Nigeria FG to commence refineries’ sale after PIB passage

By MICHEAL EBOH

The Federal Government has disclosed that it will commence the privatisation of the country’s refineries and concessioning of pipelines and depots immediately the Petroleum Industry Bill, PIB, is passed into law.

The Director General of the Bureau for Public Enterprises, BPE, Mr. Benjamin Dikki disclosed this when the Thailand Ambassador to Nigeria, Mr. Chailert Limsomboon paid him a courtesy visit at his office in Abuja.

This is a reversal of its earlier decision to go ahead with the sale of the refineries despite the non-passage of the PIB.

Considering that the PIB has gone through two legislative sessions without being passed, it is uncertain the bill will survive the current session in view of the controversies surrounding some of its provisions, a situation that would have kept the bill at the National Assembly for more than 12 years.

But Dikki assured that the BPE is currently concentrating on perfecting the legal and regulatory framework for all the sectors of the economy to create the enabling environment for private sector participation.

According to him, the purpose of the review of the legal and regulatory frameworks was to aggregate the regulatory powers currently dispersed in various agencies in each sector into one sector regulator and separate policy from regulation.

Dikki also highlighted the huge potential in the transport sector, noting that Nigeria has over 193,000 kilometers of federal roads which provides opportunities for potential road concessionaires.

He said that fifteen out of the seventeen successor companies created out of the Power Holding Company of Nigeria, PHCN, are fully in the hands of the private sector while the remaining two are at the concluding stages for handover to the private sector.

He, however, noted that the Transmission Company of Nigeria, TCN, would continue to reside with the Federal Government.

In his own comment, the Thailand Ambassador to Nigeria, Mr. Chailert Limsomboon, disclosed that his country has made economic cooperation with Nigeria the high point of its new Africa Initiative.

Limsomboon noted that in the past, Thailand had not paid enough attention to the economic opportunities in the West Africa sub-region, particularly Nigeria, saying, “Hope we have not missed the train in the Nigeria privatisation programme.”

He pointed out that, while in Nigeria, he would make exploration of business opportunities and expansion of economic cooperation with Nigeria a priority.

He said the purpose of the visit was to learn about the reform and privatisation policy in Nigeria and the new growth sectors to properly sensitise the Thai business communities that may be interested in investing in Nigeria.

The BPE had last year announced plans to privatise the four refineries in the country next year, as part of ongoing reforms in oil and gas sector.

Spokesperson for the BPE, Mr. Chigbo Anichebe, had disclosed that the privatisation would be handled in line with the usual strategy of the BPE, which was to sell a certain percentage of shares and reserve a certain percentage for the workers, host communities and Nigerians.

Anichebe, however, explained that the privatisation plans were currently at the preliminary stage, where the blueprint of the policy would be decided.

- See more at: http://www.vanguardngr.com/2014/07/fg-commence-refineries-sale-pib-passage/#sthash.kvMUSFtr.dpuf

Between illegal and modular refineries in Niger Delta

Ilegal oil refineries in Nigeria thrive on illegal oil bunkering, stolen crude oil, and vandalism of oil pipelines and other installations. Without a doubt, these illegal oil operations are reprehensible and should not be condoned for a number of reasons.

Firstly, it is improper for citizens of this country to destroy oil installations in their bid to steal crude oil as feedstock for illegal refineries.

Secondly, it is lawless to set up any kind of refinery without going through the licensing process with the relevant government agency – Department of Petroleum Resources, DPR. Thirdly, it is most inappropriate for anybody, Nigerians or Foreigners, to steal crude oil belonging to the Nigerian State with impunity.

Finally, and perhaps the most worrisome is what the illegal oil refiners do with the residue (black oil) from crude oil distillation process. There are serious environmental issues involved regardless of whether they dump the ‘black stuff’ into the river or simply incinerate it.

I recently had a thought-provoking discussion on the issue of illegal refineries with Prof. GoddyIgwe, the Director,Centre for Gas, Refining & Petrochemicals, University of Port Harcourt. However, on further reflection I realized that there may be a few positive lessons to be learnt from these illegal oil operations.

First lesson: there is a significant imbalance between our projected refining capacity and existing capacity, such that it has become very tempting to boil crude oil in drums knowing that there is a guaranteed market for the petroleum products (which they usually sell as diesel, AGO).

Second lesson: small-scale (modular) refineries could be profitably sited close to oil flow stations and terminals. So, I thought that it may be unwise for government to ‘throw out the baby with the dirty bath water’.

Big vs. modular refineries

The capital outlay for any 100,000 barrel per day (bpd) refinery is about $1.5 billion, while a 24,000 bpd modular refinery is roughly $250m. Therefore, it is easier to access funds for the modular refining modules (through US Ex-IM Bank).

