In the face of the present economic challenges in Nigeria and the apparent global stance on oil production,1 there is an urgent need to overhaul the Nigerian oil and gas sector even as it remains a major source of revenue generation for the nation. To this end, there have been various initiatives at diversifying the sources of income to redress the current economic downturn without neglecting the sector that produces the largest volume of income. In overhauling the Nigerian oil and gas sector, it is necessary to revisit the processes by which crude oil is refined and more particularly by addressing the issue of modular refineries.
What is a Modular Refinery?
Crude oil in its natural state has little practical use, but when it is refined we can end up with petrol, diesel, jet fuel, liquid petroleum gas (LPG), gas oil, heating oil and residues such as bitumen. Through refining, by-products for lubricants most importantly for petrochemicals can be obtained2, and considering the high demand for refined products, the increased agitation for more efficient modalities for refining crude oil is justified.
A modular refinery is a processing plant that has been constructed entirely on skid mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping the components link together to form an easily manageable process.3 It is manufactured in controlled conditions, fully assembled and tested prior to overseas shipment, and installed at a client's site in much less time than a traditional refinery.4 Constructing a modular refinery in Nigeria requires a design capacity not exceeding thirty thousand barrels per day (30,000BPD). If the plant capacity exceeds 30,000BPD, the plant must be upgraded to a full conventional refinery.5
Despite the reasons advanced in support of the establishment of modular refineries in Nigeria, it must be emphasized that it cannot take the place of traditional refineries. Modular refineries can only supplement the conventional refineries and in Nigeria with its peculiarities of low maintenance culture, relative insecurity and the dearth of funds, it will do the country great good to focus its attention in this direction whilst sorting out the never-ending challenges of managing regular refineries.
The Legal and Regulatory Framework for Establishing Modular Refineries in Nigeria
The process for establishing a petroleum refinery in Nigeria is regulated by the Department of Petroleum Resources (DPR)6 through Policies and Regulations made by the Ministry of Petroleum Resources.7 The regulatory procedure is laid out in compliance with Regulations (2) and (3) of the Petroleum Refining Regulations8 made under Section 9 of the Petroleum Act.9
An application for licence to construct or operate a refinery is made to the Minister of Petroleum Resources. The Applicant is required to accompany the application with not less than three copies of a detailed study of the project and the prescribed fees under the regulation which is non- refundable.10 The Minister in the exercise of his discretion may grant the application if the Applicant has complied with the prescribed terms and conditions listed in the regulations.11 An applicant who intends to modify or enlarge an existing refinery with a view to increasing the capacity of the refinery must submit an application to the Minister. The application will be considered after the non-refundable prescribed fee is paid. The approval of the Minister must be in writing.12 For example, if the Applicant intends to enlarge the plant capacity beyond 30,000BPD, the plant shall be upgraded from a modular refinery to a full conventional refinery; otherwise the Minister may refuse the application.13
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* Frederick Adefarati, LL.B. (Benin); B.L. (Nigeria); LLM (Swansea) Associate, Energy and Natural Resources Department and Real Estate & Succession Department, SPA Ajibade & Co., Lagos, Nigeria.
Portia Chigbu LL.B. University of Nigeria, Nsukka, B.L (Nigeria), Associate, Dispute Resolution Department, SPA Ajibade & Co., Lagos, Nigeria.
1 Oil and gas remains the engine of the world economy, and the consensus view is that the demand for oil is on the rise despite negative statistical data. See: Jude Clemente, "The Steady Drumbeat of More Global Oil Demand" https://www.forbes.com/sites/judeclemente/2017/05/29/the-steady-drumbeat-of-more-global-oil-demand/#c3dc9275e2d7 (accessed on 7th September 2017)
2 https://asokoinsight.com/news/modular-refineries-are-economic-wastes-nigeria (accessed on 25 August 2017).
3 Ikenna Ifedobi "Benefits of Modular Refining in Emerging Economies;" available at www.guardian.ng/opinions, accessed on 29th July 2017.
4 Sonny Atumah; October 17, 2017; www.vanguardngr.com (accessed on 4th August 2017).
5 See "General requirements and guidance information for the establishment of modular refineries in Nigeria" as published on May 2017 by the Federal Ministry of Petroleum Resources, available at: http://www.publicnow.com/view/7FAD7CDDCB3411F3EDBD0487266D3A116BD6C096?2017-07-03-16:30:25+01:00-xxx2146, accessed 7th September 2017.
6 Guidelines for the Establishment of Hydrocarbon Processing Plants (Petroleum Refinery & Petrochemicals) in Nigeria, 2007 published by the Department of Petroleum Resources. available at: https://dpr.gov.ng/index/wp-content/uploads/2013/09/GUIDELINES-REFINERY-AND-HYDROCARBON-PROCESSING-PLANTS.pdf, accessed 7, September 2017.
7 Pursuant to Section 47 of the Petroleum Refining Regulations, Laws of the Federation of Nigeria, No. 45 of 1974, the Director of Petroleum Resources, Ministry of Petroleum Resources is empowered to give directions as to the manner of compliance with any matter provided under the Regulation.
8 Petroleum Refining Regulations Laws of Nigeria 45 of 1974 Cap P10 LFN 2004.
9 Petroleum Act of 1969 Cap P10 LFN 2004.
10 Section 1 of the Petroleum Refining Regulations.
11 Section 2 of the Petroleum Refining Regulations.
12 Section 3 of the Petroleum Refining Regulations.
13 See "General requirements and guidance information for the establishment of modular refineries in Nigeria" as published on May 2017 by the Federal Ministry of Petroleum Resources.
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