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Vacancy: The Crude Oil Refinery Owners Association of Nigeria (CORAN)

PAID POST

CORAN is looking to employ an Executive Director who will be responsible for overseeing, planning, organizing, directing, coordinating, and implementing CORAN policies, programmes, directives, and strategic plans as determined from time to time by the CORAN National Executive Committee, NEC, Chairman, and Secretary

Job Description: Executive Director (CORAN)

The Executive Director of the Crude Oil Refinery Owners Association of Nigeria (CORAN), under the supervision of the Secretary and the leadership of the association’s Chairman, will be responsible for overseeing, planning, organizing, directing, coordinating, and implementing CORAN policies, programmes, directives, and strategic plans as determined from time to time by the CORAN National Executive Committee, NEC, Chairman, and Secretary.

 The Executive Director will perform the following duties:

  • He/she shall co-ordinate and oversees the day-to-day general administration and management of CORAN National Secretariat.
  • Manage and administer the Secretariat, human resources, financial and other resources effectively to achieve the objectives of the CORAN.
  • Coordinate and ensure the effective and efficient implementation of CORAN strategic plan, programmes, policies, decisions and resolutions of National Executive Committee, BOT and the AGM,
  • Prepare preparations and represent the Association in high level meetings in regulatory agencies, Government agencies and Private sector, and professional bodies to present and articulate the CORAN positions
  • Develop programmes, initiatives and projects that relate to the regulatory, representative, re-engineering and public interest roles of the CORAN.
  • Review and recommend approved plans and budgets to the Chairman and Secretary during the annual planning and budgeting cycle.
  • Prepare and propose an annual plan and budget to the Chairman and Secretary for presentation at the CORAN National Executive Committee.
  • Manage research and development of policies, working papers, memoranda of understanding, briefs, idea notes, and other materials for CORAN Leadership.
  • Create business development, sponsorship, and advertising activities to generate revenue for CORAN.
  • Promote professionalization of the National Secretariat to better serve local private refineries.
  • Assist CORAN governance structures and platforms, including committees and forums in organizing and implementing their programs, strategies, priorities, and goals.
  • Facilitate and promote collaboration and partnership with external stakeholders, local and international organizations and Development Partners, donors etc
  • Manage and ensure smooth transition from one outgoing CORAN. leadership/administration to an in-coming administration.
  • Ensure continuity and consistency of programmes and policies of successive CORAN administration.
  • Ensure the timely monitoring and evaluation of programmes, policies, plans and milestones using the necessary monitoring and evaluation mechanisms and tools.
  • To carry out any other duties and assignments that may be assigned by NEC, chairman and Secretary from time to time

Requirements:

The ideal candidate should have a minimum of 7 years’ experience in administration and management.

Qualification:

  • First degree – BSc or HND
  • An advance degree such as M.Sc. in Business Administration will be an added advantage.

Contact:

Qualified candidates should send their CV and cover letter via email to info@coran.ng in PDF format not later than two weeks from the date of this publication.


Shell Nigeria Recommences Crude Oil Supply to the Port Harcourt Refinery (PHRC)

The Shell operated Bonny Oil & Gas Terminal completed the supply of over 475,000barrels of crude oil to Port Harcourt Refining Company (PHRC) after a prolonged outage of over five years, during which the Refinery underwent rehabilitation and integrity activities on its supply pipeline from BOGT.

“This significant milestone was made possible through intensive preparations, collaboration, and the dedication of both the BOGT and PHRC teams”, Shell told its staff in an internal memorandum.

Key preparatory activities at the Refinery and Terminal to ensure seamless recommencement of crude oil supply included:

  • Pressure and leak testing to assure pipeline integrity by relevant subsidiaries of te NNPC Ltd.
  • Integrity and maintenance activities on the BOT Refinery export pumps (which had been shut down for an extended period) and associated instrumentations at the terminal through diligent efforts of the BOT operations and maintenance teams.

Shell said that it identified some issues at planning and execution stages among others which included:

  • Effective communication: to assure Asset Integrity and the safe supply of crude oil without any environmental impact.
  • Crude Oil Accounting: critical concern highlighted by BOGT was periodic crude oil accounting for two reasons
  1. Continuous assurance of integrity of pipeline (wide volume discrepancies could be an early indication of compromised pipeline integrity).
  2. Compliance with Regulatory guidelines.

Through the duration of the refinery supply, the team experienced a number of challenges.

These included wide discrepancy of compared supply volumes between the Terminal and Refinery, significant export pressure increases and low flow rates (compared to historical data).

However, at the point of each challenge, the team (BOT and PHRC) paused, took a step back and jointly reviewed the concerns, agreed on remedial actions and a way forward before recommencing supply. This resulted in the successful and safe completion of the refinery supply with no harm to people, environment, or equipment.

