By McJohn Adjoto
Mini refinery earned close to $13Million in 2014
The Mini refinery located on the Ogbele marginal oil and gas field in eastern Nigeria has produced over 45 Million litres of diesel since it was commissioned in December 2011.
“Sixty Five percent of the volume produced is sold in the domestic market”, said Layi Fatona, managing director of Niger Delta Petroleum Resources (NDPR), operator of the field. “The rest is utilized by the company for oilfield operations”. Fatona told a roomful of guests at the February 2015 edition of the Lagos Oil Club Q+A that 135 companies from 12 states in Nigeria, including Nassarawa in the north, send their trucks to load at the refinery.
The topping plant converts 1,000Barrels of crude from the Ogbele field into 120,000 litres of diesel every day. Small as it is, it is the only privately owned crude oil refinery in Nigeria.
Fatona argued that the crude oil refining enterprise is a much more value adding proposition for growing the Nigerian economy than producing crude oil into the terminal and exporting it. “The value chain here is long”, he explained. “Just look at the number of companies and their employees that we have to deal with, in this small operation”.
Apart from NDPR, the Nigerian state is the only other operator of crude oil refineries. The state hydrocarbon company NNPC runs four refineries with nameplate capacity of 445,00BOPD, but the performance is so poor that over 70% of petroleum products used in the country are imported.
“In 2015, Nigeria should be thinking less about crude to terminal than crude into refinery”, Fatona declared.
NDPR is planning, as part of a two – five year plan, to expand capacity fivefold to 5,000BOPD which, “if we assumed a 60% operational efficiency rate, equates to revenues greater than $3Million per month, or $36Million per annum”, the company notes in a statement outside Fatona’s speech. “This would require capex of $12Million to achieve, with a payback of around six months”.
“We have valued the refinery using EV/EBITDA multiples which assume a 50% EBITDA margin on revenues, 30% corporate tax rate and a 6x EV/EBITDA multiple which is typical for a global refinery, to arrive at our NAV value of $32Million”, the company says.