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How investors stall govt’s drive for private refineries…

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Like a failed dream, the strategic plan to mobilise private interest in local crude oil refining may have run into a brick wall.

 

The licencees for private refineries have recoiled into their respective shells, seeking other opportunities in the oil and gas sector.

 

The Federal Government has since 2002 to date, issued over 39 licences to private operators to establish refineries of various capacities in the country, to lift the profile of local refining capacity from the current 445,000 barrels per day (bpd), a result of ill-maintained low capacity utilisation of four facilities owned by the government.

 

But so far, only the Niger Delta Petroleum Resources, located in Ogbelle, Rivers State, with Dr. Layi Fatona as the promoter, has commenced production of 1,000bpd of refined oil.  Also, Orient Petroleum Resources Plc has completed the detailed engineering, sourced the modules of its refinery and completed site acquisition, perimeter and topographical surveys, geotechnical, geological and hydro-geological surveys, site civil engineering works prior to construction of internal roads and reinforced concrete plinths for installation of refinery equipment.  But it is yet to start production.

 

Indeed, virtually all the licensed operators had serially defaulted on their respective deadlines to commence production, leading to licence withdrawals on their part, with even increased reluctance for mandate renewals as stipulated in the enabling law.

 

Factors cited as challenges for the takeoff of the various projects by the licensees included huge upfront start-up fee; lack of sovereign guarantees to secure cheaper loans from the international finance market; and uncertainty over guarantee of free market pricing policy.

 

Despite government’s reconsideration of the start-up fee in favour of the licencees, the investors still failed to show serious commitment, thereby truncating initial objective of the private refineries’ initiative.

 

However, a source at the Department of Petroleum Resources (DPR) told The Guardian that the agency had already processed new applications for private refineries and that they were now awaiting approval from the Ministry of Petroleum Resources.

 

The source said that the new applicants were depot owners who may not have the challenges of bank guarantees.

 

The source added that the 39 licences would have been able to process over 2.654 million barrels per day, which would have reduced the country’s dependence on fuel importation.

 

For instance, Amakpe Refinery Plant, one of the companies that got a  licence was configured to process 6,000bpd of crude oil from Qua Iboe.

 

The existing four local refineries (445,000 bpd capacity) only contributed about four to 20 per cent in the past five years to the national Premium Motor Spirit (PMS) consumption in the country.

 

The Guardian’s enquiries revealed that in May 2002, the Department of Petroleum Resources (DPR) granted licences to 18 private refineries to operate out of which only one was able to come on stream.

 

The successful applicants were: Akwa Ibom Refining and Petrochemicals Limited, Badagry Petroleum Refinery Limited, Clean Waters Refinery, Ilaje Refinery and Petrochemicals, Niger Delta Refinery and Petrochemical Company Limited, NSP Refineries and Oil Services Limited, Ode-Aye Refinery Limited, and Orient Petroleum Resources Limited.

 

Others were Owena Oil and Gas Limited, Rivgas Petroleum and Energy Limited, Sapele Petroleum Limited, Southland Associates Limited, and South-West Refineries and Petrochemical Company, Starex Petroleum Refinery Limited, The Chasewood Consortium, Tonwei Refinery, Total Support Refineries, and Union Atlantic Petroleum Limited.

 

As at 2010, Amakpe International Refinery Incorporated with capacity to process 12,000 bpd got its approval to operate revalidated in 2007, but got stuck due to political reasons in Akwa Ibom State.

 

Resources Petroleum and Petrochemicals International Incorporated with capacity to process 100,000bpd, located in Ikot Abasi, Akwa Ibom State, also got its Approval To Construct (ATC) revalidated in 2010. Sapele Petroleum Limited with 100,000bpd located in Sapele, Delta State, also got its ATC revalidated in 2010. Rehoboth Natural Resources Limited, with capacity to process 12,000bpd got permission to operate in 2008, but applied to convert ATC to Licence To Establish (LTE) as 2010.

 

Amexum Corporation with capacity to produce 100,000bpd, complained of lack of financing which stalled the project’s takeoff. Antonio Oil, located in Ogun State, with capacity to produce 27,000bpd, commenced civil and structural works on its site, but was unable to go farther.

 

Gasoline Associates International Limited Refinery, located in Ipokia Ogun State, with 100,000bpd capacity got its LTC granted and was also unable to continue.

 

Ologbo Refinery Company Nigeria Limited, located in Ologbo, Edo State, with 12,000bpd capacity, completed its engineering package, but its licence was not renewed by DPR and could therefore not go further.

