Modular refineries owners back Dangote on crude supply, seek Tinubu’s intervention
Chigozie Amadi
Modular refineries, on Sunday, confirmed the concerns raised by Africa’s richest man, Aliko Dangote, on the fact that some mafias in the oil sector were bent at stopping in-country refining of crude oil for the production of Premium Motor Spirit, popularly called petrol, and other refined petroleum products.
Operators of modular refineries stated that they had raised this concern severally in the past but received no positive feedback, stressing that the Chairman of Dangote Petroleum Refinery just re-echoed it last week.
They spoke to our correspondent through their umbrella association, Crude Oil Refinery Owners Association of Nigeria, while reacting to Dangote’s recent revelation on the matter.
CORAN is a registered association of modular and conventional refinery companies in Nigeria. Modular refineries are simplified refineries that require significantly less capital investment than traditional full-scale refineries.
The Publicity Secretary, CORAN, Eche Idoko, said, “You can see that Dangote has raised similar concerns just as we’ve been saying all along about the mafias in the oil sector. These merchants have held the country hostage, especially in the area of our domestic petroleum products’ supply and it is crippling the whole economy.”
Last week, Dangote revealed that both local and international cartels, which he described as “mafia”, made repeated attempts to sabotage the $19bn Dangote Petroleum Refinery project located in Lagos.
“Well, I knew that there would be a fight. But I didn’t know that the mafia in oil, they are stronger than the mafia in drugs. I can tell you that. Yes, it’s a fact,” he said.
Dangote, who described himself as a fighter, said they tried all sorts to stop him. Dangote spoke at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.
“As a matter of fact during the COVID period, some of the international banks were looking forward to making sure that they push us into default of our loans so that the project will just be dead. And that didn’t happen with the help of banks like Afreximbank,” the oil firm’s boss had stated.
CORAN explained that the rise in food inflation in Nigeria could also be attributed to the hike in the pump prices of petroleum products, especially PMS, stressing that in-country refining would have helped in tackling these costs.
“The reason why this government hasn’t been able to tackle inflation, especially food inflation in the country is because of the prices of petroleum products. And you can’t keep playing the ostrich,” Idoko stated.
He added, “Yes we understand that if you are in OPEC you can decide to peg the price of your crude to OPEC standard, but in all OPEC-member countries, including Saudi Arabia, Russia, etc, they all have special arrangements internally for their people.
“They have special arrangements for domestic use of crude. Even South Africa has crude oil reserves, but where is Nigeria’s reserves? And I don’t mean oil reserves in the ground that are yet explored, but reserves that are stored somewhere.”
On June 3, 2024, The PUNCH reported that the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, declared that Nigeria would continue to comply with crude oil production adjustments approved by the Organisation of Petroleum Exporting Countries.
Lokpobiri, who spoke at the 37th OPEC and OPEC+ meeting, had explained that the oil production adjustments by the global oil cartel were meant to stabilise the market.
“Nigeria remains unwavering in its commitment to the agreements made under the Declaration of Cooperation. Our adherence to these production adjustments is crucial for maintaining market balance and supporting global efforts toward sustainable oil market stability,” the minister had stated in a statement.
But CORAN argued that the mafias in the oil sector were fighting Nigeria from attaining self-sufficiency in the domestic refining of crude oil because these persons were profiting from petroleum products’ importation into the country.
“Who is this present government talking with on issues that have to do with supply, energy efficiency and others? Who are they talking with, who are the stakeholders? We have made efforts to meet with the President severally, but every attempt was blocked. Who are those benefitting from the current situation in the country?” the association’s spokesperson stated.
Idoko added, “And if they don’t believe us because we are an association of smaller refineries, at least they have heard Dangote say it now. Who are these people fighting the self-sufficiency in the refining of petroleum products in Nigeria? The Minister of Petroleum, who is actually the President, should speak about this.
“He should tell us what is his principle. Is he looking at creating self-sufficiency in domestic refining of petroleum products or that he wants to continue the regime of petroleum importation? If it means the presidency speaking to Nigerians directly, telling us what their policy thrust is on this matter, then fine.”
Dangote had also during his speech revealed that international oil companies denied him access to their crude because they did not think he could succeed with the 650,000 barrels per day capacity refinery.
