Mini refineries show way out of Nigeria’s 90% fuel import dependence

Nigeria’s four crumbling state refineries have continued to under perform, leading to higher annual fuel-import bill and export of jobs, which could be reversed by creating an environment that enables private sector driven mini refineries.

There are currently 40 modular refineries registered, 10 of which are in advanced stages of development and could be producing fuel as early as next year. The two leading projects of about 17,000 barrels a day each “have really started work,” Ibe Kachikwu, minister of state for petroleum said in an interview with Bloomberg.

Small refineries operate in other parts of the world, including in China and Iraq, producing gasoline and diesel for the local market. They typically are not very complex plants, and because of their size, are considered to be less efficient. Modules that make up the plants are designed and built in a warehouse and shipped to Nigeria. The advantage of modular refineries is that they can often be put together 12 months faster than a conventional one.

Nigeria imports 90 percent of its oil products and fuel import bill of $7 billion even as it exports large volumes of crude. Seven months to end of his tenure, Kachikwu is still talking about getting the country’s refineries working again. At the ground breaking ceremony of 5,000 barrels per day modular refinery in Imo State on October 3, Kachikwu was quoted as promising that the government is committed to making the country’s refineries functional again by the end of 2019.

BusinessDay reported November 1, 2017 that Akwa Ibom, Delta and Bayelsa were supporting modular refining ventures by local investors. The construction of a $50m modular refinery is in progress in Akwa Ibom state. Delta’s 20,000 bpd modular refinery is being planned and the $120 million Rehoboth’s 60,000 bpd capacity modular refinery supported by the Bayelsa state government is roaring to take off. Conservative estimates put these three projects at over $200m.

However, Joe Attueyi, CEO of Rehoboth Refinery told BusinessDay there is no local bank that can provide guarantee for loans to kick start modular refineries running into millions of dollars. Hence they are counting on foreign development banks like US and China Exim banks among others but they require Federal Government guarantees.

“Our view is that only the Federal Government really, using one of its numerous agencies either the local content board, Bank of Industry, Central Bank of Nigeria (CBN) scheme that can break that logjam, that fundamentally are what incentives are,” Attueyi said.