“In conclusion, the recommencement of crude oil supply from the Bonny Oil and Gas Terminal to the Port Harcourt Refinery is a significant achievement and a game-changer for the industry and the country. The intensive preparations, collaboration, and dedication of both teams involved were instrumental in overcoming challenges and ensuring a safe and efficient supply operation. This milestone will support the Government’s aspiration of steady supply of petroleum products to the downstream market and other associated benefits to the economy of the nation”, Shell says.


‘We’ve Bolstered Our Credentials in Nigerian Crude Oil Refining’

In the first of a three-part series, GBITE FALADE, CEO of the Nigerian integrated energy provider Aradel Holdings, fields questions around the sustenance, daily obstacles and the opportunities in the Nigeria’s burgeoning private sector crude oil refining business

He spoke to Akpelu Paul Kelechi

There is a very poor understanding of the profitability of the crude oil refining market in Africa, and indeed Nigeria. But to go by Aradel’s report, things look pretty good. You were unable to export crude oil for a significant part of 2022 and 2023 and so you recoursed to growing your refining portfolio.You earned 13Billion Naira from sale of refined products in the first quarter of 2023, which was more than quadruple your earnings from crude oil. And you’ve  grown that segment  even more since then.   Is the refined product market probably more profitable than the crude export? Your company has been very profitable when there was not even a drop of crude supply. That’s contrary to widely held perception.

Gbite Falade, Aradel CEO

The profit margin in the upstream is superior to the one you have in refining. When you also consider that that same upstream crude becomes the basic feedstock for your refining, the entire investment on refining infrastructure in your inside battery limit which includes your plants, the outside battery limit which includes storage and many other things, plus the ecosystem of all that you need for off-take, loading, and the sheer number of workers to run a midstream-downstream refinery, you need to ensure that the margin that you have beyond your feedstock input price, is significant enough to cover the general and overhead expenses and then amortise for the CAPEX you have invested in that refining space. By the time you do the accounting, it would be clear that you don’t have that much wiggle room that you have in the upstream.

In the upstream, you need fewer human beings to bring the crude to the surface.  Personnel that you need in the refining midstream and downstream is much more. The sort of quality standards that each product must confirm to and the Q&A processes, lab testing to make sure it works well, your process safety setup and so on, by the time you take a view of all of that, the headroom that you have between the difference in your feedstock price and your realized price at which you sell the processed product does not give you the same quantum of margin as in upstream.

Aradel Holdings produces its own crude, so you probably would not be facing the same challenges that other refiners are facing when it comes to allocation of crude to refineries. But, do you agree that crude should be sold in (the local currency) Naira to modular refinery operators since they are producing for the local economy?

The PIA has actually leap frogged to making that a construct that allows domestic refiners to access crude and pay for it in naira.

You spoke of your company’s likely delivery of Premium Motor Spirit (PMS) in 2024 and, by implication, increased crude intake capacity. How much crude oil increase do you need for you to get to PMS?

We are on a journey to commissioning our PMS station in 2024. We’ve started the process and there are activities within that process that are significantly time driven, some are also significantly driven by the global supply chain. Today, we have a PMS station that is mechanically completed so what we’re getting into now is the commissioning in 2024.

The PMS train has a capacity of about 3,000 barrels per day so it’s capable of churning out about almost 500,000 litres of PMS on a daily basis when fully loaded. It’s a good start and it’s something that we will build on. We are [also] increasing the capacity utilisation of our entire refinery, which today stands at 11,000 barrels per day. Of the five products that it will produce, we designed the refinery in such a way that naphtha, which is the reformate feedstock for PMS, that is produced from that comes to about 3,000 bpd.

Also, we are increasing our capacity utilisation. In 2021 we ended up with a capacity utilisation of about 12½%. We doubled that in 2022 and we have set a target to practically almost double that in 2023. So, whether the PMS comes in or not, we will increase capacity utilisation and there’s a target we have set for ourselves for 2024.

The PMS train does not necessarily increase our capacity utilisation because we’ve been selling the naphtha that should have gone into the PMS train. So, when the PMS train comes, we would redirect the destination of the naphtha to become input into the PMS train. In the medium term, we are working to get to 90% and above capacity utilisation for our refinery. In the event that we have other modular refineries that are producing naphtha that they do not have a destination for, we could take it from them and add it to our own, even while we have not reached 90% capacity utilisation. We can have enough naphtha feedstock to fully max out the capacity of PMS.

Without necessarily adding crude itself?

Yes.

You figured out a way around regulatory, export and logistics to ensure that you export naphtha for some foreign exchange. Now you want to use the product to earn local currency?

There is a balance between what we devote to export and what we commit for local reticulation. It’s an economic decision but we also think it’s a social responsibility decision for us. We make sure that we are returning value to our shareholders but we are also satisfying some wider community of stakeholders including our local economy.

Besides, even on the international markets, you’re having challenges. We’ve just come through a very difficult one where even though we had aspiration for exports, the evacuation infrastructure was not available. If we had not taken time to develop an alternative destination for the crude, we would have been lame ducks. Our pride will always be that we not only maximised return to shareholders, but we also are active contributors to the economic development of our nation [and] easing the burden on the Naira.

