Private refinery owners seek Nigeria’s guarantee on crude supply

Apr 18, 2005 02:00 AM

Federal Government has been urged to guarantee constant supply and at reasonable discount, crude oil feed stock for private refinery owners, in a bid to boost indigenisation in the oil industry and reduce economic effects of fuel importation in the country.
The call was made at a media parley organised in Lagos by the Association of Petroleum Refinery Owners of Nigeria (APRON), where efforts were also made at debunking some allegations on the status of private refineries, who were issued approvals to construct plants.

The association, led by its Chairman, Justice Samuel Omotunde Ilori (former Chief Judge, Lagos State) insisted that approval to construct (ATC) private refineries were issued by Ministry of Petroleum Resources only in October, 2004, and a grace period of 18 months given within which each licensee was expected to begin construction, after studies have been carried out and drawings done.
"There is a need to correct a wrong impression created in the minds of the Nigerian public, both on the soundness and efficacy of Federal Government's deregulation policy of the downstream oil sector and in the minds of our foreign partners as to the time frame for construction of private refineries contained in the ATC issued to our members", Ilori stated.

Speaking on the guidelines for grant of licenses to establish private refineries and the enormous financial outlay involved, Ilori claimed, "no company can embark on the activities of feasibility studies, front-end engineering design and configuration, geological and seismic tests until it has received the approval to construct. The ATC was issued by the Ministry in October, 2004, and is still valid until end of March, 2006".
To him, "we are aware that there are some elements who are interested in confirmed importation of petroleum products to Nigeria, for personal benefit no matter the injury such importation inflicts on this nation's economic welfare. Such elements will go to any length to sabotage government's laudable policy intended for the benefit of all Nigerians".

He revealed that only 14 out of 18 applicants were granted ATCs by the government, with two previous ones, making 16 successful awardees in all, and disclosed moves by the private owners to begin operations and necessary requirements for local refining within the approved time frame.
Dismissing the issue of mergers among owners, Ilori claimed such a move would not work based on the peculiarities of each approval, based on location, area of operations and construction capacity.

Majority of the owners at the forum (11 private owners attended) also called for government guarantee on feed stock supply for their plants, once operations commence, and a discount on the price of crude oil allocations to the private refineries. Even though they preferred total deregulation of the downstream sector, they urged government to do so in an orderly fashion so as to assuage the fears of technical and financial partners on likely reversal of relevant policies.
According to Dr Diran Fawibe of International Energy Services, "a lot of efforts are going on among players in the private refinery sector and incentives are needed from government. There should also be focus on the rationale of pricing of local products as against the international market. If government claims it is losing on fuel importation, then it is sensible to give discount to private owners".

"Private owners have problems as long as the present policy of crude oil pricing continues. Crude oil has to be appropriately priced for local refineries. Government has to realise the necessity for discount in crude price.”
“What you give in discount on crude would be gained in the multiplier effect on the economy, through employment opportunities, and manufacturing of useful by-products", Fawibe added.

Source: This Day
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