Experts in the oil and gas sector have appealed to the Federal Government to provide non- cash guarantees for developers of modular refineries, to attract both foreign and local investors.
The experts made the appeal in separate interviews in Lagos on Saturday, against the backdrop of funding challenges facing construction of modular refineries in the country.
Retired Capt. Emmanuel Iheanacho, Chairman, Eko Petrochemical Refinery, said government should be willing to provide non-cash guarantees, frequently demanded as comfort by Engineering Procurement and Construction (EPC).
Iheanacho urged government to enter into a strategic partnership agreement with modular refinery developers, who have attained the Authority-To-Construct (AOC) approval.
Iheanacho, who is also the Chairman, Integrated Oil and Gas Ltd., urged government to engage banks in financing the building of modular refineries in the country.
According to him, the demand for locally refined products has been on the increase in the last few years.
Iheanacho said that building a modular refinery of about 1,000 barrel capacity costs over $1.2 billion.
“Building a modular refinery is not easy, apart from site your refinery beside the sea, one can as well site it near a marginal oil field.
“Finance is the major reason why most investors in the modular refineries abandon it.
“No bank is ready to give loan to investors in modular refineries that is why it is just only two out of 40 investors giving licences that were able to build it.
“Government should engage the banks to provide the finance needed for building modular refineries,” he said.
According him, modular refineries will enable more efficient economic performance by boosting the country’s Forex earnings.
“It will add greater value to our export oil trade, fuller employment through regular and more specialised job opportunities that would be created and many more positive impacts, ” he noted.
Iheanacho said there were several challenges facing the potential Nigerian modular refinery investor, which included
articulating the market report and general feasibility of the proposed development.
He said others relate specifically to the nature of the refining activity, which is of great technical, chemical and engineering complexity.
Iheanacho said it therefore, requires a commensurate level of high engineering skill and capacity in the conception and articulation of the refinery development proposals.
“These professional skills and competence are not always easily available or accessible to the intending local investor in modular refineries.
“There is also the challenges related to finding land situated at an appropriate location relative to the intended utility as the address for a refining plant.
“Refineries have got to be close to the sea or located in close proximity to upstream producing assets to facilitate the import of feed stock and evacuation of refined products.
“Finally, as refineries are very expensive investments there is the problems associated with finding finance in an environment where the banks and other financial institutions have very limited capitalisation,”he said .
He said that government should recognise the strategic importance of promoting the business of private ownership and operations of refineries.
Also, Mr Muda Yusuf, the Director-General, Lagos Chamber of Commerce and Industry, (LCCI) , urged the government to review its policy on refined products to encourage investors into the sector.
Yusuf said: “It is pitiful that after many years of oil discovery, the country is still importing its refined products for consumption.
“As long as we have oil and gas sector linked with the government, private investors will continue to evade the sector.”
He also urged the government to overhaul the sector to encourage private investors.
Also, Dr Saka Matemilola, Former Chairman, Nigerian Council of Society of Petroleum Engineers,(SPE ), said it was obvious that finance was the problem of building modular refineries.
Matemilola, however, urged the Nigerian National Petroleum Corporation (NNPC) to repair the existing refineries towards improving their production capacities.
He also urged the DPR not to revoke the licences of investors who were unable to build modular refineries noting that withdrawal would not solve the challenges facing the sector.
Matemilola said there was need to work with the licence owners, to address the issue of sourcing for finance from the banks to build the refineries.