The manufacturing time for plant, equipment and machinery for a plant of 100,000 bpd capacity is within the range of three to four years. Start-up for modular refineries of 24,000 bpd is within 18-20 months.

The modular system allows the plant to be expanded to 100,000 bpd capacity in structured increments. The increments can be funded with the cash flows from Phase 1 and additional phases, and so the refinery will not incur additional debt for the expansion. The expansion of the modular plant capacity can be done without shutting down production from existing equipment and plants. This is not the case with big capacity refineries.

Revenue streams and pay-back periods are faster with the modular refining format, than with the larger capacity refineries.

The major short-coming with modular refineries are that the plants are semi-automated and less labor-intensive, i.e. not many jobs can be created directly. For instance, 20 to 30 personnel can operate a 24,000 bpd modular refinery. Most of the spin-off jobs created are of a secondary nature, and based on the location of the site.

In summary, modular refineries are simple, efficient and fast to start up. Such refineries usually operate at optimal capacity at all times. The relatively small investment cost allows for private investors to enter the refining business much easier.

It also enables government to build the bigger capacity refineries using the modular format, but in incremental stages.However, government- built modular refineries should have full conversion facilities (i.e. catalytic reformers and naphtha hydrotreaters) to enable the refineries produce premium motor spirit, PMS or petrol.

National oil refining model

There is a current over-reliance on government- owned refineries. Nigeria can also adopt a refining model that relies on modular refineries (built and operated by private investors) that will produce all refined products with the exception of petrol. The implication is that the modular refinery operators will not have to invest in catalytic converters and naphtha hydrotreaters that are required to convert naphtha to petrol.

These equipments are capital intensive and complex. Therefore, the exclusion of such facilities in a modular refinery plant will further reduce the cost of set-up. This will enable the modular refiners to focus on producing diesel, marine diesel, dual purpose kerosene (DPK), aviation turbine kerosene (ATK), and low-pour fuel oil (LPFO).

On the other hand, Nigerian National Petroleum Corporation, NNPC refineries can focus on PMS production and become essentially transformed into PMS complexes instead of full conversion refineries. In this case, NNPC refineries will buy all the naphtha feedstock from the modular refinery operators and convert these to PMS.

Other products that NNPC refineries can produce will include fuel oil, bitumen, asphalt, and petrochemicals. Based on 60% capacity utilization, NNPC refineries have the capability to process 20.3 million litres of PMS per day. These national refineries can add another 13.8 million litres per day if they are converted into PMS complexes, and thus satisfy the nation’s immediate PMS production needs.

- See more at: http://www.vanguardngr.com/2014/03/illegal-modular-refineries-niger-delta/#sthash.LPGe5Egm.dpuf

Divcon, Milora partner on refining technology

By SEBASTINE OBASI

The long delay in carrying out regular turn around maintenance, TAM, in the nation’s refineries due to paucity of funds may not be experienced any longer if the government embraces the new technology introduced by a specialist American group.

This innovative propriety patent on refinery and petrochemical processes has the invaluable potential of increasing the reliability of the operations as well as reducing energy consumption in the plants.

Speaking on the technology which is a products of research by members of the Milora Group, Mr. Johan Vanderborght said his group is currently in Nigeria under a strategic alliance with Divcon Engineering Group.

He said his company is willing to transfer this technology to refinery and petrochemical plants in Africa that are interested in optimizing their yields in a cost effective manner.

Giving an example on refinery process in terms of the quality and color of the heavy vacuum gas oil (HVGO) before and after optimisation on the vacuum distillation column, Vanderborght explained that with the technology will increase the throughput, and improve the yield and quality.

Also speaking Mr. Mieke Dams, co-founder of the Milora group, said, “We have set-up an integrated global network, with cross cooperation between Nigeria, Europe and the United States. This team is composed of highly experienced global specialists, with a proven track record of several decennia in refinery and petrochemical industry.”

According to the founders of the Milora Group, the team is supported by a network of major European suppliers, such as CMI, CG Global, Geldof for industrial boilers, transformers, high pressure vessels, with the aim of transferring technology and business know how to Nigerians in a practical and efficient manner, driven by competent and experience operators in this strategic industry.

Other areas of strategic technical cooperation with Divcon Engineering Group include; proprietary patents to improve refinery and petrochemical processes, best practical & technology practices used by major industry leaders, business and operational knowledge transfer, best US and EU business and operational practices ISO standards, lean management and six sigma as used by major industry leaders.

The agreement also includes improvement of effectiveness and efficiency, practical and hands-on approach, training and certification of Nigerian nationals.

