How to establish mini refinery

How to establish mini refinery

The recent announcement by the Federal Government disclosing plans to convert illegal refineries into modular plants may have opened a new frontier of investment opportunities.

The Federal Government in taking the decision believed that the overall damage from piracy, theft and fraud for Nigeria’s crude oil which is estimated at about $1.5 billion a month, according to the U.S Deputy Ambassador to the United Nations, Michele Sison, who cited a Chatham House report, could be reversed

Senior Special Assistant on Media and Publicity to the Vice President, Mr. Laolu Akande, had in a statement said that the plans are part of President Muhammadu Buhari’s new vision for oil-producing communities in the Niger Delta.

According to him, modalities are now being worked out to explore how some of the illegal refiners and the local communities in the region can become shareholders in the proposed modular refineries concept of the Federal Government.

A modular refinery is a refinery made up of smaller and mobile parts- (skid-mounted)- that are more easily fabricated and can be more quickly transported to site. They come in different sizes with varying capacities normally lower capacity than conventional refineries with more elaborate and complicated set-up.

Under the plan being considered in the presidency, government could supply crude to the local refineries at a reasonably concessioned price, as an incentive to stop the current practice where illegal refiners vandalise and steal the crude. The concept would also prevent the environmental degradation of their area.

This also means that marginal field operators can supply crude to the new modular refineries that would have the illegal refiners integrated.

 For far too long the nation has been dependant on importation of refined petroleum products due to the fact the four crude oil refinery in Nigeria cannot meet the local demand for the product which currently stands at an estimated sixty million {60,000,000} liters of refined petroleum products (PMS, DPK and AGO) per day.

Setting up the Refinery

The Mini Refinery and Portable Crude Oil Distillation Plant is capable of processing from 2,000 Barrels Per Day (BPD) of any stream of Light or Heavy Crude Oil within API Gravity of 29°- 42.8°, into Naphtha, Diesel, Kerosene and Fuel Oil.

Mini Refineries are ideally suited for remote locations and are viable for Investments by Private and Public Sector Groups as a source of rapid production of primary fuel products and raw materials for Petrochemical Downstream Industries.

The investor can apply for oil block allocation or partner with government at different level on a PPP basis to guarantee investment and feedstock for the production plant.

Establishing a crude oil refinery requires approval from the Department of Petroleum Resources (DPR), the petroleum regulatory organisation in Nigeria.

Licensing Procedure

Applications for approval to establish a refinery or any other hydrocarbon pro-cessing plant shall be made in the manner described in section 1.3 below and in the form schedule in Appendix 1.

1.3 Approval process for the design, construction, commissioning and opera-tion of a process plant

The approval process is designed to ensure that ap-plicant for approval and permit to establish a Petro-leum Refinery (or a process plant), understands the industry, the technical and economic implications of the project, the sociological and environmental impact of the plant, and mainte-nance provisions required to protect the health of the operating staff and safety of plant. It is designed to prevent avoidable waste of resources by ensuring at each stage that the applicant understands the statutory requirements of each phase of the project.

Consequently, the ap-proval shall be given in three sequential stages: License to Establish (LTE), Approval to Construct (ATC) and Li-cense to Operate (LTO) re-spectively.

Note that requirement in sections “2.1.1 item IV, 3.4 item 2(iV), 6.3, Appendix I post-script item (iii)” re-garding payment of “refund-able commitment deposit of $1 million per 10,000 BPSD capacity” of this guideline are no longer applicable effective 2009.

