By Tope Adeboboye
For years, it was an area beleaguered by restiveness among its youths. And that is understandable.
The Niger Delta produces the nations wealth, yet the area and its peoples have suffered untold deprivations. Opportunities for development were few and far between, and environmental hazards plagued the air, their farmlands and their creeks. Living in the Niger Delta seemed like a plague.
The area and its peoples have fared much better since an amnesty programme granted to armed militants in the area was introduced by the late President Umaru Musa YarAdua in 2009. The programme has succeeded largely in preventing pipeline vandalism and other violent activities consistently unleashed on oil facilities. Several young men and women have been trained in different skills in Nigeria and overseas.
But the people living in oil producing communities are not totally out of the woods yet. Unemployment has remained a major problem, and illegal refineries still dot many communities in the creeks.
The Federal Government says the establishment of modular refineries in the area would curb oil theft, illegal refineries, create more jobs and achieve fuel sufficiency. Minister of State for Petroleum Resources, Timipre Sylva said recently that creating jobs and opportunities for youths remains the best strategies to stop restiveness in the Niger Delta. He said part of his mandate is to collaborate with players in the private sector to establish oil and gas facilities, including modular refineries.
He spoke at the ground-breaking ceremony of an Energy Infrastructure Park at Okpoama in Brass Local Government Area of Bayelsa State. The facility will host a modular refinery of 2,000 barrels per day. It is the fourth under the Federal Governments plan to use modular refineries to drive the development of the region.
Sylva said modular refineries would also promote availability of petroleum products in the country, conserve foreign exchange utilisation for the importation of petroleum products, promote socio economic development in order to stop restiveness, criminal and illegal refinery activities thereby sustaining peaceful coexistence in the Niger Delta and mitigate environmental degradation associated with illegal refinery activities, crude oil theft and pipelines vandalism.
A modular refinery generally refers to a simple or complex refinery whose parts are fabricated or constructed in several component parts or units called modules. These modules can then be assembled easily to form the plant. Furthermore, they can be transported in modules across distances and put together at the location desired.
It can also commence production with a small capacity and grow its capacity over time by adding more modules. A modular refinery may therefore be composed from skid-mounted modules of small capacities, put together to achieve a refinery of even up to 100,000 barrels per stream day.
In 2016, President Buhari launched a roadmap of short and medium term priorities in the oil and gas industry tagged Seven Big Wins. ‘Refineries and Local Production Capacity’ is the fourth initiative.
The Ministry of Petroleum Resources, it was gathered, had injected equity capital funds in three modular refineries with the Waltersmith 5000 bpd modular refinery at Ibigwe, Imo State already in operation.
Others are the 12,000 bpd Hydroskimming modular refinery being constructed by Azikel Petroleum Limited at Obunagha, Gbarain, Bayelsa and the 2,500 bpd modular refinery being developed by Duport Midstream Company as part of its Energy Park in Egbokor, Edo.
The Department of Petroleum Resources (DPR), noted that more investment in modular refineries would augur well for Nigeria. The agency warned businessmen supporting illegal refining activities to channel their resources to legitimate transactions.
The Director of the DPR, Mr. Sarki Auwalu, said the agency would license more modular refineries to encourage local in-country refining. He charged private firms to consider setting up modular refineries.
He said there are proposals for 38 modular refineries with capacity ranging from 5,000 barrels per day to 30,000 barrels per day, with six conventional plants with a total capacity of 1.35 million barrels per day. He asserted that Nigeria is capable of attaining self-sufficiency in gas processing and refining, stressing that the agency was more interested in monies from royalties.
In his opinion, if a local production company like the NDPR has the capacity to produce, refine and market 11,000 barrels per day of petroleum products, other willing investors could achieve the same feat.
On January 21, President Muhammadu Buhari performed the virtual inauguration of the National Oil and Gas Excellence Centre. At the event, he spoke on the completion of the 5, 000 barrels per day Waltersmith Modular Refinery.