- See more at: http://www.vanguardngr.com/2014/06/divcon-milora-partner-refining-technology/#sthash.UKmaZ1eQ.dpuf

Labour Decries FG’s Inability to Curb Crude Oil Theft, Pipeline Vandalism

By Linda Eroke

The organised labour has expressed concern over the inability of the federal government and its security agencies to address the menace of crude oil theft and pipeline vandalism, which it said is now a well-established industry in the country.

Chairman, Trade Union Congress of Nigeria (TUC), Rivers State Council, Mr. Chika Onuegbu, who made this known, lamented that the combined effect of oil theft, pipeline vandalism and insecurity is forcing the multinational oil companies to divest from the Niger Delta thereby throwing thousands of Nigerians into the already saturated labour market.

He noted that by government’s own admission, more than 10 percent of the country’s total crude oil production is stolen every day adding that this is almost double the total production of Ghana.

“The nation therefore loses between $6 billion yearly to crude oil theft and another N165 billion to theft of refined products. As if this is not enough, there is also the brazen vandalism of pipelines which has adversely affected the supply of crude to the refineries resulting in low or no output from our four refineries.

"In addition, the general insecurity of lives and property in the country has among other things adversely impacted on the oil and gas industry,” he explained.

He added that revelations by the lawmakers had shown that the heinous act is being perpetrated by oil thieves in collaboration with highly placed individuals in the country.

“Hardly does a day pass without stories of how Nigerian crude oil is brazenly stolen by oil thieves assisted by their collaborators in high places. The revelations at the various probes by the National Assembly are heart-breaking as billions of Naira (and now trillions of Naira) meant for the improvement in the welfare and condition of living of ordinary Nigerians are brazenly stolen by those who they are entrusted in their care.

“All these are examples of violence against the people of Nigeria. The killings and maiming of Nigerians, whether by Boko Haram, militants, cult groups, kidnappers, armed robbers, misguided youths, political thugs and other forms of societal vices by deviant groups under whatever guise, are all examples of direct violence”, he said.

Speaking further, he decried federal government’s insensitivity towards honouring the agreement reached early this year with the unions in the oil sector over the planned sale of the nation’s refineries.

It accused government of deliberately delaying the implementation of agreement in order to lay the ground for its privatisation agenda.

The TUC boss alleged that ”government wants to deliberately ensure that the refineries are unable to produce in order to privatise them."

Onuegbu, who is also the Industrial Relations Officer of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), argued that much of the gains ascribed to privatisation by the proponents of the policy are actually gains from other reforms.

“Government blinded by its privatisation glaucoma, fails to see that much of the gains ascribed to privatization by the proponents of the policy are actually gains from other reforms. For instance, the government did not privatize NITEL for MTN, Econet (now Airtel) etc. to sprout and grow. They simply created the enabling environment and the GSM market blossomed,” he said.

On this note, he appealed to government to honour the agreement signed with the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and PENGASSAN in January 2014 to avoid any unnecessary industrial crises in the nation’s oil and gas sector.

Ecopetrol to Supply New Colombian Refinery Targeting 2015 Start

Colombian Refinery

Colombia’s state-controlled Ecopetrol SA (ECOPETL) agreed to supply crude to a refinery scheduled to start operations in 2015, said the governor of the country’s top oil-producing province where the facility will be located.

The refinery will cost about $1.5 billion to build and have a refining capacity of 40,000 barrels of crude a day, supplying fuel to the region and diluent to Ecopetrol for the transportation of heavy crudes by pipeline, said Alan Jara, governor of Colombia’s central Meta province.

“We spoke with Ecopetrol,” Jara said in a telephone interview yesterday. “There is a letter of intent that guarantees the oil necessary to supply the refinery.”

Ecopetrol, Colombia’s largest oil company, will supply the refinery although volumes are yet to be defined, the company said in an e-mailed response to questions. Colombian President Juan Manuel Santos said May 6 that Colombia’s environmental agency ANLA awarded a license for the refinery project that will be overseen by La Empresa de Petroleos del Llano-Llanopetrol.

Llanopetrol is seeking a partner that will provide financing for the refinery and has received several offers so far, Jara said. The province of Meta owns the majority stake in Llanopetrol.

A decision on the partner will be made in the “coming days,” with construction of Colombia’s third refinery likely to start in the first quarter of 2015 and finish before year-end, he said.

Colombia has operating refineries in Cartagena and Barrancabermeja, both owned by Bogota-based Ecopetrol.

Culled from Bloomberg News

Shell Considers Retiring Coker Amid Shale Oil Boom

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, is considering retiring one of two coking units at its only refinery in California as the company seeks to run lighter crude at the plant.

