Fuel subsidy: Senate summons NNPC over 43 modular refineries
Written by Henry on July 24, 2019
The Senate on Tuesday lamented the multi-billion dollar being paid by the Federal Government to subsidise refined petroleum products for Nigerians.
The upper chamber has, therefore, mandated its petroleum committee to invite the Ministry of Petroleum and the Nigerian National Petroleum Corporation to brief it on the status of existing refineries in the country.
It also asked the committee to ascertain the true position of things with the newly licensed modular refineries.
The decision followed a motion by Sen Rose Oko (PDP — Cross River) on a motion entitled, ‘Existing Petroleum Subsidy: Ensuring Self-Sufficiency in Domestic Refining of Petroleum Products’.
The motion had 42 other senators as sponsors.
Speaking on the motion at the plenary, Oko said although Nigeria was producing 1.7m barrels of crude oil per day, its moribund refineries had little refining capacity.
She lamented that the nation was importing about 90 per cent of its fuel, negating much of the benefits accruing to oil producing nations from high crude prices.
She said despite the resources expended on turnaround maintenance, none of the NNPC’s four refineries currently functioned up to 50 per cent of their combined capacity of 445,000 barrels per day.
She added that data from the Department of Petroleum Resources website indicated that a total of 633,000 barrels per day refining capacity had already been lost due to the expiration of licences of both conventional and modular refinery projects.
Oko, who also spoke on the fuel subsidy, said more than $160m was spent on subsidy in early 2017.
In his submission, Senator Ifeanyi Ubah, who is also a major player in the petroleum industry, asked the Senate to invite other stakeholders for the parley.
He said the Major Oil Marketers Association of Nigeria, the Depot and Petroleum Products Marketers Association, the Independent Petroleum Marketers Association of Nigeria and the Department of Petroleum Resources should be part of the talks.
Ubah noted with regret that Federal Government’s policy of importing refined petroleum products while still trying to encourage local production would never encourage investors.
He said, “There is a reason many people are scared of investing in modular refinery. They are afraid that the Federal Government would continue to import fuel and that would affect their business.
“The Nigerian government should, as a matter of urgency, go to our reserve and take $1bn and use it to guarantee the investment of those who have invested heavily in modular refineries.
“If we release $10bn to 1,000 companies with proven capacity to manage modular refineries, the nation would have more than enough fuel supply and refined petroleum products importation would be a thing of the past.”
Other senators including Barau Jibril, Thompson Sekibo and Ali Ndume also called for grants to support the actualisation of the 43 modular refineries in the country.
The Senate in a voice vote urged the committee on petroleum downstream and upstream, when constituted, to report back to the upper chamber on the status of modular and existing refineries in eight weeks time.
The President of the Senate, Ahmad Lawan, said the motion was designed to ensure that the 43 licensed modular refineries became operational.
Meanwhile, the NNPC through its exploration and production arm, Nigerian Petroleum Development Company, has signed a $3.15bn Financing and Technical Services Agreement with Sterling Oil Exploration and Energy Production Company Limited for the development of Oil Mining Lease 13.
Also, the Federal Government has granted approval for the phase two development of the Otakikpo marginal field in Oil Mining Lease OML 11, which involves the full Field Development Plan and Environmental Impact Assessment of the field in order to boost crude oil production from the site.
The NNPC said on Tuesday that the financing deal would help increase the country’s crude oil production as the corporation made efforts to meet its three million barrels per day oil target.
The OML 13 is 100 per cent owned by the NPDC and is located in the eastern axis of the Niger Delta covering a total area of 1987km².
The Group General Manager, Group Public Affairs Division, NNPC, Ndu Ughamadu, quoted the corporation’s Group Managing Director, Mele Kyari, as describing the funding arrangement as “a game changer to oil and gas project financing in Nigeria.”
The GMD, who was represented by the Chief Operating Officer, Upstream, Mr Roland Ewubare, expressed gratitude to President Muhammadu Buhari for approving the transaction, adding that the OML 13 held strong potential both for the petroleum industry and the nation’s economy.
He said that the Federal Government was expected to earn over $10.2bn in royalties and taxes from the project over the next 15 years while the NNPC would earn over $5bn after payment of the entire financing obligation.
Kyari said the acreage could boast over 926 million stock tank barrels and 5.24 trillion cubic feet, respectively of oil and gas reserves, adding that the financing and technical services agreement was for a period of 15 years, while the $3.15bn ceiling funding would be provided by SEEPCO with a 10-year capital investment period and five years for cost recovery.
First oil of about 7,900bpd is expected from the project by April 1, 2020 while production is expected to peak at 94,000bpd and 542mmscfd within four years.
The Chairman of Sterling Oil Exploration and Energy Production Company Limited, Tony Chukwueke, expressed delight at the opportunity offered the company to support the production and reserves growth aspiration of the Federal Government.
On the OML 11, it was gathered that the government through the DPR issued the approval to Green Energy International Limited, the operator of the Otakikpo marginal field.
The approvals came on the heels of the Memorandum of Understanding signed by GEIL and its partners for a finance package of over $350m from international financiers.
The Director, Corporate Affair, GEIL, Olusegun Ilori, disclosed that the company planned to increase crude oil production from 6,000 barrels per day to 20,000bpd.
The Chairman, GEIL, Prof. Anthony Adegbulugbe, commended the Federal Government and the DPR for the approval, adding that it complemented the efforts of the operator in attracting the necessary financing to unlock the potential of the field and boost investors’ confidence in the project.