Economics, technical skill, key concerns in FG’s move to legitimise illegal refineries
The purported move to convert illegal crude oil refiners in the creeks of the Niger Delta into a structured modular refining operation by the Federal Government has not factored in concerns about sustainability, technical competence and economics of the operation, experts say.
Yemi Osinbajo, Nigeria’s acting president during a visit to Rivers State on February 14, said the Federal Government was now willing to work with illegal refiners instead of destroying their operations.
However, there are unresolved issues in the plan, prominent of which is where to source feedstock for the refinery operation as the current method thrives on stolen crude through vandalised pipelines.
Experts question also the technical competence of these operators as illegal refiners waste other important derivatives in their makeshift operation which also spare little thought for the environment, hence their lack of technical competence may impede plans to structure their activity into a complex modular operation.
“These guys (illegal refiners) are used to bunkering oil pipelines and sourcing their crude oil illegally then they operate from free sites located in the bush. They have really low cost operations and they still sell their diesel blend (called Asari diesel) for just under the price of the regular diesel,” Dolapo Oni, head of energy research at Ecobank tells BusinessDay.
“Moving them to a structure environment where they buy crude oil or have to refine to certain specifications maybe a challenge,”
Business costs such sourcing regulatory approvals, building infrastructure, hiring technical personnel and cost associated with disposal of wastes among others elude their operation.
Chuks Nwani, energy lawyer and vice president, Powerhouse International Ltd, an energy resources firm, agrees with Oni’s position.
“Refining is a chemical process that produces varieties of petroleum products including petrochemicals that are used by our industries to produce other useful products.
“The illegal refineries are surviving because the crude is stolen. If they are actually buying that crude, they cannot be in business because it is not sustainable and besides it has several environmental issues,” Nwani said.
But Nigeria would rather have an environment that is amenable to crude oil production as the stakes are high.
Crude prices that have witnessed depression for much of 2016 inched south after an OPEC output cut deal saw prices climb above $50.
Nigeria, dependent on crude earnings for over 70 percent of its spending, it’s 2017 budget is based on meeting production output of 2.2million barrels per day to rake in N1.9 trillion revenue.
With an economy in recession where inflation rates climbed to 18.72 percent in January based on figures from the national statistics office, Nigeria will glad do a deal with the devil to restrain an economy merrily sliding downhill.
This is also the unspoken intent of calls made by many analysts that local ingenuity should be cultivated rather than criminalised.
Four years ago, an intensive clampdown on their operations by the Joint Task Force (JTF) saw the destruction of 748 illegal refineries.
The four-month long operation witnessed the arrest of 498 suspects and grounding of 545 assorted boats including 26 barges and 18 vessels illustrating the size of an underground industry.
Experts also suggest how a possible integration could work.
“I think if we are going to grant them crude oil from the domestic crude allocation to refineries and guarantee offtake, if they can produce diesel up to a manageable spec, then we can make something of sort,” Oni says.
Chuks Nwani suggests, “The operators of the Illegal refinery be identified and sent for foreign training in petroleum refining, while the government should do a full deregulation in our petroleum sector to allow investors build refineries which will absorb these people upon completion of their training.”
A full deregulation of Nigeria’s petroleum sector does not still rank high on the government’s priority based on fears it may adversely affect the weak and vulnerable -who are now on the losing end of current economic policies.