The company has applied to county regulators for a permit to shut the flexicoker at the 156,400-barrel-a-day Martinez refinery northeast of San Francisco, a move that would shrink the plant’s reliance on heavy oils and cut its greenhouse-gas emissions by 15 percent, Destin Singleton, a Shell spokeswoman, said May 16. The unit helps convert the denser crude into more valuable products such as diesel and gasoline.

Shell is considering the shutdown as hydraulic fracturing and horizontal drilling unleash record volumes of light oil from shale formations across the middle of the U.S. California’s refiners, lacking pipeline access to the growing crude supplies, are bringing in the most ever by rail as they work to counter shrinking production within the state and from Alaska.

STORY: Why Oil Prices Haven't Gone Crazy

“The reality is that we are looking at each individual refinery and making economic decisions as to what is the most optimal feedstock,” John Abbott, downstream director for The Hague-based Shell, said in an interview at Bloomberg’s headquarters in New York May 16. “This is one of the most competitive assets on the West Coast of the U.S. and in California.”

Industry refining margins on the U.S. West Coast, a rough indicator of profitability, averaged $7.62 a barrel in the first quarter, almost twice the $4.07-a-barrel coking margin on the Gulf Coast, Shell said in a statement April 30.

Train Deliveries

The Martinez refinery doesn’t have the equipment to unload oil from rail cars and has never received crude from other terminals that take train deliveries, Singleton, based in Houston, said by e-mail. The refinery will continue to receive oil by pipeline and vessel using existing infrastructure once the coker is shut, she said.

Crude Mix

“Overall, heavy crudes are a big part of our current mix,” Singleton said. “We’ll be processing the same crudes we refine today, but the mix will be lighter — meaning significant reductions in greenhouse gas emissions, less electricity use, and more efficient operations.”

A delayed coker, which was installed at the refinery in the 1990s, based on air regulatory filings, will remain in service, she said.

Refiners from Tesoro Corp. (TSO:US) to Valero Energy Corp. (VLO:US) are working to bring more shale oil to their plants on the U.S. West Coast by rail. Trains delivered 395,053 barrels of oil to California in March, a record volume for that month, the most recent data available from the state Energy Commission show.

Shell is seeking permits to build a rail complex at its Anacortes refinery in Washington state that would allow the plant to unload oil from as many as six trains a week, regulatory filings show. The company has also said that it’s carrying upgraded crude to the West Coast from its Scotford oil-sands upgrader in Canada.

Crude Imports

Martinez imported 903,000 barrels of medium-to-heavy crude in February from Canada, the most recent data available from the Energy Information Administration show. The complex already processes some lighter crudes, like Bakken oil, along with heavier feedstock from California’s Central Valley, Singleton said.

Contra Costa County regulators are expected to prepare a report on the environmental impacts of the coker retirement, and the public will have a chance to comment on the plan during that process, she said.

Chevron Corp. (CVX:US)’s Richmond refinery, west of Martinez, is also applying to local regulators for a project that would change its crude slate. The plan would replace a hydrogen plant and increase capacity at the fluid catalytic cracker’s hydrotreater and sulfur-recovery system to run higher-sulfur oils.

Culled from BloombergNews

The Refinery We’ve Been Praying for in Nigeria

By Simon Kolawole, Email: simon.kolawole@thisdaylive.com

It is not every day you get driven by a billionaire. I had to enjoy the moment as Forbes’ Africa’s richest man, Alhaji Aliko Dangote, got behind the wheels last Sunday. We were heading for Victoria Island from Ikoyi, Lagos State, for a briefing on his proposed refinery. He was wearing a simple short-sleeved shirt and a pair of jeans, too simple for the wealthiest black man. I could not but ask him: “So you drive yourself?” He said, “Mostly at weekends.” He even had a story to tell me: “There was a day I was driving and the traffic lights stopped me. Some guy looked out of his car and saw me. He appeared surprised. He asked, ‘So you know how to drive?’ I simply laughed. Why would I not know how to drive?!” I teamed up with him to laugh it off.

When I heard the news of Dangote’s plan to build a 400,000-barrels-per-day refinery, I was amazed. I’m not sure most Nigerians know the significance of what is about to happen. Let us make some sense out of it. In 1965, General Yakubu Gowon built Nigeria’s first refinery which we call “Port Harcourt I” with a capacity of 60,000bpd. Ten years later, Gowon awarded the contract for the construction of Warri Refinery with a capacity of 100,000bpd. It was completed and inaugurated by General Olusegun Obasanjo in 1978. Obasanjo himself started the 100,000bpd Kaduna Refinery, which was inaugurated by President Shehu Shagari in 1980. “Port Harcourt II”, also started by Obasanjo, was completed by Gen. Ibrahim Babangida in 1989 to process 150,000bpd. Since then, we have stopped building refineries - even though our consumption has been doubling and tripling.