Section II

2.1. License to Establish

This approval stage is to confirm general feasibil-ity of the proposed proj-ect, market plan, products specifications, site selection, proposed crude oil (or feed-stock) supply plan and prod-uct evacuation plan, prelimi-nary safety and environmen-tal impact statement, and organizational plans. The following submissions shall be made to the Department of Petroleum Resources to facilitate the corresponding milestone approvals as item-ized in sections 2.1.1 to 2.1.4:

2.1.1. Application and Statutory Payments for all licenses and approvals

1.i) Submission of applica-tion for licenses to establish a private refinery as stipu-lated in Appendix l

2.ii) Payment of statutory application fee of fifty thou-sand US dollars only (US $50,000) for LTE,

Plant Relocations and ATC Revalidation or one hundred thousand dollars only (US $100,000) for li-cense to operate (LTO) in bank draft in favour of Fed-eral Government of Nigeria ‘DPR Fees Accounts’ and

iii) Payment of N500,000 Service charge in bank draft in favour of the ‘Department of Petroleum Resources’

1.iv) Payment of refundable deposit of One million dol-lars only (US $1,000,000) for every 10,000 bpsd refin-ery capacity for LTE, Plant Relocations and ATC Revali-dation.

Refund is subject to ad-herence to agreed project execution schedule within the first eighteen months and achievement of 70% front end engineering design (FEED) before expira-tion of the license otherwise the sum deposited is forfeit-ed to the Federal Government.

The Bayelsa Example

In line with the aspiration of the Federal Government to reduce the number of illegal refineries in the oil rich Niger-Delta region, the Bayelsa State Government recently indicated interest in building three modular refineries in the State

Governor of Bayelsa State,  Mr.  Seriake Dickson,disclosed this at the Sub-Sea Nations and Africa Oil and Gas Investment Forum, in Houston Texas.

 He said that the establishment of the modular refineries and other oil and gas related businesses, will stem the tide of militancy and illegal refineries in the Niger Delta region, adding that sustained investments will bring stability and growth in the region.

 “The policy I want to appreciate the federal government for and which is also why I am here is the issue of modular refinery. Some of these young people are engaged in illegal refineries. We know that is not the right thing to do, but somehow, they are doing it. Our environment is affected in the process.

We want to establish three modular refineries – one in each senatorial district, so that some of these young people, who engage in illegal refineries, can be brought together in an organised manner, working with our partners.

We have the feedstock, though we don’t control petroleum because it is in the exclusive list, we have goodwill. Bayelsa already has an oil well, which we are operating. We have struck our first oil. We intend to take our case to the Nigerian National Petroleum Company, NNPC and oil producing companies, to make feedstock available for the modular refineries to take off,he said”

Integrated Oil takes the lead

FIVE months after it got a License To Establish (LTE) a refinery from the Department of Petroleum Resources (DPR), Integrated Oil and Gas Limited, had in April 2016, said its $116 million refinery would be a reference point in Nigeria.

The latest move to increase domestic refining capacity was disclosed by the Group Managing Director of the firm, Mr. Anthony Iheanacho, during a facility tour to the refinery complex in Lagos last year. This is even as the 20,000 barrel per day (bpd) refinery came at a period when stakeholders faulted the move by the Nigerian National Petroleum Corporation (NNPC) to establish co-location refineries and rather advised them to give support to holders of modular refinery licenses.

The GMD said the company has submitted its Front End Engineering Design (FEED) to DPR and was awaiting approval to move to the Authority to Construct (ATC) stage.

Iheanacho said contrary to criticisms that modular refineries are not economical, the reverse is the case because such refin-eries have lesser risk exposure compared to bigger refineries.

‘‘It may interest you to know that petrol production is the last stage of any refinery. All other petroleum products come before petrol. So to say that it is only petrol that a modular refinery can produce is totally untrue,” he said.

Upon completion, he said the refinery to be sited at Tomaro in Irede community, Lagos, will produce naphtha Automotive Gas Oil (AGO), Household Kerosene (HHK), Low Fuel Pour Oil (LFPO), Dual Purpose Kerosene (DPK) and later petrol.

He explained further that the refinery is to be built on 90 hectares of land and is to have a huge strategic reserve, ship repair yard, flour mills and a helipad to cater for its aviation business logistics.

And to ensure that the project is safe for the Tomaro community, he said a stake-holders meeting comprising the commu-nity leaders, DPR, Lagos State govern-ment officials and the local government will tomorrow (Tuesday) brainstorm on the Environmental Impact Assessment (EIA) of the project.

The Integrated Oil boss equally cleared the air on stories making the rounds that the project has impacted negatively on the Tomaro community, saying construction was yet to begin on the site.