The Department of Petro-leum Resources (DPR) has disclosed that of the 18 petroleum refinery licences issued by the Federal Government four years ago, only about five could be categorised as viable projects.
A DPR director, Dr. Tony Chukwueke, explained to THISDAY yesterday that for a refinery project to be successfully executed, a full cycle economics of the project must be carried out and only about five refinery projects in the country were being established on this principle.
In the same vein, the President of the Nigerian Association of Petroleum Explorationists (NAPE), Mr Austin Avuru, who also spoke with THISDAY on the same issue yesterday, was even more critical as he stated that only one of these four or five projects actually looked serious.
�For a refinery project to be successfully executed, the feed stock and off take must be evaluated and the full cycle economics of the project must be carried. Only the refinery projects in Akwa Ibom, Ondo, Ogun, Rivers, Delta and Bayelsa States can be said to be serious projects because they are based on complete evaluation,� Chukwueke said.
Describing the concept of full cycle economics in the establishment of refineries, Chukwueke said it bordered on the effective combination of crude production with refining activities in the downstream.
�It is such that when the upstream is more profitable, you use the upstream to cushion the downstream and when it is the other way round, you use the downstream to cushion the upstream. That way, it is integrated and the project is more robust�, he said.
Speaking on the same issue, Avuru also told THISDAY that up to 18 licenses were given out about four years ago and of the 18 operators that got the licenses, four of them seemed to be making moves but only one seemed actually serious.
�You know there were 18 licenses given out, these 18 licenses were given out about four years ago and of these 18, we hear about four of them who have made sufficient noise but only one of them, which is Orient Petroleum is close to getting to construction stage,� Avuru said.
Chukwueke had earlier stated that government had taken a decision to encourage more investments in the downstream by giving preference to companies that agree to invest in the downstream, in the allocation of crude oil blocks which has made more investors from Asia interested in Nigerian Assets.
�We have had a flood of investors from Asia who are interested in our downstream sector in so far as we give them opportunity in the upstream and this is forcing us to increase the number of blocks on tender in the forth coming bid round from the 50 blocks initially announced to 60 subject of course to the approval of the minister,� he said.
He said the operators of most of the blocks in the country had not embarked on the investment in the downstream and major developmental projects because it was not contained in the contract that they signed with government that they must carry out such investments.
He said the new policy of tying assets in the upstream to interest in investing in the down stream will help to direct genuine investments to the downstream since the companies that will now win Nigeria�s blocks in the upstream will have it signed in their agreement that they must invest in specific projects.
�Before now, the contract with companies that won crude oil blocks did not say they must invest in our downstream. We have tried to persuade them and we have failed. But now, it is contained in our contract with block winners that they must invest in refineries and this is a precondition for the award of the blocks in the first place,� Chukwueke added.
Oct242006