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(from the right) PDP Chairman National Caretaker Committee, Senator Ahmed Mekarfi; Foremr Preident Goodluck Jonathan; Former Vice President Namadi Sambo; NCC Secretary, Senator Ben Obi and other party leaders during the Non-Elective National Convention of the Peoples' Democratic Party at the Eagle Square, Abuja. Photo by Abayomi Adeshida 12/08/2017

NNPC: New Strategic Investments to Fetch $30bn

Why Modular Refineries May Not Take-off – Experts:

From John Meze, Lagos:

In a deft strategy to shore up revenues in the post cash call era,  the Nigerian National Petroleum Corporation (NNPC) has launched  aggressive investment activities  where it hopes to raise at least  $30billion over the next ten years.

The investment activities include arrangements with  four  strategic upstream joint venture partners  (JVPs) from where it hopes  to incrementally harvest  the targeted $30billion revenues to the national treasury in the next  10 years.

The critical Joint Venture alternative financing upstream investments include: The $1.2 billion multi-year drilling for 36 offshore/onshore oil wells under the NNPC/Chevron Nigeria Limited, codenamed project Cheetah and the NNPC/First E&P JV and Schlumberger tripartite $800 million alternative funding agreement for the development of the Anyalu and Madu fields in the Niger Delta.

Others include the $1billon NNPC/SPDC JV Project Santolina and the NNPC/Chevron $780 million Project Falcon on Sonam, hitherto financed through JV Cash Call.

DAILY ASSET’s checks revealed that the oil conglomerate was able to attract the investments due to the commitment of its technical and finance experts who successfully negotiated the deals leading to the signing of multiple agreements with the JVPs.

One of such agreements, NNPC/SPDC JV Project Santolina was signed about a week ago in London, officials of the NNPC confirmed at the weekend.

“These four projects alone are going to raise incremental revenues to Nigeria of over $30 billion over the life of the projects in less than 10 years. They will also serve as part of the vehicle for exiting JV Cash Calls. We have to pay our arrears of about $6billion that were incurred pre-2016 and we are also paying up a tranche of about $1billion 2016 arrears. We started in April 2017 with the payment of $400million and we will pay the balance before the anniversary of the first payment,’’ said Group Managing Director of NNPC, Dr Makanti Baru while speaking yo DAILY ASSET on the new developments.

The new investment arrangements, it was learnt would allow the Corporation to subsequently operate from the production revenue less the first line charge to government, which is the royalties and petroleum profit tax. The implication is that whatever profit that accrues afterwards would then be remitted to the government after deduction of production cost.

Bleak Future For Proposed Modular Refineries

However, plans by Federal Government to introduce modular refineries especially in the Niger Delta region may hit the brick wall unless the oil and gas sector is comprehensively deregulated, oil and gas experts have warned.

Besides, operators of illegal refineries in the Niger Delta  Region, whom the Federal Government was targeting with the planned policy to license modular refineries may not take up the opportunities thrown up by the policy due to lack of investment capacity, DAILY ASSET investigations revealed.

Since the Federal Government announced it would issue modular refinery licenses, the illegal operators who were advised to pool their resources are yet to do so since there has been no single expression of interest in a modular refinery license, sources close to the Department of Petroleum Resources (DPR) which issues refinery licenses confirmed.

Experts who spoke to DAILY ASSET said   modular crude oil refineries would only be attractive for investment if the oil and gas sector was fully deregulated. And with the deregulation of the sector not yet in sight, the modular refinery policy might suffer a still birth, oil and gas experts future stated.

One of the experts, Engineer Ogeden

gbe, who spoke exclusively to DAILY ASSET explained deregulation of  the industry would create an enabling environment which would make the market competitive for the refiners.

Ogedengbe who was a former managing director and chief executive officer of the Port Harcourt Refinery as well as former managing director, Engineering and Technology of the Nigerian National Petroleum Corporation  (NNPC), faulted government’s hold on the nation’s refineries, adding the best for the government  was  to partner with the private sector  and reduce its stakes to between with 20  and 25 percent equity which he suggested could come  in the form of crude oil supply.

“Government can say that their own responsibility as shareholder is to supply the crude,” he maintained.

Engineer Ogedengbe stressed that “That is why it is important that before you set up refineries there must be a bankable feasibility study that takes care of all the possibilities and when this is done the project becomes profitable and it can serve for many years. I have seen refineries in America that are more than 100 years old, it does not mean that the original plant is still producing, they are refurbished and expanded. So I am saying that the refinery in Port Harcourt is still the newest in Africa. They say it is very old, useless and cannot be repaired. It is not true. Give it to the right company it will be fixed,”he stated.

While further informing on the need for the government to assist the midstream through the provision of crude oil he stated that some modular refineries may not be able to assess the seed product which is crude oil so easily under the present arrangement.

According to him, “for the modular refineries some can’t even find the crude and when they cannot get it from NNPC, they will want to go to Shell because the cost of lifting the crude oil  is so enormous and 15 percent of such proposed modular projects have not started operations”, he further explained.

Ogedengbe identified the Aret Adams refinery which was acquired by the Niger Delta Development Commission (NDDC) as  the only one which has met the criteria for modular refinery operation.

“The factors required for successful operation   include location, source of crude. “So setting up modular refineries requires that you have the source of crude supply and even if you have the source of crude you must have the immediate market to which is ready to absorb the products from the refinery otherwise the project will not be successful,” he added.

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