All the refineries built by the government since we discovered crude oil have total installed capacities of 410,000bpd, almost equal to what one man is about to build. And, of course, you and I know that government refineries barely produce anything. That is why we keep importing petroleum products. Even if they work at full capacity, they cannot meet the demand. Only God can give us the accurate figure of the trillions of naira we have wasted importing fuel, including cost of freighting, demurrage, storage  at fraudulent tank farms, fraudulent subsidy payments, bank charges, and such like, since Gen. Sani Abacha’s time. This is to say nothing about the opportunity cost - how much could we have been generating if we were refining and exporting products? How many jobs could have been created?

I had called Dangote on phone to get some facts on his proposed refinery. After talking for some minutes, he said it was better we saw face to face. One of the questions troubling my mind was: since the downstream sector has not been deregulated, how does he hope to make money? Over the years, I had been campaigning for more refineries to be built. I once suggested that government should build and lease out the management, with the ultimate goal of selling them off through privatisation. I even suggested at a stage that local entrepreneurs should be empowered with oil blocks with the sole aim of encouraging investment in refineries. I was told to shut up, that I was not an economist and that I didn’t know anything about market forces. I was lectured that without deregulation, nobody would build new refineries.

So why is Dangote building a refinery without deregulation?

“I will explain,” he said, as we settled down in his yacht, anchored at Walter Carrington Crescent, Victoria Island. I was devouring cashew nuts with the kind assistance of a glass of Coke while he was dealing gently with tea. “With or without deregulation, there is nothing stopping anyone from building a refinery. I am not a marketer. All I will do is buy crude oil at the market price, refine and sell to marketers at the market price. It is marketers that deal with subsidy. If government continues to subsidise, marketers can buy products from us and then collect the subsidy from government. If not, they can sell to motorists at the market price. It’s not complicated. Don’t forget that when they go to foreign refineries to import petrol, they buy at the market prices before coming home to claim subsidy payments.”

That was a startling revelation for me. Deregulation is clearly not an obstacle to building a refinery in Nigeria. Maybe I should have built a refinery myself (don’t laugh) instead of fruitlessly suggesting it to the government. Why didn’t I think of this all along? Well, it is not a 10 kobo business. That is why. The Dangote projects - a fertilizer plant in Edo, petrochemical and petroleum refining plants situated at Olokola in Ogun and Ondo states - will cost him $9 billion, for which he has sourced $3.3 billion loan from local and international banks. If the refinery was a government project, it would probably cost $15 billion by the time politicians, party chieftains and the middlemen in the private sector massage the figures. Dangote’s refinery, according to estimates, will create  9,500 direct jobs and 25,000 indirect jobs when completed.

The story continues. Recent developments in the international crude oil market are not particularly in Nigeria’s favour. The world is developing alternatives to crude oil. Nigeria’s biggest customer, the United States, has scaled down oil imports from Nigeria, from the height of 1.1 million barrels a day to a little over 200,000. That is massive. We’re now practically hawking our oil like groundnut sellers inside Lagos traffic. Our biggest customers are now India and China. It takes 18 days to ship crude to the US, compared to 35 days to China. This has implications for finance. Some varieties of Nigerian crudes, meanwhile, are not preferred in the international market since they are only good for gasoline but not so much for Euro IV diesel. Apart from the lesser diesel output, it is more difficult to get the correct density and some of the other specs. Therefore, even our Sweet Crude (Bonny Light) has its limitations.

“With global demand for crude oil projected to keep dropping,” Dangote said, “the way forward is for us to start exporting refined products rather than crude. We will get far much better value that way. In the next five to seven years, we should stop exporting crude altogether. Apart from South Africa, the refining capacity in Sub-Saharan Africa is grossly insufficient. Angola has a refinery that can only handle 30,000 barrels per day, whereas they consume 120,000 barrels. Cote d’Ivoire refines 60,000. Niger Republic is just 20,000. Ghana has 45,000. That is why our primary target is the regional market. Other African countries will be coming to buy products from our refinery when it is completed by 2016, insha Allah. That is our strategic plan.”

We finished chatting and took a boat across to the Lagos Motor Boat Club, Ikoyi, from where we had driven to Victoria Island an hour earlier. He saw me off to the gate as we chatted on other matters of interest, including swimming. I jumped into my car and drove off, imagining myself as a billionaire driving a young journalist to my yacht for an interview. Not a bad act to follow.

