigerian National Petroleum Corporation (NNPC) in Kaduna, Warri and Port Harcourt to substantially meet the country’s fuel demands; but experts have argued otherwise for modular refinery outfits.

In their 2017 report: Nigeria’s refining revolution, experts at the PricewaterhouseCoopers (PwC) considered that the market opportunities for refined petrol in Nigeria and around its West African neighbors were too huge to be ignored especially when it is suggested that existing refineries in Gabon, Senegal and Ivory Coast are unable to meet demands which are on the rise.

In their products consumption analysis, the PwC team explained that as at 2015, Nigeria’s annual consumption of petrol was at 17 billion litres, diesel – three billion litres, and aviation fuel – 400 million litres. The team added that while these were on the rise, transportation and power were the major drivers of demand for petrol and diesel especially because of the poor showings of the country’s public electricity system and citizen’s subsequent resort to self-generation.

Additionally, the PwC team stated that, “with oil prices expected to remain low in the medium to long term, the focus on ramping up domestic refining capacity should become imperative,” to Nigeria because with lower oil prices come cheaper crude feedstock and higher margins for refiners would could also leverage the ever-present uncertainty in global crude oil market to shift Nigeria’s focus on crude oil production alone to crude value realisation by start of the next decade.

They explained that serving as a bottom-up approach, modular refineries such as the 30,000bd Waltersmith Petroman refinery would exist profitably alongside conventional refineries like the 650,000bd Dangote’s but with modular refineries smartly closing up demand and supply gaps of cluster consumptions.

According to the PwC experts: “Modular refineries are assumed to be set up close to crude sources either within existing refineries or on onshore marginal fields. They are also assumed to be set up close to consumption clusters thereby making them better positioned for domestic supply.

“On the other hand, conventional refineries are assumed to be set up to source for crude internationally and to supply both international and domestic markets.”

A date to keep
Been one of the many refineries licences issued by Nigeria to investors to set up, the team at the Waltersmith Petroman refinery disclosed their intention to come on stream by the beginning of the second quarter of 2020. This would possibly make the refinery a pioneer within its class thus giving it the potential benefits and otherwise therein.

Its Managing Director, Mr. Chikezie Nwosu however explained in a technical presentation to Sylva that they were ready for expectations.

Nwosu said the refinery project was done in partnership with a government entity, the Nigerian Content Development Management Board (NCDMB) which has 30 per cent equity in it with the balance of 70 per cent left for Waltersmith.

He noted that the NCDMB in addition to its equity share has provided major guidance and contributions on Nigerian content, technical and commercial issues as well as corporate governance practices to the project, adding that a final investment decision (FID) on the project was taken in September 2018 with an 18-month delivery time from November 2018 to May 2020, for its first phase.

Feedstock for the refinery, he explained would come from the Egbema/Assa and Assa North/Ohaji oil fields operated by ND Western in a joint venture with the NNPC.

Clearly, Nwosu said the first phase to be commissioned in May 2020 would supply 5,000bd of petroleum products with the second phase for 25,000bd also commissioned for construction in May.

According to him, the project would further develop a 300 megawatts (MW) power plant which feasibility study had been concluded and FID expected by the last quarter of 2020.

While inviting Sylva to commission the refinery’s first phase and groundbreaking for the second phase, he solicited his support for an ongoing commercial farm-in discussions with the joint venture of NNPC and Shell for security of production and refinery feedstock.

Similarly, the firm’s chairman, Mr. AbdulRazaq Isa explained that the decision to set up the refinery was to help solve the challenges of crude oil loss from crude handling and the cost of crude transportation from the marginal fields owned by Waltersmith Petroman.

He noted that the promoters have diligently worked to ensure that the delivery time for the first phase which is 18 months would not be missed, and stated that the phase one would contribute about 271 million litres of refined products including diesel, naphtha, heavy fuel oil (HFO) and kerosene annually to the domestic market in addition to the jobs it would create for the host communities.

An eagerly expectant FG
In his remarks on status of the modular refinery project, Sylva said he was delighted with pace of the project which he considered good enough to support the government’s domestic refining plans.

Accompanied by NCDMB’s Executive Secretary, Mr. Simbi Wabote on the inspection tour, Sylva said the “incorporation of the modular refinery component in the existing business concerns of Waltersmith Petroman Oil Limited, is exactly what was envisaged by the federal government with marginal fields allocation.”

He stated that, “the overall expectation was to see indigenous Nigerian companies do well and (that) the Waltersmith modular refinery is a major bright spot which has recently been incorporated into the nation’s projection for petroleum product sufficiency and availability.”

The minister applauded the team at Waltersmith Petroman, but equally called for a reliable focus on corporate social responsibility which he advised would give the refinery a sustainably successful relationship with the host community.
He also commended Wabote for NCDMB’s insight in partnering the private firm for the modular refinery and pledged the commitment of the government to its May 2020 completion, commencement of operations and expansion.

Besides Sylva, Wabote also said that the partnership was a clear indication that the government and private entities could engage in profitable investment drives. He noted that the necessary steps were taken to ensure the full realisation of the objectives of the project.
According to Wabote, the partnership with Waltersmith Petroman was stirred by Nigeria’s quest to improve her in-country refined products capacity.

He reiterated that the May 2020 completion date of the refinery’s first phase will coincide with the groundbreaking for the second phase targeted at delivering 25,000bd of crude oil and condensate refinery designed to produce gasoline, diesel, liquified petroleum gas (LPG), kerosene and aviation fuel.