A major intervention initiative which was initiated during the immediate past administration is now crippling investment entered into by a number of investors in the Modular refinery space.
The absence of the Investment Fund in addition to absence of crude supply arrangement has further frustrated the Modular refinery operators.
LEADERSHIP reports that a critical meeting is being proposed between the Minister of State for Petroleum Resources (Oil) Heineken Lokpobiri, and the Modular Refinery operators with the aim of resolving crude supply to them in local currency.
The venue of the proposed meeting was not revealed by our source but the meeting will conclude discussion on naira sale of crude to operators.
But investigations by LEADERSHIP shows that the Central Bank of Nigeria (CBN) may have jettisoned a proposed establishment of Refinery Development Fund that was initiated to facilitate construction of such facilities across the country.
Our Correspondent reports that the Crude Oil Refinery-owners Association of Nigeria (CORAN), has 15 members whose refineries are in various states of development.
Our findings shows that of the 15 only 5 are close to peak production while the other 10 are still under construction and lacking capacity to access funding.
It is also understood that if the 15 refineries begin production total output would be close to 120,000 barrels a day generating over 2 million jobs.
It is not clear about the fate of the Fund which the government and operators agreed to be domiciled with the CBN.
The 10 refineries are not only looking to borrow funds after spending close to $20 million to reach their present development stage but are also struggling to negotiate crude supply agreement.
Three out of the 5 refineries, namely Waltersmith, OPAC and Edo refineries are the only facilities that have overcome major challenges while the remaining 2 are affected by non crude supply locally.
It would be recalled that the Federal Government and Crude Oil Producers in the country have committed to a sustainable supply of crude oil to Nigerian refineries under a market determined pricing system.
The producers under the aegis of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce Industry (LCCI) at the instance of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) agreed to concede to a framework that would be mutually beneficial with a focus on ensuring that the local refineries are not strangulated with off-the-curve prices.
The parties made the commitment at a virtual meeting convened by the Commission Chief Executive, Engr. Gbenga Komolafe, with the OPTS on status review of the Framework for Seamless Operationalisation of Domestic Crude Oil Supply Obligation Template last month.
The meeting was part of efforts to effectively implement key sections of the Petroleum Industry Act, especially the aspect of pricing and crude supply to the domestic refineries.
Engr. Komolafe said President Bola Ahmed Tinubu, is fully committed to providing a level playing ground for producers and refiners to do business in the industry.
He said there is need to have a rule of engagement to ensure that the pricing model from the oil producers is not seen to be strangulating the domestic refineries. He directed producers and refiners to henceforth provide the regulator with cargo price quote on crude supply and delivery to effectively monitor and regulate transactions among parties. “We need to have the price quotes on a monthly basis” he directed.
The Domestic Crude Oil Supply Obligation (DCOSO) has a convergence with the nation’s energy security.
The NURPC boss said his administration is re-engineering its regulatory processes. “We allow all our processes to be transparent. While the Federal Government targets implementation of the regulation, all parties must concede to the rules of engagement as a guide for operation” he said
The regulator said it is committed to driving the issue of willing buyer/willing seller. “We need to discuss pricing especially as parties have committed to respecting their domestic crude oil obligation. For us as the regulator, we don’t want the upstream sector to be operated sub-optimally through cost under-recovery. So, the regulator is very alive to that. In crude pricing, we will never allow price strangulation to dis-incentivize our domestic refining capacity optimization.
The regulator does not support cost under-recovery in the upstream sector, and we will continue to work to ensure that crude supply profiteering as a negative factor that can strangulate our domestic refining capacity optimization is disallowed.”
The CCE further stated that “NUPRC is truly committed to attracting needed investments to boost upstream development and optimization of our hydrocarbon resources just as we want sustainability of domestic energy supply in the midstream and downstream sector.”
The spokesman of the CORAN, Eche Idoko, confirmed to our Correspondent that investors are at the moment struggling to get crude supply to sustain operations.
Idoko, said the proposed Refinery Development Fund has been a major set back to the sector and urged the present administration to revisit the initiative and called on the CBN to ensure its facilitation.
Meanwhile the CORAN is set to evaluate the investment landscape and operational viability of refinery businesses as Nigeria transitions towards a deregulated downstream oil market.
The Association is set to hold the inaugural edition of the Nigerian Crude Oil Refining Summit scheduled for October 7th and 8th, at the Eko Hotel & Suites, Lagos.
This critical event, themed “Making Nigeria a Net Exporter of Petroleum Products,” comes at a crucial time for the Nigerian oil industry as the nation navigates the opportunities and challenges presented by the downstream oil deregulation.
The summit aims to provide a comprehensive platform for discussing the significant transformations within Nigeria’s oil sector.
As the country transitions towards a deregulated downstream oil market, there is a pressing need to evaluate the investment landscape and operational viability of refinery businesses.
This deregulation is expected to cultivate a competitive market environment, attract foreign investments, and boost the operational efficiency of local refineries.
“This summit is a vital step in our journey to not only meet domestic demand but also position Nigeria as a leading exporter of petroleum products. We are excited to bring together industry experts, policymakers, and investors to collaboratively explore and address the challenges and opportunities that lie ahead,” said Mr. Momoh Jimah Oyarekhua, CORAN.
The summit will highlight the importance of creating a stable and transparent regulatory framework that encourages investment while protecting consumer interests and at the same time promoting collaboration between regulatory authorities, crude oil producers, and refinery operators to ensure a steady supply of feedstock at competitive prices, thereby supporting sustainable refining operations
According to CORAN, in light of the global shift towards cleaner energy and sustainable practices, the summit will also address the need for Nigeria to adopt advanced technologies, enhance local content, and align with global best practices. These strategies are essential for the country’s refineries to thrive in an evolving energy landscape and to achieve the goal of becoming a net exporter of petroleum products.
“Our mission at CORAN is to empower Nigeria’s refinery sector to reach its full potential. By fostering collaboration and innovation, we aim to transform challenges into opportunities, driving economic growth and energy independence for our nation,” Oyarekhua said.
The Nigerian Crude Oil Refining Summit 2024 will feature keynote speeches, panel discussions, and networking opportunities with key stakeholders, including government officials, industry leaders, and international investors. Attendees will have the chance to engage in in-depth discussions about the future of Nigeria’s refinery business and explore collaborative approaches to overcoming industry challenges.
The Crude Oil Refinery-owners Association of Nigeria (CORAN) is dedicated to advancing the interests of Nigeria’s refinery owners and operators. CORAN advocates for policies that promote investment and growth in the oil refining sector, ensuring the industry’s sustainability and its contribution to Nigeria’s economic development.
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