Crude oil refining in Africa & the way forward

Most refineries in Africa tend to be medium to large-scale refineries, perhaps because of the state of technology at the time they were built. This article is about presenting a cost- effective and timely option, as represented by the modular refining format.

Review of Crude Oil Refining in Africa:
There are a total of 42 refineries in Africa, with a total name-plate capacity of 3,217,600 barrels per day (bpd). The major refining countries are Egypt with 9 refineries (774,900 bpd); Algeria with 5 refineries (303,700 bpd); Libya with 5 refineries (380,000 bpd); South Africa with 4 refineries (545,000); and Nigeria with 3 refineries (445,000 bpd). More than half (i.e. 51.7%) of Africa’s refining capacity is in North Africa. According to McKinsey’s database, most of these are State-Owned (59%). 29% are based on joint ownership with government and 12% are joint-venture arrangements between International Oil Companies (IOC’s).

These national refineries operate at different levels of efficiency. Considering data of average national capacity utilizations from 2006-2009 (Oil & Gas Journal refineries survey), the efficiency levels for these countries are: Egypt (81%), Algeria (94%), Libya (87%), South Africa (85%), and Nigeria (18%).s

In the past 20 years, only 3 Greenfield refineries have been constructed in Africa. These were built in Adrar (Algeria) and Khartoum (Sudan) with China National Petroleum Company (CNPC) partnering with the governments, with capacities of 13,000 bpd and 100,000 bpd respectively. The third one was built in Alexandria (Egypt) by Egypt General Petroleum Corporation, Egypt’s national oil company (NOC) with a capacity of 100,000 bpd. Planned new builds were constructed by Petrochina at Ndjamena (Chad) and Zinder (Niger) with same 20,000 bpd capacity. The third is being constructed by Sonangol, Angola’s NOC at Lobito (Angola) with a capacity of 200,000 bpd. From the foregoing, refining in Africa is led by NOC’s, and new investments are dominated by the Chinese National Petroleum Companies.

Big Capacity Refineries versus Modular Refining Format
The capital outlay for any 100,000 barrel per day (bpd) refinery is about $1.5 billion, while a 24,000 bpd modular refinery is roughly $250m. Therefore, it is easier to access funds for the modular refining modules (through US Ex-IM Bank). The manufacturing timescale for plant, equipment and machinery for a plant of 100,000 bpd capacity is within the range of 3-4 years. Start-up for modular refineries of 24,000 bpd capacities is within a timeframe of 18-20 months. The modular system allows the plant to be expanded to 100,000 bpd capacity in structured increments. The increments can be funded with the cash flows from phase 1 and additional phases, and so the refinery will not incur additional debt for the expansion after the first unit is installed. Unlike big capacity refineries, the expansion of the modular plant capacity can be done without shutting down production from existing equipment and plant.

Revenue streams and pay-back periods are faster with the modular refining format, than with the larger capacity refineries. The major short-coming with the modular format is that the plants are semi-automated and less labor-intensive, i.e. not many jobs can be created directly. For instance, 20 to 30 personnel can operate a 24,000 bpd modular refinery. Most of the spin-off jobs created are of a secondary nature, and based on the location of the site.

In summary, modular refineries are simple, efficient and fast to start up. Such refineries usually operate at optimal capacity at all times. The relatively small investment cost allows for private investors to enter the refining business much easier. It also enables government to build the bigger capacity refineries using the modular format, but in incremental stages. However, government- built modular refineries should have full conversion facilities (i.e. catalytic reformers and naphtha hydrotreaters) to enable the refineries produce sufficient PMS.

African Oil Refining Model Worth Considering
There is a current over-reliance on government- owned refineries. Africa can also adopt a refining model that relies on modular refineries (built and operated by private investors) that will produce all refined products with the exception of petrol (PMS). The implication is that the modular refinery operators will not have to invest in catalytic converters and naphtha hydrotreaters that are required to convert naphtha to petrol. These equipments are capital intensive and complex. Therefore, the exclusion of such facilities in a modular refinery plant will further reduce the cost of set-up. This will enable the modular refiners to focus on producing diesel, marine diesel, dual purpose kerosene (DPK), aviation turbine kerosene (ATK), and low-pour fuel oil (LPFO).

