'Why N8.1 Trillion Greenfield Refineries Suffer Set Back'

Nigerian Minister of Petroleum Resources Diezani Alison-Madueke is the subject of controversy resulting from a probe into the fuel subsidy crisis in the oil-producing West African state. Protests over the cancellation of subsidies erupted in 2012., a photo by Pan-African News Wire File Photos on Flickr.

‘Why N8.1 trillion Greenfield refineries suffer set back’

WEDNESDAY, 08 MAY 2013 21:05
FROM COLLINS OLAYINKA AND ROSELINE OKERE, HOUSTON, TEXAS BUSINESS SERVICES - BUSINESS NEWS
Nigerian Guardian

THE Federal Government has attributed the delay in the take off of Greenfields refineries to the non-deregulation of the country’s downstream sector.

The Minister of Petroleum Resources, Diezani Alison-Madueke, who made this disclosure at the opening ceremony of the Offshore Technology conference in Houston, Texas, assured that the government was working hard to ensure that it establishes investors’ confidence to achieve self-sufficiency in crude oil refining in the country.

The Federal Government had signed a N51.8 billion (N8.1 trillion) Memorandum of Understanding (MoU) with various local and international investors between 2011 and 2012 to build 10 refineries across the country, which is expected to save the country from fuel importation.

But the Federal Government has not been able to achieve much progress, as some investors have not been able to meet deadlines and progress to the next level of negotiation.

The minister, who was represented by the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Andrew Yakubu, said that while the government is making effort to ensure that the four refineries in the country are producing up to full capacity, it is also working hard to ensure that the proposed Greenfield refineries are up and running.

She stated: “We must get the business model right. There are quite a number of issues that are wrong. No investors will want to invest in a regulated environment. Today, the petroleum product market is regulated and there are quite a number of things that are needed to be done to ensure that the business environment is conducive enough for investors to invest. The business models must be right. We are working hard to establish investors’ confidence in the Greenfield refineries.

“There are four refineries with a combined nameplate capacity of 445,000 barrels per day built in Kaduna, Port Harcourt and Warri. We have LNG plant with installed capacity of 22 million tonnes per annum. The country is currently implementing two additional LNG projects, which will give a total in-country capacity of over 40 million tonnes per annum when completed. The long-term plan is for Nigeria to become the gas hub of the sub-region”, she said.

According to her, The history of oil and gas exploration is replete with how new paradigms have successfully created new opportunities which hitherto were thought to be non-existent. The West African Transform margin plays an excellent example of this. Prior to its emergence as a hotbed of exploration activities, the West Africa oil province was dominated by onshore and shallow water production from Nigeria, Gabon, Angola and to some extent Equatorial Guinea”.

She said that Nigeria has over 35 billion barrels of proven oil reserves and 187 trillion Cubic Feet (TCF) of proven gas reserves with plans to increase it in the next few years.

Diezani disclosed that the current crude oil and condensate production runs at over 2.4 million barrels per day and gas of over eight billion cubic feet per day day.

“It is projected that based on current industry trend crude oil and gas production would rise to over three million barrels per day and 10 billion cubic feet per day by 2015.

Diezani said that governments within the West African region including Nigeria have embarked on both developmental and economic projects aimed at realizing the benefits of hydrocarbons discovery.

She said: “In Nigeria, for instance, on-going initiatives of government in the sector are primarily geared at ensuring positive impact on the economy. There is plan for growth in crude oil reserves and expansion in production capacity; we are repositioning gas for re-industrialisation and stimulation of the economy, regional and export penetration; revitalization of existing downstream capacities and additional capacity to support energy needs and reform of key institutions to anchor the growth aspirations of the industry”.

To create an enabling environment for investment, she noted that the government was pursuing a reform agenda that will ensure transparency and accountability; good governance practices and processes; reinforcement of linkages between the oil and gas industry and other sectors of the Nigerian economy; establishment of a framework that protects the interest of all stakeholders; the development of a modern petroleum law that will govern the industry; provision of adequate security through the adoption of a five prong approach of law enforcement, amnesty and rehabilitation, infrastructural development, economic empowerment and stimulations of investment inflow into the regions.

She explained that there are numerous opportunities for investment in the Nigeria oil and gas sector ranging from gas processing/distribution/utilization to petroleum products supply and distribution, including ancillary support services.

Diezani said that the draft Petroleum Industry Bill (PIB) was designed to increase exploration and development activities in the region by creating more competitive environment for both independents and the major oil companies.

This addition, she noted, would attract more investment into the sector, adding that Nigeria will continue to play a very significant role in the global oil and gas energy supply mix post shale oil and gas discoveries in the world.