 

On the upfront start-up fee, DPR sources noted that ‘ultimately, the government reconsidered and accordingly reduced the fee in line with investors’ expectation; in spite of this concession, the investors still failed to show serious commitment; raising funds locally was obviously a problem, as bank interest rates of 20 per cent and above would make borrowing for such a project a suicidal mission!

 

‘On the other hand, much cheaper foreign loans required certain sovereign guarantees that government did not consider necessary.  Other investors demanded a free market pricing policy that eliminated subsidies, as the uncertainty and time lag related to subsidy refunds could jeopardise the ultimate  success of such ventures.’

 

When it became evident to DPR in 2007 that the majority of the 18 oil refinery licencees in Nigeria did not have either the financial resources or engineering expertise or the zeal to follow DPR’s specific guidelines,  it  cancelled all the outstanding licences and only a few reapplied under more strenuous guidelines.

 

The source said that when it became evident that the investors were complaining of the stringent conditions, the DPR removed the statutory $1million performance deposit required from investors, for the establishment of private refineries in Nigeria.

 

He said: ‘The government had realised that the deposit requirement was a disincentive to investors who were willing to establish refineries in the country. The requirement, which is contained in the ‘Guidelines for the establishment of hydrocarbon processing plant (Refinery & Petrochemicals) in Nigeria,’ states that a $1million refundable deposit is to be made by an investor for every 10,000bpd refinery capacity to be established.

 

He stated that this move was part of government’s strategy to encourage private sector participation in crude oil refining and also her desire to locally refine 50 per cent or more of Nigeria ‘s crude oil.

 

The DPR revoked earlier licences issued to investors in 2004, citing lack of credible milestones by the companies, and introduced the 2007 revised guidelines, which contained the $1million refundable deposit requirement.

 

He added that the government had reviewed the law that guides the establishment of private refineries and was now awaiting the final approval.

 

On the process of getting the licence, the DPR source stated: ‘The first stage is to get a licence to establish. The next stage is the submission of the basic engineering design package of the plants to the DPR at the completion of which an approval to construct would be granted to only those who meet the specifications. Those firms given the licences usually have up to two years to meet the requirements of the second stage, or lose the preliminary licences.

 

‘Successful applicants are expected to meet the necessary requirements under this stage within two years of issuance of the preliminary licences. Companies that fail to meet the above requirements within the stipulated period will automatically lose the preliminary licences.’

 

The last stage of approval is a licence to operate a future plant, which would affect only companies that successfully go through the second state.

 

He said that over the years, many of the applicants got stuck at different stages of the processes of the projects and their licences were withdrawn.

 

A top official of an International Oil Company (IOC), who spoke on the condition  of anonymity, tied  the company’s participation in investing in private refinery to the quick deregulation of the downstream sector.

 

He said that a deregulation policy was the best solution to petroleum scarcity in the country, stating that it was the only condition on which the company would invest in building private refineries in the country.

 

According to the source, ‘we believe that deregulation is the best way forward for the oil and gas industry and the country because if the sector is deregulated, private operators would be able to build new refineries and there would be healthy competition.

 

‘We cannot go into refining because the business environment is not conducive right now.  The banks are not ready to give out loans for such investment and we cannot approach our shareholders. There are so many loopholes.  We do not know the quantity of fuel being brought into this country. Smugglers are smuggling fuel into this country on daily basis and how do you think we would be able to make it? It will not be easy competing with big refineries outside the country. Our company is selling off some of its refineries around the world because of its inability to compete.’

 

He stressed that if the issue of subsidy continued to drag, it would be difficult for practitioners in the industry to build a new refinery.

 

He said the company would continue to operate as a profitable and resilient organisation, able to compete effectively in a fully deregulated downstream industry.

 

Reacting to this development, the President, National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr. Herbert Ajayi, called for an incisive review of the factors that made those previously granted licences for refineries not to start operations, with a view to putting right whatever could have been wrong.

 

‘All private operators previously granted licences for refineries should be re-invited to partner the government and be assured of the supply of feed-stock of crude oil, the refusal of which, NACCIMA understands, aborted their intervention,’ it urged.

 

He stressed the need for government to look critically into the law that abolishes illegal refineries.

 

He said: ‘NACCIMA believes if these illegal refineries are made legal and is effectively done, it would boost local supply capacity of petroleum products, create jobs and invariably may also reduce prices when competition fully takes its course.