The refinery, located near the Ibigwe marginal field flowstation in Imo State, is the biggest commissioned modular refinery in Nigeria. The African refinery project is being developed in phases by Waltersmith Refining and Petrochemical Company. The phase one of the refinery started operations in November 2020 and is intended to reduce Nigeria’s import of petroleum products.
A senior DPR official, who doesnt want his name mentioned, spoke on the project: The Waltersmith modular refinery comprises a crude distillation unit, tank farm, and other related facilities. It is expected to deliver 271 million litres of refined petroleum products a year. The crude oil storage capacity of the refinery is approximately 60,000 barrels. There are plans for the refinery.
“The refinery is planned to be expanded in phases to have a 20,000bpd crude oil refining facility and a 25,000bpd standalone condensate refining facility taking the total processing capacity to 50,000bpd.
“The refinery receives feedstock from the Waltersmith-operated Ibigwe marginal field. The petroleum products produced in the refinery include diesel, naphtha, heavy fuel oil, and kerosene.”
In a bid to ensure the success of the project, it was learnt that President Buhari has instructed the Ministry of Petroleum Resources, DPR and the Nigerian National Petroleum Corporation (NNPC) to provide necessary support in securing oil and condensate feedstock for the second phase.
The commissioning was attended by the Imo State Governor, Hope Uzodinma while Mr Timipre Sylva, who represented President Buhari, officially unveiled the facility. In attendance also were NNPC boss, Mele Kyari, Executive Secretary, Nigerian Content Development & Monitoring Board (NCDMB) Simbi Wabote and Waltersmith chairman Abdulrazaq Isa. Commercial operations began on November 3, last year. Seplat Petroleum has a working agreement with Waltersmith on processing.
The company will build the second phase in two parts – a standalone condensate refinery with 25,000 bpd capacity expected to be completed in 2023, and another with a 20,000 bpd crude processing plant.
The Edo Modular Energy refinery is yet another successful modular refinery set to increase crude oil production from 6,000bpd) to 60,000 bpd. The project, set to commence operations between September and mid-October, is being developed by two Chinese firms; AIPCC Energy Limited and the Peiyang Chemical Equipment Company Ltd.
The first phase will produce 1,000 bpd, while the second phase will produce 6,000 bpd; with a long-term goal of producing 60,000 bpd.
It was gathered that Phase one will target a production ratio comprising 55 per cent diesel, 38 per cent fuel oil and less than 10 per cent naphtha. The company has assured that some of its products would be exported to boost foreign exchange earnings. It is believed that 80 per cent of the diesel requirement in Nigeria would be taken care of by the project.
The investment is also expected to benefit Edo people through job creation, increased revenue and ease of pressure on other refineries.
Many stakeholders believe the key objectives of the modular refinery initiative would be achieved.
But some others have expressed cynicism at the modular refinery option. They claim the profit margins in the oil and gas drilling industry are so low that most modular refineries might not be economically viable.
According to data from NYU Stern School of Business, the average net profit margin for the industry as of January 2020 was 6.8 per cent,.
Competition from shale oil, excessive supply, generous financial markets and COVID-19 pandemic also have a deleterious effect on the sector’s net profit margins.
“But there is a silver lining on the horizon for the industry in Nigeria which, among others, makes the case for modular refineries easy to argue, an oil and gas expert opined.
“Africa currently has a deficit of 87 million metric tonnes per annum between demand and refining capacity in Africa. According to the International Energy Agency, this deficit may increase to over 200 million metric tonnes by 2030. This provides very significant opportunities for installation of more refining capacity on the continent.
“Some analysts have observed that the countries in the best position to take advantage of this opportunity are those that have access to crude oil within their borders, access to a large market for the finished refined products and access to experienced personnel who can operate the assets.
Nigeria, with inadequate refining capacity, meets all the criteria, hence the opportunities for modular refineries – simple, fast to start up and usually operating at optimal capacity.
