FG reviews licences for private refineries

By Sola Oluwadare, Lagos - Updated: Tuesday 30-06-2009

Shell’s exploration base in Bonny,
River StateFOLLOWING to the disclosure by the Nigeria National Petroleum Corporation (NNPC) last week that the Warri and Port Harcourt refineries have been shutdown due to vandalism of pipelines by the militants in the Niger Delta, the Federal Government has commenced the review of the guidelines for setting up private refineries.

The procedure was introduced recently based on the revocation of 18 licences to establish refineries earlier granted in 2004 by the government to 18 private companies.

The licences were revoked due to what government described as non performance.

The NNPC Group Managing Director, Mohammed Sanusi Barkindo, had last week, told the House of Representatives Ad-hoc Committee on Niger Delta crisis that the damage to the pipelines feeding Warri meant that Kaduna refinery would not receive supply; hence the resort to the use of already stored crude, which was expected to run out in 15 days.

Barkindo, who spoke through the corporation’s Assistant General Manger, Technical, Gabby Meheux, said “What we have currently now will last for 15 days and after that no product. The consequence is that no refining would take place and no product would be available from Kaduna because the pipelines that supply crude to Kaduna were vandalised and until they are repaired, we can not pump crude.”

According to findings, the Federal Government came up with the stringent conditions, key to which was need for the payment of a refundable performance deposit of $1 million for every 10,000 barrels per day refinery capacity built by those licensed.

The licensees are supposed to pay the money immediately the license to build the refineries is awarded.

Besides,other guidelines include: payment of statutory application fees of $50,000 and a Department of Petroleum Resources service charge of N500, 000. Also, the refund of the N1 million is subject to adherence to project execution schedule within the first 18 months and the achievement of 70 per cent detailed engineering design, otherwise, the sum deposited will be forfeited to the government.

Some of the companies that have qualified to go ahead with the building of the refineries include: Amakpe Refinery Company and Rehoboth Refinery. While the former is expected to begin construction later this year, Rehoboth Refinery had scaled the hurdle for the building and it is trying to meet the statutory requirements for approval to construct.

Amakpe Refinery Company was reported to have almost completed constructing a modular refinery at Ikot Usekong-Eket in Akwa Ibom State, with the cost of phase one of the project being $53.7 million and the second phase is expected to cost $57million. The first phase of the project at completion would produce 6,000 barrels per day, after which the second phase will commence.

A source at the Department of Petroleum Resources (DPR) said though there were several applications to establish refineries, only the two had been granted licences to go ahead, while others were still struggling with meeting the requirements.

The source confirmed that the DPR had already submitted a review of the guidelines to the Ministry of Petroleum and would soon be approved.

Different stakeholders have been complaining on what they called stringent conditions stipulated for the approval for the establishment of refineries, making it difficult to embark upon. These conditions might be the reason why only two companies were given approval from March 2007 till date to acquire either licences to establish or approval to construct.

Meanwhile, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has called on the Federal Government to expedite action towards fixing the comatose refineries as a way of reducing the incidence of fuel scarcity and the general lull in the downstream sector.

The chairman, IPMAN Mosimi Depot, Mr. Adebisi Bada, said the fact that Nigeria has oil and is supposed to refine its oil made it clear to Nigerians that the previous leaders contributed largely to the unfortunate situation.

Bada berated the state of the refineries, saying the government should be decisive on whatever policy it wants to use to move the sector forward.

“The state of refineries has not been okay even before now. If actually we have some countries that do not have refineries and they get fuel, the government should take decision, decisive decision on whatever policy it want to adopt. It has to do with the decision.

There was a government in place sometimes ago, which wanted to sell the refineries. It actually took a step towards that but the decision was reversed,” Bada noted.