 

‘We have watched with dismay the continuous destruction of small refineries classified by government as illegal in the country. We believe that the action of government/Ministry of Petroleum Resources is not the best given the current problem confronting the country in the petroleum sector; as it would further compound the sector’s supply chain of petroleum products. To ensure strict compliance and standards with the laid down criteria by the operators of the small (but now legal) refineries, there is the need for the DPR to assume effective supervisory role,’ he said. (Guardian)

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Extortion: Customs disciplines employee, keeps mum on officers indicted for multi-billion naira corruption.!

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The Nigerian Customs Service (NCS) said on Monday that it is taking disciplinary action against one of its personnel for alleged N500,000 extortion.

The customs officer, Ibrahim Suleiman, was said to have extorted N500,000 from a car buyer named Muhammad Ahmad along Mokwa-Jebba Road in Niger State on 22 February.

In a statement posted on its verified Facebook Page, the customs noted that the Comptroller, Federal Operations Unit Zone ‘B’ Kaduna, Dalha Chedi, handed over the accused officer to the Assistant Provost Marshal (APM) Customs Police Unit, Kaduna, on Monday.

Mr Chedi said he had directed the Customs Police Unit responsible for enforcing discipline in the service to conduct further interrogation.

He added that the complainant has been invited to assist in the investigation.

“This unprofessional and ungodly act will not be condoned. A thorough investigation has just commenced by this handing over to unravel the facts surrounding the allegation. The outcome shall be made public to serve as a deterrent to others,” he was quoted as saying.

“We are deeply concerned and assure the general public that the matter will be treated with the deserved vigour, decisiveness and transparency.”

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Oba Otudeko, Aig-Imokhuede, NGX Group honour Ogunbanjo’s legacy

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Prominent figures from the Nigerian business landscape came together to pay tribute to the late Bamofin Abimbola Ogunbanjo during an Afternoon of Tributes and Closing Gong Ceremony, organized by the Nigerian Exchange Group in collaboration with Coronation Group.  

The event, held on Tuesday, February 27, 2024, served as a homage to the enduring legacy of the luminary. 

 Among the distinguished speakers who graced the occasion were Dr Oba Otudeko, Chairman of Honeywell Group and Past President of the Nigerian Stock Exchange (NSE); Mr Aigboje Aig-Imuokhuede, Chairman of Coronation Group; Alhaji (Dr) Umaru Kwairanga, Chairman of the Nigerian Exchange Group; and Mr Temi Popoola, Group Chief Executive Officer of NGX Group, alongside other notable personalities. 

What the stakeholders said about Ogunbanjo  

In his opening remarks, Alhaji (Dr) Umaru Kwairanga encapsulated the essence of Bamofin Ogunbanjo’s profound impact, emphasizing his pivotal role in steering the successful completion of the demutualization process within the Group.  

Kwairanga hailed Ogunbanjo as not merely a leader, but a beacon of light and a guiding force within the community, underscoring his instrumental contribution to reshaping the Group’s trajectory in the West African sub-region. 

 Mr Aigboje Aig-Imuokhuede, Chairman of Coronation Group, reflected on the unparalleled commitment demonstrated by Ogunbanjo throughout the demutualization process, extolling his remarkable service to the industry.  

  • “You served the world in a way only few could do,” Aig-Imuokhuede remarked, paying homage to Ogunbanjo’s indelible legacy and wishing him eternal peace. 

 Temi Popoola, Group CEO of NGX Group, echoed the sentiments of admiration and gratitude, highlighting Ogunbanjo’s unwavering dedication to the exchange’s success and seamless leadership transitions. 

 Dr. Oba Otudeko, past president of The Nigerian Stock Exchange (NSE), shared poignant recollections of Ogunbanjo, portraying him as an adroit gentleman whose simplicity, brilliance, and doggedness were instrumental during the demutualization process. 

 Reflecting on Ogunbanjo’s legacy, Mr Abubakar Mahmoud, SAN, former Chairman of NGX, lauded his patriotism and commitment to national development, while Mr Olusola Adeosun, President and Chairman of Council at the Chartered Institute of Stockbrokers, expressed deep sorrow at the loss, emphasizing Ogunbanjo’s magnetic personality and profound impact on the institute. 

 Mr. Sam Onukwue, Chairman of the Association of Securities Dealers, hailed Ogunbanjo’s transformative leadership and global perspective, crediting his strong legal acumen and industry experience in navigating the exchange’s restructuring. 

 Echoing sentiments of admiration, Mr. Darren Bennett-Voci, CEO of Beta Glass Plc, paid tribute to Ogunbanjo’s leadership and professionalism, crediting his strategic guidance during challenging times. 

 Erelu Angela Adebayo, former Chairperson of NGX Real Estate, fondly recalled Ogunbanjo’s unwavering commitment to Nigeria’s progress, portraying him as a patriot who left an indelible mark on the industry. 

