The Nigerian National Petroleum Company (NNPC) Limited has attributed the inability of existing private modular refineries in the country to produce petrol to the regulation of the price of the commodity by the government. NNPC said the price regulation did not make good economic sense for investors and discouraged them from making investments needed to produce petrol and help solve the country’s fuel importation burden.
The company, however, stated that the existing modular refineries produced best quality aviation fuel and diesel used locally, adding that huge investment opportunities exist in the modular and condensate refining spaces in the country and should be leveraged by willing investors.
Group Executive Director, Refining, NNPC, Mr. Mustapha Yakubu, made the assertions during the Midstream and Downstream Leaders’ Forum, one of the panel sessions at the recently held Nigerian International Energy Summit (NIES 2022) in Abuja.
Two modular refineries in Nigeria – Waltersmith in Imo State and Niger Delta Exploration and Production (NDEP) in Ondo State – are already running but are not producing petrol, while a couple of others are expected to come on stream between this year and next two years.
The only known private refinery that has the capacity to produce petrol is the 650,000 barrels per day Dangote Refinery in Lagos, which is expected to come on stream by the first quarter of 2023.
Yakubu dispelled the impression that modular refineries could not produce petrol, saying some companies are already building modular refineries that would produce petrol. He explained that producing petrol in a modular refinery only required making additional investment in the already running one to have a cracker that would enable the production of petrol.
Yakubu said, “I think it’s a wrong impression to say modular refineries cannot produce PMS (Premium Motor Spirit), they can. People need to start and scale up. I know people that, today, are aiming at getting up to 50,000 barrels per day but because of financing, they can start with 10,000 barrels and then scale up gradually up to 50,000.
“What do you need to produce PMS? It’s to do additional investment to put in a cracker so that after your naphtha production, you can produce PMS. But the reason why they cannot produce PMS is because there is price regulation.
“So, for me, if they produce PMS today, at what cost are they going to produce? At what cost are they going to sell under this regulated environment?
“For those who are looking for investment, honestly, the space is there. Once you have a fully deregulated environment, the opportunity will be there for all of us.”
Maintaining that the current regulated petrol pricing was discouraging the modular refiners from investing more to produce petrol, the NNPC GED argued that if diesel and aviation fuel were not deregulated, the operators would not be producing the products.
He stated, “I know small refineries that are producing the best ATK (Automotive Turbine Kerosene) ever, which most of our airlines are using. If government today says okay, buy ATK at a certain price, they will not produce it.
“I know small refineries today that have what they call the forward-sale for their ATK, they have a forward-sale for their diesel just because those two products are already fully deregulated. So, it’s just the regulation that we have that is keeping down the PMS.”
Yakubu urged private investors to take advantage of the on-going transition towards renewable energies, pointing out that there is an opportunity in the emerging hydrogen fuel.
With the gas feeds in large quantity in the country, he advised that Nigerian investors should start thinking towards investing in hydrogen, saying Namibia has already started.
Noting that it had become difficult for fossil fuel to attract financing from international banks due to the energy transition pressure, Yakubu stated that investors could venture into building smaller condensate refineries as alternative business opportunities.
He said, “If you have condensate refineries like 10,000; 20,000 barrels per day capacity, I can tell you that 80 per cent of the fuel product is PMS, because when you get the liquid from the gas, it’s as good as the diesel that you have.
“So, we just need a small process line to come up with 80 per cent stream of PMS. But how much are you going to sell it under this regulated condition.”
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