The scarcity of refining capability at current oil refineries is the principle driver of Nigeria’s gas disaster, which hampers the socio-economic improvement of the nation. It locations a excessive subsidy burden on the federal government and has lengthy made Nigeria dependent on imported petroleum merchandise. The nation makes use of little renewable power.
The gas disaster has additionally led to the proliferation of artisanal refineries within the oil-producing Niger Delta area, with large environmental and well being challenges.
The just lately signed Petroleum Trade Act (PIA) 2021 goals to pave the way in which for elevated funding in Nigeria’s crude oil refining capability.
It additionally seeks to handle the grievances of oil-producing communities: unemployment, lack of socio-economic improvement and environmental air pollution. The Act made a provision for a much less cumbersome course of for granting operational licenses to buyers within the downstream oil operation, which might improve funding curiosity in modular refineries.
Lately, there was elevated curiosity from the Nigerian authorities’s petroleum ministry in modular refineries as a way of addressing the deficit of petroleum merchandise.
Modular refineries are simplified crude oil refineries with capacities starting from 1,000 to 30,000 barrels per day. They’re well-suited for distant areas.
Over 30 licences for modular refineries had been issued in 2015 by the Division of Petroleum Sources (now Nigerian Upstream Petroleum Regulatory Fee).
However only a few function successfully, due to inconsistencies surrounding coverage and rules in Nigeria’s funding area. There may be nevertheless no readability within the petroleum business Act to treatment these inconsistencies.
At the moment, modular refineries are thought-about helpful to assist meet power demand within the nation. However in view of the worldwide name for the discount of greenhouse gasoline emissions, they’re a brief time period resolution.
On the 2021 local weather change convention in Glasgow, Nigeria’s President Muhammadu Buhari pledged to realize web zero emissions by 2060. This could imply de-carbonising the oil and gasoline sector.
Modular refineries as an answer
The modular refinery know-how has enchantment on a number of fronts. It’s easy and simple to copy.
These refineries will be constructed inside 12 to twenty months. They are often inbuilt phases at a low value and supply flexibility for upgrades primarily based on an investor’s desire.
They’ll pay for themselves in a single to 5 years, relying on the kind of refined merchandise.
Nigeria refines nearly none of its personal crude oil. The price of importing refined petroleum merchandise exceeded petroleum exports by US$43.56 billion in 2020. If modular refineries lowered or eradicated gas importation, they’d get monetary savings spent on importation and subsidies and scale back strain on overseas change.
The refineries are usually sited shut to grease manufacturing amenities. This creates alternatives for extra Nigerian companies, that are the principle gamers within the onshore marginal oil fields.
Native individuals might be engaged in making, putting in and working the refineries. This would supply employment, which is far wanted within the oil-bearing communities. The low know-how requirement permits native engineers and technicians to take part.
The Nigerian Content material Improvement and Monitoring Board, promotes native content material within the oil and gasoline industries, has envisaged 70% of the fabrication actions throughout the modular refinery area will likely be carried out regionally.
The lowered pipeline community requirement has the potential to extend direct jobs within the type of truck drivers, gross sales assist and different assist providers, which will likely be required to ship the refined merchandise to the final mile.
The sector might additionally drive petrochemicals analysis and improvement within the native universities.
Though modular refineries might assist in assembly Nigeria’s rising demand for petroleum merchandise and have a variety of different potential advantages, they bring about challenges too.
Coverage and rules: There may be a variety of uncertainty and inconsistency surrounding coverage and rules in Nigeria’s funding area. This has been blamed for a US$15 billion loss yearly in overseas investments.
This expertise might discourage buyers and stands out as the motive many modular refinery licences have expired.
Social challenges: Lack of integration of the present unlawful artisan refineries into the mainstream of the modular refineries might create rigidity and lead to oil theft and armed battle.
Carbon emissions: Oil refining contributes about 5% to 10% to international complete emissions. It might improve with the proliferation of modular refineries, that are much less environment friendly than standard refineries. Nigeria’s emissions commitments would possibly require the modular refinery operators to introduce greening applied sciences.
Technical challenges: Premium motor spirit, or petrol, is the product in best demand in Nigeria. Making it in a modular refinery requires catalytic reformers and fluid catalytic cracking unit or hydro-cracker models. These models current a lot of the technical challenges in current refineries in Nigeria.
A number of the recognized challenges might be addressed as a brief time period resolution to the power disaster.
Steps would possibly embody:
- coordinating rules to construct buyers’ confidence
- incorporating current native applied sciences – artisanal refineries – into the mainstream
- collaboration between the modular refinery operators and establishments of upper studying within the nation to develop higher catalysts.
However the long run resolution to the power disaster could be to include inexperienced applied sciences into modular refinery operations.
That is essential in order to not undermine Nigeria’s efforts to de-carbonise the nation. One other resolution might be the usage of renewable power within the transport sector to cut back the demand for refined petroleum merchandise.