“In a system where, for 35 years, people are used to counting good money, and all of a sudden, they see that the days of counting that money have come to an end, you don’t expect them to pray for you. Of course, you expect them to fight back.
“And I think that is the process that we’re now really going through. But the truth is that, yes, the country, the sub-region, and also the continent, of sub-Saharan Africa, need this refinery. So, you expect them to fight through non-supply of crude, non-purchase of the product, but I think it’s all temporary. We’ll get there,” he added.
Dangote has been importing crude oil from the United States to get feedstock for the refinery.
The PUNCH had reported earlier this month that international financiers that were meant to fund the construction of about 20 modular refineries in Nigeria had withheld their funds due to the challenge of getting guarantees for crude oil supply to the facilities when they are completed.
Producers of crude oil in Nigeria, who are largely international oil companies, have not been able to provide guarantees to assure the financiers that crude would be supplied to the modular refineries when the plants are set to produce refined petroleum products.
Based on this, funders of the facilities have held onto their funds pending when the Federal Government would be able to impress it on IOCs to provide the guarantees required for crude oil supply to modular refiners.
Although Nigeria prides itself as the largest crude oil producer in Africa, it exports bulk of its crude to earn foreign exchange, starving domestic refiners who find it tough to source the United States dollar required for the purchase crude.
Nigeria currently has 25 licensed modular refineries. Five of them are operating and producing diesel, kerosene, black oil and naphtha. About 10 are under various stages of completion, while the others have received licences to establish.
Operators of modular refineries had told our correspondent that aside from the five that were in operation currently, the remaining plants were embattled due to the major challenge of crude oil unavailability, a development that has stalled funding from financiers.
“Only about five of our members have completed their refineries. The others are having a major challenge. This challenge is that the people who are supposed to finance them have not disbursed financing for construction because they want some level of guarantee.
“A guarantee that if they finish the refinery, they are going to get feedstock, which, of course, is crude oil,” Idoko had stated.
Efforts to get the Nigerian Upstream Petroleum Regulatory Commission, on Sunday, to speak on the concerns raised by the refinery operators were not successful.
The spokesperson of the commission, Olaide Shonola, could not be reached, as her number was not connecting, while she had yet to respond to a text message sent to her on the subject up till when this report was filed.
However, while responding to the demand for a Conditional Term Sheet by the financiers of modular refiners earlier, the commission stated that it received figures on the production capacities of indigenous refineries and had presented them to crude oil producers to make the commodity available.
NUPRC’s Chief Executive Officer, Gbenga Komolafe, while reacting to a question by our correspondent on the matter, however, stated that the commission would not guarantee supply to refineries that had yet to come into existence.
“This still borders on the implementation of the domestic crude oil obligation. First of all let me make it clear that establishing a refinery of whatever capacity, whether it is a modular refinery or the bigger sized refinery, is a commercial engagement. So the commission can’t come in to give any form of guarantee. I need to make that clear.
“However, the regulator will only implement the provisions of the PIA given that all the regulatory activities of the commission are expected to be in compliance with the provisions of the law. So as it relates to guaranteeing feedstock to refiners, that is enshrined under section 109 of the PIA.
“And what we have just done in furtherance of that provision is that we have put in place a regulation that has to do with domestic crude oil obligation. So in the implementation of that provision, what we do is that we receive the figures on the domestic refining capacity from the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
“And once we receive that, our development and production department factors the numbers against the capacities of the various producers within the upstream sector and makes it obligatory for them (crude producers) to meet those numbers, thereby guaranteeing that volume of supply to existing licensed and operating refineries, not refineries that have not come into existence,” Komolafe had explained.
The NUPRC boss had stressed that “we do not guarantee crude for financing of refineries that have not come into existence.”
Recall that the commission recently promised to ensure that crude oil was supplied to domestic refiners
It stated that in compliance with the provisions of Section 109(2) of the Petroleum Industry Act 2021, the NUPRC in a landmark move, had developed a template guiding the activities for Domestic Crude Oil Supply Obligation.
“The commission in conjunction with relevant stakeholders from NNPC Upstream Investment Management Services, representatives of Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery came up with the template for the buy-in of all.
“This is in a bid to foster a seamless implementation of the DCSO and ensure consistent supply of crude oil to domestic refineries,” Komolafe had stated.
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