 

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Qatar seals LNG deals Nigeria once sought

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Qatar is courting foreign investors to expand its gas expansion project, and the energy companies falling over themselves are the same ones that turned their nose up at Nigeria’s invitation to invest in its liquefied natural gas (LNG) plants.

BusinessDay findings showed Qatar is already one of the world’s largest suppliers of LNG — gas cooled into liquid form so that it can be piped onto ships for export – and it is making plans to further increase its LNG production capacity following the discovery of vast new gas reserves.

Qatar announced new plans to expand output from the world’s biggest natural gas field, saying it will boost capacity to 142 million tonnes per annum (mtpa) before 2030, according to Saad Sherida al-Kaabi, Qatar’s energy minister.

The new North Field expansion, named North Field West, will add a further 16 million tonnes of LNG per year to existing expansion plans, Sherida al-Kaabi said at a news conference on Sunday.

Meanwhile, Nigeria LNG Limited (NLNG), owned by the federal government of Nigeria and three international oil companies, has been on force majeure for more than 15 months.

“Recent studies have shown that the North Field contains huge additional gas quantities estimated at 240 trillion cubic feet, which raises the state of Qatar’s gas reserves from 1,760 [trillion cubic feet] to more than 2,000 trillion cubic feet,” said al-Kaabi, who also heads the state-owned company QatarEnergy.

These results “will enable us to begin developing a new LNG project from the North Field’s western sector with a production capacity of about 16 million tonnes per annum”, he said.

This will bring Qatar’s production capacity to 142 million tonnes once “the new expansion is completed before the end of this decade” – a nearly 85 percent rise from current production levels, al-Kaabi added.

The QatarEnergy chief said the firm will “immediately commence” with engineering works to ensure the expansion is completed on time.

BusinessDay’s findings showed ExxonMobil has pumped nearly $30 billion into gas projects in Qatar within long-term partnership agreements.

The US oil giant ExxonMobil has pumped nearly $30 billion into gas projects in Qatar within long-term partnership agreements, its Senior Vice President has said.

According to Peter Clarke, ExxonMobil’s senior vice president, the oil giant began investing in Qatar’s gas projects during the 1990s and that it has contributed to the development of 12 of the 14 gas facilities in the Gulf country.

“We have also invested in 27 LNG vessels to transport Qatari gas…over the past years, we have invested nearly $30 billion in major projects in Qatar…we also have important ventures with Qatar in the US, mainly Golden Pass Terminal,” Clarke told the Qatari Arabic language daily Asharq in an interview.

Contrast this with Nigeria where investors have largely been unimpressed with overtures to build new liquefaction plants.

The NLNG has seen its output decline owing to gas supply constraints, which also pose a threat to its expansion plan.

It had on October 17, 2022 declared a force majeure on product supplies from its production facilities on Bonny Island, following the declaration of force majeure by all its upstream gas suppliers.

Since the development of the NLNG, new projects have been too few and far between. e Two LNG projects in Nigeria: Olokola LNG and Brass LNG have been unable to reach a final decision by the stakeholders as investors have pulled out.

The OK LNG project was stalled because all the international oil companies (BG, Shell and Chevron) withdrew from the project, with only the Nigerian National Petroleum Company (NNPC) left.

The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Total, ConocoPhillips and Eni Group. But ConocoPhillips withdrew from the project in 2013 and has stalled since then.

“As we move into the early 2030s, there’s going be huge demand for gas from Asia, and I think QatarEnergy is squarely focused on that,” said Tom Marzec-Manser, head of gas analytics at commodity pricing and data company ICIS. Qatar has secured two huge gas supply deals with China over the past 15 months.

Last June, it agreed to sell 4mn tonnes a year of LNG to China National Petroleum Corporation for 27 years, following a similar deal with China’s Sinopec in November 2022.

Qatar’s LNG ramp-up comes amid growing demand for gas, which is set to grow by 2.5 percent, or 100 Bcm (3531 Bcf) in 2024, the International Energy agency said in its gas market report for Q1 2024.

Qatar accounted for 20 percent of LNG volumes in 2023, the Paris-based agency said in the report.

“In particular, the United States and Qatar have been driving this trend, accounting for 34 percent and 26 percent of all contracted volumes in 2023 respectively. Considering only post-FID (final investment decision) projects, these countries’ share was 21 percent and 39 percent,” the IEA said.

It is this kind of critical thinking and rigour that is absent in Nigeria’s policy formulation and execution which is scaring away investors.

 

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