Oyarekhua: Inadequate Supply of Crude Oil, Threat to Modular Refineries

Crude Oil Refineries Owner’s Association of Nigeria (CORAN) through its chairman, Mr. Momoh Oyarekhua, has bemoaned the continued failure of responsible agencies to supply its members with crude to run its operations in Nigeria saying such actions are capable of destroying its members’ investments while stifling growth in the sector

Mr. Oyarekhua made the observation during an exclusive interview on Channels TV Business Morning show on Monday where he shed light on issues bordering on the removal of fuel subsidy and how Nigeria can achieve optimal production and supply of required oil & gas products for the country, locally without depending on importation.

He pointed out that the issues raised regarding the capabilities of the modular refineries were needless especially the claim that the modular refineries cannot sufficiently offer products to bridge the existing huge gaps in the market.

He expressed unwavering belief in the installed capacities of the refineries to contribute significantly to solving Nigeria’s energy crisis if the government would supply sufficient crude oil to them.

He stated that modular refineries were important for the country hence operating licenses were issued and it was expected that their operation would improve the Nigerian economy and guarantee energy security.

Oyarekhua emphasized that, while the NNPC’s comments about the viability of their operations were necessary, it does not lessen the potential of modular refineries to address critical difficulties confronting Nigeria’s oil and gas sector which is, according to him, the reason why licenses were issued by the government in the first instance.

He said “We at the Crude Oil Refinery Association of Nigeria (CORAN) are active operators in this arena, and we have witnessed the economic benefits that modular refinery operations may provide, such as subsidy elimination.

“What modular refineries do in this space is to locate themselves near the point of production, so eliminating the cost of transporting petroleum overseas, bringing it back, and the cost of the intermediaries who profit from selling these products. As a result, Nigeria might benefit from modular refineries by lowering costs and making products more accessible.

“Operating modular refineries in Nigeria would solve the difficulties of subsidy, the incremental value of PMS, intermediaries’ expenses, petroleum product theft, and pipeline breakages, therefore generating gainful employment and improving the country’s petroleum product security.

He went further to posit that modular refineries will eliminate terminal and port costs, charges which put together contributes to higher prices, including international traders’ and suppliers’ margin of imported products.

In response to concerns regarding modular refineries’ limited refining capacity, Mr. Oyarekhua highlighted that, whereas traditional refineries have refining capacities of 30’000bpd and higher, modular refineries have refining capacities of less than 30’000bpd and that cumulatively all the modular refineries can provide refining capacity equivalent or above one single conventional refinery.

He said that it is worth noting that modular refineries may not be capable of handling enormous amounts on their own, but their strength resides in their combined effect which ultimately provides a pool of available products for their entire country.

“When many modular refineries are strategically installed across the country, they compete and considerably contribute to Nigeria’s refining capacity, lowering the need for imports and boosting energy security.

“As a result, we will save the foreign exchange that is now being utilized to bring petroleum goods into the country, which is also putting excessive pressure on our foreign exchange. And, if you look at some of the countries outside of Nigeria, they do have more small units of refineries as opposed to the massive refineries, which they believe helps to boost healthy competition and create alternatives in production should the larger refineries fail, their production should continue, which will drive down prices.

“This is yet another advantage of modular refineries being operational in Nigeria”

“We are convinced that modular refineries are economically viable with efficient operations, which are a direct outcome of the government’s support in crude oil supply.”

Speaking further, Mr. Oyarekhua called on the new government to intervene and guarantee the supply of crude as stipulated in the previous DPR operating laws, saying that the government is expected to supply 60% of the crude required to run a modular refinery in the country and the PIA bill provided for a domestic obligation for crude supply to the modular refineries.

He lamented that it was absurd for an oil-producing country like Nigeria to withhold crude supply from modular refineries after years of pleas, resulting in redundancy in multiple modular refineries and a general discouragement of investors who seek to enter the market.

“In our case, we did not fund our refinery entirely; we had foreign partners willing to bring equipment into the venture in exchange for equity.

“And this is what the majority of modular refinery owners are saying: if the government could guarantee the supply of crude oil to them, many modular refinery owners would be driven to do their best in return.

“For example, our company’s 10,000bpd refining capacity, which has been in operation for over a year, has not been able to refine up to 10,000bpd due to a lack of supply, but without the intervention of Pillar oil, which has been supporting us with about 1,500b, the refinery would have remained idle”.

Finally, Mr. Oyarekhua said Dangote Refinery’s entry into the market is not a threat to the modular refineries or are modular refineries a threat to Dangote refinery emphasizing that strong competition is critical for industry progress.

He noted that CORAN members are committed to its value proposition, which includes decentralized refining capabilities, local economic empowerment, and meeting specific regional demands.

“The market is unique, and as I previously stated, we have a niche market. Some refineries are located in Delta, Imo, Edo, and other places, and we take care of our catchment areas since there are states very close to us, and any products they will require will come from the modular refinery close to them because the catchment area.” He stated.