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Why IOCs can’t build refineries in Nigeria

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By Adewale Sanyaolu

If stakeholders’ submissions are anything to go by, then the dream of the country to attain self-sufficiency in domestic petroleum products refining from 445,000 barrels per day (bpd) to 1,429,000bpd may not see the light of the day.
The experts who spoke to Daily Sun in separate interviews, said unless issues surrounding ease of doing business, incentives, insecurity, especially in the Niger Delta, and a clear cut fiscal regime are addressed, no investor will be willing to commit resources into building of refineries in the country.
Minister of State for Petroleum, Mr. Ibe Kachikwu, had last week, said that International Oil Companies (IOCs) operating in Nigeria must stop treating the country like a “trading colony” and instead invest in the energy sector if they want to retain access to the nation’s resources. Such investment, according to him, includes crude refining locally.
Some of the world’s biggest independent oil traders, the Minister said, had benefited for years from exporting Nigeria’s crude and selling to the country refined petroleum products without putting money into developing the sector.
“We have to get selfish on this,” he told the Financial Times in an interview. “If you have been selling to me (refined) products for six years and you can’t put a foothold in the country, then I shouldn’t be buying products from you.”
Failed efforts to involve private sector
In 2002, 18 License to Establish (LTE) were granted investors to build refineries by the Department of Petroleum Resources (DPR) but as at today, only one of them had come on stream with just 1,000 barrels (bpd), capacity.
The refinery is operated by Niger Delta Petroleum Resources (NDPR), which produces only automotive gas oil (AGO), popularly called diesel.
The Nigerian National Petroleum Corporation’s (NNPC)’s refineries located in Warri, Kaduna and two in Port Harcourt, has an installed capacity of 445,000bpd.
More worrisome is the fact that despite efforts to increase local refining capacity to conserve foreign exchange, the country’s three refineries could only produce 43,743,273 million litres of petrol in July as against the country’s daily consumption of 40 million litres.
This means the country’s forex request for imports of petroleum products, which currently stands at 35 per cent will further increase in the coming months unless something drastic is done about the state of the refineries.
Though the corporation had hinted of plans to ramp up production from the 445,000bpd to 1,429,000, the plan had yet to materialise as the refineries are now operating at less than 40 per cent capacity.
According to DPR, the increase in refining capacity is to be achieved from the licensing of 25 private refineries by the agency.
DPR had, in a statement in March, said contrary to claims that it had withdrawn the licences of some private refineries hitherto issued to operators, it never did.
Rather than withdraw licenses, the department maintained that it was in alignment with government’s aspiration of improving Nigeria’s refining capacity by strengthening its regulatory oversight function of the petroleum sector in Nigeria.

Shell’s take
Former Executive Director of Shell Petroleum Development Company (SPDC), Mr. Malcolm Brinded, had said the company cannot build a refinery in Nigeria because there are surplus refineries across the world, adding that refineries were no longer profitable, hence the decision of the company to invest in the gas sector.
Brinded, who was in-charge of the Upstream International Unit of the company said rather than build new refineries, the company was divesting from those it had interest in around the world.
“With respect to downstream, two comments there. Shell is divesting from refineries all over the world because there is a surplus of refineries; we no longer own any refineries even in the United Kingdom.
“I will also say because of the surplus of refineries available, in a way, one has to look very closely whether building new refineries is a good investment for anyone not just for Shell but for countries involved.
“In today’s world, not looking at the past but where we are today, there is surplus of refinery capacity which essentially means many refineries in the world run at a loss. Which also means one can get refined products back again and pay very little for it to be refined,’’ Brinded had said.

Industry position
Partner, Bloomfield Law Practice, Mr. Ayodele Oni, explained that while most of the IOCs are already overburdened with the huge cost involved in operating in the upstream sector of Nigeria, questions have been raised as to the economic sense in investing into the downstream sector.
For one, he explained that the strong involvement of the government and the economic environment tightened by the unwillingness of the government to deregulate the sector overtime had put a clog in the efforts to secure IOCs’ commitment in the downstream.
‘‘Although licenses had been given to foreign investors to build refineries, including Akwa Ibom Refinery and Petrochemicals, Tonwei Refinery, Badagry Petroleum Refinery, Clean Water Refinery and a host of others, none of the IOCs has committed to an actualisation.
On the other hand, he said Nigeria currently has pressing challenges with regard to foreign participation in the oil sector.
According to him, present concerns are as to the level of willingness to invest in the Nigerian oil sector in comparison to the strong drive during the 1st and 2nd Republic. He added that several reasons can be adduced to the reduced participatory interest of IOCs in investing in Nigeria’s oil sector.
‘‘It is  is a well-known fact that the control and profits of oil reserves are largely split between host countries (NOCs) and the IOCs. In the Nigerian case, oil reserves are split between the Federal Government which, by virtue of series of legislations and regulatory frameworks, has the major controlling share,’’ he said.
President, Nigerian Liquefied Petroleum Gas Association (NLPGA), Mr. Dayo Adeshina, said investors would only go to countries where they are sure they will get return on investment, and won’t be swayed by sentiments.
Adeshina argued that the current foreign exchange distortions in the country would not encourage investment just as the fiscal regime is not clear on where the government stands and what investors stand to benefit.
The NLPGA boss said the insecurity in the Niger Delta region is a big minus for the country as most investors are not keen on either making new investments or expanding existing ones because critical oil and gas infrastructure assets are being destroyed on a daily basis.
‘‘The issue of investment is that of collaboration. It is not enough for government to tell investors or compel them to come and invest. The fiscal regime must be clearly stated out before the investment can begin to come.
“A situation where the investor makes provision for his security, takes care of the community from its meagre resources and still battles with hostilities, is uncalled for. Government must be ready to play critical role because the investors equally carry out their own risk assessment proposal. And if the result is not favourable, the expected inflow won’t come,’’ he said.