On the other hand, the NOC refineries can focus on PMS production and become essentially transformed into PMS complexes instead of full conversion refineries. In this case, NOC refineries will buy all the naphtha feedstock from the modular refinery operators and convert these to PMS. Other products that NOC refineries can produce will include fuel oil, bitumen, asphalt, and petrochemicals. The major downside to this proposed model of refining is the transport cost of moving naphtha from each modular refinery to the NOC’s PMS complexes. To mitigate the transport costs, modular refineries can be strategically located near the source of crude oil feedstock and the NOC’s PMS complexes. This proposed interdependence between private modular refiners and State-Owned refineries is likely to ensure sustainable availability of petroleum products in Africa.

Hurdles and the Role of Government
The major hurdle to implementation is political in nature. Petroleum products, by their characteristics, are linked to all transport systems and so private ownership of refineries carries with it some national security implications. Secondly, the daily cash flows that attend such business will likely confer enormous political capital and influence on private owners. As a result, government officials are unlikely to provide a clear framework and incentives that permit indigenous private investment in the refining business. However, governments in Africa can also adopt the modular refining format in constructing medium to large-scale refineries and in partnership with Chinese NOC’s.

Dr Chijioke Nwaozuzu, a petroleum policy expert wrote from Port Harcourt

Products of Crude Oil Refining

Products of crude oil refining includes liquefied petroleum gases, pentanes plus, aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil, petrochemical feedstock, special naphtha, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous products. Actually, product of crude oil refining can be grouped according to the way crude oil is distilled and separated into fractions. These includes light distillates (Liquid petroleum gas (LPG), Gasoline (also known as petrol), Kerosene, Jet fuel and other aircraft fuel.), middle distillates (Automotive and rail-road diesel fuels, Residential heating fuel, other light fuel oils) and heavy distillate (Heavy fuel oils, Bunker fuel oil and other residual fuel oils)

Now let’s look at each of the products of crude oil refining:

Motor Gasoline (Finished)

A complex mixture of relatively volatile hydrocarbons with or without small quantities of additives, blended to form a fuel suitable for use in spark-ignition engines. Motor gasoline, as defined in ASTM Specification D 4814 or Federal Specification VV-G-1690C, is characterized as having a boiling range of 122 to 158 degrees Fahrenheit at the 10 percent recovery point to 365 to 374 degrees Fahrenheit at the 90 percent recovery point. “Motor Gasoline” includes conventional gasoline; all types of oxygenated gasoline, including gasohol; and reformulated gasoline, but excludes aviation gasoline.

Aviation Gasoline (Finished)

A complex mixture of relatively volatile hydrocarbons with or without small quantities of additives, blended to form a fuel suitable for use in aviation reciprocating engines. Fuel specifications are provided in ASTM Specification D 910 and Military Specification MIL-G-5572. Note: Data on blending components are not counted in data on finished aviation gasoline.

Diesel Fuel

A light distillate fuel oil that has a distillation temperature of 550 degrees Fahrenheit at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 975. It is used in high speed diesel engines generally operated under frequent speed and load changes, such as those in city buses and similar vehicles.

Fuel Oil

A light distillate fuel oil that has distillation temperatures of 400 degrees Fahrenheit at the 10-percent recovery point and 550 degrees Fahrenheit at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 396. It is used primarily as fuel for portable outdoor stoves and portable outdoor heaters.

No. 2 Diesel Fuel

A distillate fuel oil that has a distillation temperature of 640 degrees Fahrenheit at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 975. It is used in high-speed diesel engines that are generally operated under uniform speed and load conditions, such as those in railroad locomotives, trucks, and automobiles.

Fuel Oil (Heating Oil)

A distillate fuel oil that has a distillation temperature of 640 degrees Fahrenheit at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 396. It is used in atomizing type burners for domestic heating or for moderate capacity commercial/industrial burner units.

No. 4 Fuel

A distillate fuel oil made by blending distillate fuel oil and residual fuel oil stocks. It conforms to ASTM Specification D 396 or Federal Specification VV-F-815C and is used extensively in industrial plants and in commercial burner installations that are not equipped with preheating facilities. It also includes No. 4 diesel fuel used for low- and medium-speed diesel engines and conforms to ASTM Specification D 975.

Gas Oil

A liquid petroleum distillate having a viscosity intermediates between that of kerosene and lubricating oil. It derives its name from having originally been used in the manufacture of illuminating gas. It is now used to produce distillate fuel oils and gasoline.

Gasohol

A blend of finished motor gasoline containing alcohol (generally ethanol but sometimes methanol) at a concentration of 10 percent or less by volume. Data on gasohol that has at least 2.7 percent oxygen, by weight, and is intended for sale inside carbon monoxide nonattainment areas are included in data on oxygenated gasoline.

Heavy Gas Oil

Petroleum distillates with approximates boiling ranges from 651 degrees Fahrenheit to 1000 degrees Fahrenheit.

