Market News

…FIDs on hold as investors reassess risks

By Adewale Sanyaolu

Nigeria’s effort to achieve self-sufficiency in petroleum refining is facing fresh hurdles, with multiple modular refinery projects delayed.

Daily Sun’s findings reveal that more than five Final Investment Decisions (FIDs) are currently in limbo, as investors tread cautiously amid concerns about the sustainability of crude supply agreements tied to the government’s naira-for-crude policy.

Some of the investors who spoke to Daily Sun in separate interviews are currently reassessing the inherent risks.

Regrettably, the flip-flop in the implementation of the naira-for-crude policy is equally a major disincentive to investment decisions, as modular refineries have been edged out of the plan, leaving the space for only big players.

Some of the proposed refineries, which are at various stages of FID discussions, are currently stuck as their partners and potential investors are unclear about the guaranteed supply of crude oil.

Speaking to Daily Sun on the development, the Publicity Secretary of the Crude Oil Refiners Association of Nigeria (CORAN), Mr. Eche Idoko, said the association is aware of the development and has been taking steps to address this industry concern.

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He said only those with oil production fields, such as Waltersmith and Aradel, could be said to be producing close to full capacity, adding that even at that, Aradel had to go into a third-party arrangement with Seplat Energy to supply part of what they need to produce at the full capacity of 11,000 barrels per day.

On the other hand, he said the naira-for-crude initiative, which ought to have provided succor for modular refineries, hasn’t helped because the Federal Government has made it clear that the initiative was for only refineries producing Premium Motor Spirit (PMS), otherwise called petrol.

“That pronouncement by the Federal Government is another way of excluding smaller refineries because the majority of our members are into the production of AGO, also known as diesel, because of the bottom line.

So, we said most of the heavy-duty vehicles use AGO just like others use petrol in order to make them see reasons why our members should benefit from the policy as well, and by extension spread it to all members. That was our argument, and that is where we are at the moment.

So, for now, I can only say that it is the Dangote Refinery that is benefitting from the naira-for-crude policy.’’

Besides attaining self-sufficiency in domestic refining of petroleum products, the CORAN scribe said the need to rake in more foreign exchange through the export of petroleum products is a major consideration that the Federal Government ought to look into by ensuring that it makes crude oil available to local refiners.

“We are looking forward to some pronouncements from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) because we recently had a forum with NMDPRA, organised by Platts, where we highlighted some of these challenges and they promised to look into it.

He lamented further that there hasn’t been much improvement in the capacity utilization of its members, as they continue to struggle with lack of access to crude oil.

For instance, he said OPAC Refinery, with a production capacity of 10,000 barrels per day, only has access to 3,000 barrels per day, which takes them to just 30 per cent of capacity, and on days when they don’t get supply, their operations are crippled.

On the other hand, he said Edo Refinery is almost completing an expansion of almost 30,000 barrels per day without any concrete crude oil supply arrangement in place.