Shell donates N1bn to P’Harcourt library project

By Sampson Unamka

A modern e-library donated by Shell to the Port Harcourt Literary Society has opened its doors to book lovers and other literary enthusiasts. The N1.03 billion library is one of the N2 billion social investment projects Shell exclusively sponsored in the Niger Delta to mark Nigeria’s centenary anniversary.
The others are a hospital and sports centre in Bayelsa and Delta states respectively. Shell spent N790 million on the project that was implemented via a Memorandum of Understanding (MoU) with the Port Harcourt Library Society, which contributed an additional N240 million.
Speaking at the commissioning ceremony, Managing Director of Shell Petroleum and Development Company of Nigeria Ltd (SPDC) and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, said SPDC invested exclusively on the library project because of its strong conviction that it will deliver significant benefits and positively impact the lives of the people.
“We are pleased to deliver an ultra-modern public library that would rank as one of the biggest and most IT-driven in the country. The feedback we’re receiving shows that the literary scene in the Garden City has already changed,” said Okunbor.
Nigeria’s National Librarian, Prof. Lenrie Aina, told journalists that the facility, named Port Harcourt Literary Society Library, is the “first complete public library in Nigeria,” because, aside from Shell ensuring supply of power, books and cooling, every comfort of book lovers was considered in the design and construction of the library.
Deputy Governor of Rivers State, Dr. Ipalibo Banigo, in a speech delivered by her Senior Special Assistant, Mrs. Inegogo Fubara, thanked SPDC for supporting the state government’s desire to provide sustainable and affordable education to the people.
Chairman, Board of Trustees of the Port Harcourt Literary Society, Dr. Chidi Amuta, said the library was designed to be the heart of the Port Harcourt Book Centre that was originally conceived to commemorate the recognition of Port Harcourt by UNESCO as the 2014 World Book Capital.
He added: “Other structures awaiting donor evaluation and sponsorship include a writers’ hostel, an event centre/exhibition hall and a theatre. The Book Centre, like the Muson Centre in Lagos along which it is modelled, is conceived as a centre of culture and enlightenment.”
An obviously elated Senator Magnus Abe said: “In everything Shell has done in the Niger Delta, today it has made a statement that will never go away. It has set us as a people as partners, in truth, because it is books that will develop the Niger Delta. So having associated itself with books today in the lives of our children and in the lives of our youths, Shell has made an indelible contribution to the true development of this region. We will never forget you.”
The cynosure of all eyes at the event was 10-year old Shawn Ene who single-handedly raised over N250,000 for the donation of children’s books under the special support programme of Shell Nigeria staff’s volunteer group, Shell Employees Care. There were also poetry and drama performances at the commissioning of the library.


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Powergas receives CNG, LNG Company of the Year award

Powergas, Africa’s largest Compressed Natural Gas (CNG) producer and distributor, received the prestigious award for the Best Compressed and Liquefied Natural Gas Production Company of the Year in 2016 from the Institute for Government Research Leadership Technology (IGRLT).
Following an intensive selection process, the award is bestowed on an internationally recognised organisation that is performance driven, innovative and contributes positively to the economic growth and prosperity of Nigeria.
The IGRLT recognised Powergas as the pioneer in the off pipeline gas distribution network in Nigeria, with both gas compression and distribution capabilities and commended it for continued investment in the industry. Powergas is not only the largest but also the fastest growing CNG supplier in Nigeria, having doubled its client base in the past year.
Chairman of the Clean Energy Group and CEO of Powergas, Deepak Khilnani, said: “Thank you to IGRLT for recognising our efforts in the CNG and mini-LNG industry and congratulations to the Powergas team for continued hard work. We have an exciting phase of growth over the next two years with plans to produce enough CNG and LNG to generate 500MW of electricity at power plants across Nigeria where the pipeline does not reach.”
Director of Powergas, Mr. Aloy Duru, received the award on behalf of the organisation. Duru is a well known Chartered Engineer with over 30 years multi-disciplinary experience in the Nigerian oil and gas industry, having previously served as the Chief Engineer at Shell Nigeria.
While receiving the award, he stated: “Powergas is committed to Nigeria’s CNG and LNG development and we will continue to invest not only in additional compression and liquefaction stations but also innovative customer solutions. Our aim is to get high quality gas to you safely at competitive rates.”
Powergas was originally formed to address the severe energy and electricity challenges in Nigeria. Plagued with a limited gas pipeline infrastructure, unreliable grid connected power and expensive, environmentally polluting diesel standby power generation, Powergas’ clean and competitive ‘virtual pipeline’ offering provides natural gas to clients who are not connected to the pipeline.
Powergas operates three compression plants around Nigeria, delivering clean and cost effective energy to six states both in the west and eastern regions of the nation. An additional two compression stations are planned for 2017, spreading Powergas’ reach in over 13 states and more than 27 major cities across Nigeria, as well as capacity expansion at existing mother stations to meet demand for natural gas.
In the past six years of operations, Powergas has proudly had a 100 per cent positive safety record while conducting over 60,000 CNG deliveries.

Source: Trending news today

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