High-Sulfur Distillate Fuel Oil

Distillates fuel oil having sulfur content greater than 500 ppm.

Kerosene

A light petroleum distillate that is used in space heaters, cook stoves, and water heaters and is suitable for use as a light source when burned in wick-fed lamps. Kerosene has a maximum distillation temperature of 400 degrees Fahrenheit at the 10-percent recovery point, a final boiling point of 572 degrees Fahrenheit, and a minimum flash point of 100 degrees Fahrenheit. Included are No. 1-K and No. 2-K, the two grades recognized by ASTM Specification D 3699 as well as all other grades of kerosene called range or stove oil, which have properties similar to those of No. 1 fuel oil.

Kerosene-Type Jet Fuel

A kerosene-based product having a maximum distillation temperature of 400 degrees Fahrenheit at the 10-percent recovery point and a final maximum boiling point of 572 degrees Fahrenheit and meeting ASTM Specification D 1655 and Military Specifications MIL-T-5624P and MIL-T-83133D (Grades JP-5 and JP-8). It is used for commercial and military turbojet and turboprop aircraft engines.

Commercial Kerosene-type jet fuel intended for use in commercial aircraft.

Military Kerosene-type jet fuel intended for use in military aircraft.

Lease Condensate.

A mixture consisting primarily of pentanes and heavier hydrocarbons which is recovered as a liquid from natural gas in lease separation facilities. This category excludes natural gas liquids, such as butane and propane, which are recovered at downstream natural gas processing plants or facilities.

Light Gas Oils

Liquid Petroleum distillates heavier than naphtha, with approximates boiling ranges from 401 degrees Fahrenheit to 650 degrees Fahrenheit.

Benzene (C₆H₆)

An aromatic hydrocarbon present in small proportion in some crude oils and made commercially from petroleum by the catalytic reforming of naphthenes in petroleum naphtha. Also made from coal in the manufacture of coke. Used as a solvent, in manufacturing detergents, synthetic fibers, and petrochemicals and as a component of high-octane gasoline.

Asphalt

A dark-brown-to-black cement-like material containing bitumens as the predominant constituent obtained by petroleum processing; used primarily for road construction. It includes crude asphalt as well as the following finished products: cements, fluxes, the asphalt content of emulsions (exclusive of water), and petroleum distillates blended with asphalt to make cutback asphalts.

Lubricants

Substances used to reduce friction between bearing surfaces or as process materials either incorporated into other materials used as processing aids in the manufacture of other products, or used as carriers of other materials. Petroleum lubricants may be produced either from distillates or residues. Lubricants include all grades of lubricating oils from spindle oil to cylinder oil and those used in greases.

Wax

A solid or semi-solid material at 77 degrees Fahrenheit consisting of a mixture of hydrocarbons obtained or derived from petroleum fractions, or through a Fischer-Tropsch type process, in which the straight-chained paraffin series predominates. This includes all marketable wax, whether crude or refined, with a congealing point (ASTM D 938) between 80 (or 85) and 240 degrees Fahrenheit and a maximum oil content (ASTM D 3235) of 50 weight percent.

Xylene (C₆H₄(CH₃)₂)

Colorless liquid of the aromatic group of hydrocarbons made the catalytic reforming of certain naphthenic petroleum fractions. Used as high-octane motor and aviation gasoline blending agents, solvents, chemical intermediates. Isomers are metaxylene, orthoxylene, paraxylene.

Liquefied Petroleum Gases (LPG)

A group of hydrocarbon-based gases derived from crude oil refining or natural gas fractionation. They include: ethane, ethylene, propane, propylene, normal butane, butylene, isobutane, and isobutylene. For convenience of transportation, these gases are liquefied through pressurization.

Liquefied Refinery Gases (LRG)

Liquefied petroleum gases fractionated from refinery or still gases. Through compression and/or refrigeration, they are retained in the liquid state. The reported categories are ethane/ethylene, propane/propylene, normal butane/butylene, and isobutane/isobutylene. Exclude still gas.

Low-Sulfur Distillate Fuel Oil

Distillate fuel oil having sulfur contents greater than 15 ppm to 500 ppm. Low sulfur distillate fuel oil also includes product with sulfur content equal to or less than 15 ppm if the product is intended for pipeline shipment and the pipeline has a sulfur specification below 15 ppm.

Miscellaneous Products

Includes all finished products not classified elsewhere (e.g., petrolatum, lube refining byproducts (aromatic extracts and tars), absorption oils, ram-jet fuel, petroleum rocket fuels, synthetic natural gas feedstock, and specialty oils). Note: Beginning with January 2004 data, naphtha-type jet fuel is included in Miscellaneous Products.