How helpful has the NUPRC been to you on domestic crude obligation? They put out a release somewhere that says NUPRC has enabled Aradel and others to about 4Million barrels of crude as feedstock for your refineries. This is in the context of the domestic crude obligation that was enabled by the PIA. is this correct? Do you plan to use the Domestic Obligation anytime in future for increased refining work?

Did they mention Aradel?

Yes.

The feedstock that we have had in our refinery has been self-help. We have not succeeded in attracting feedstock barrels outside of the envelope of what we produce. For us, it comes at a price, especially when you consider the fact that the CAPEX required for building out our infrastructure and drilling the wells and doing everything else is dollar denominated.  Each barrel that we earn in naira rubs us of the opportunity to get the forex to be able to defray expenses and loan obligations that are dollar denominated.

It should have been a totally different case if we were receiving third party crude enabled by whether it’s NUPRC or somebody else that then allows us to still export our crude and earn the dollars to pay down our debt while at the same time maximising the fact that we have invested in this refinery and making the product available.

You do have an obligation of a certain percentage no matter how much crude you are producing, to refine in the local economy and the enablement of the NUPRC is say okay, we approve that you take say 3,000 of your 11,000BPD or something. Is that not the way it works?

Domestic delivery obligation is enshrined in the PIA and the PIA came in 2021. We’ve been refining since 2010-2011, so we were not under compulsion or obligation from anyone such that it would be deemed that our action is consequent to a directive or a regulation or an enshrined tenant within the PIA. We give them credit for that but that’s not the case.

But do you plan to use this domestic obligation anytime soon to increase the refining scope?

Yes, we do and without it, we will not be able to fully maximise the capacity of our refinery because no matter how patriotic we are, we still must maintain a baseline of export to generate the forex not only to meet our loan facilities that are dollar denominated, but even the economy is also helped [by inflows].

Without recourse to this delivery obligation coming from others, we would just have an investment that would be seriously underutilised and that will not be in our interest or the nation’s.

So, how do you propose to do it? Can you explain it in terms of, at what point will you be comfortable to go to Abuja and say, we’ve done this much and we need you to do this for both our and the nation’s sakes?

That conversation has started as we speak. We have written formally to the NUPRC, we’ve written formally to NMPPRA. We have asked for their intervention to come and help us with the sourcing and allocation of third-party crude supplies under the domestic crude delivery obligation that would then allow us to be able to maximise.  We have started that process and we are hoping that it’s something we can wrap up as sooner than later.

Instead of Year-To-Date figures, what was your current output in August 2023 and what is the month to date in September 2023 for crude and the refinery?

In August, we did on the average, north of 11,000 bpd coming from the upstream and that’s even a curtailed production. We had to deliberately shut-in on our gas supply to the NNLG because we just could not continue on very inferior pricing. So, the condensate, the liquid leg associated with our NAG volumes which is north of 2,000,Barrels of Oil Per Day was not produced. So that was our experience in August and that’s our reality in September.

So, when you say you’re producing 6,000BOPD  for example, you have at least a thousand barrels of condensate per day (1,000BPD) spiked that makes that 6,000 right?

Yes.

It is important that you understand where we are. We are exporting now, but why have we not lifted force majeure on our supply to the NLNG? All these things I just shared with you are part of the reasons. We also need to strengthen our leverage at the table.

You did talk about gradational increase to refinery, from 12.5%, to 25% and to 50%. What percentage are you at right now?

It is 50% that we are targeting right now and in the last one month, I’ve been doing more than 50%. We did about 6,600 consistently and we have maintained that. But you see, the challenge with the Refinery is that, you get to moments where external factors force you at times to scale back. Like when the road network is impassable because of the impact of rain on the condition of the road. So even though you are able to refine, evacuation trucks are not able to come in as often or in the same sync with how you are refining and so, you have to tank top.  In order to manage it, you might need to shut down one of the trains for ullage management. But on a steady state, we can do 6,500 to 7,500 consistently if we don’t have a choke in the evacuation and logistics area. We have lost some ground in the first half of the year. But we have ramped up in the second half of the year that we might be able to establish that 5,500 as a steady state rate but it will not reflect the full year’s average.

If we’re going to go beyond that, that’s why we need third party crude supply to then help fill the ullage that is in my refining capacity while I’m also allowed to breathe and make some export dollars.

One of your competitors in the refining business thinks it is rather expensive to install the reformer unit, especially by a modular refinery operator, to process crude oil to the point of PMS. Are you into any kind of partnerships or are you getting government funding for that?

We are not into any partnerships and we have not received any government funding for that. And the comment made by whoever made it that it is very expensive, is correct. In installing our trains 2 & 3, which is 10,000 barrels, the cost of the reformer unit itself, was as much, if not more, than what it cost us to install trains 2 & 3 combined. So, it’s really expensive and it is the reason why most modular refineries would not contemplate doing it but for us, we have a long-term vision. Ultimately, we would like to scale up to capacities that are much higher, for which the 11,000 BOPD that we are grappling with right now will look like a proof of concept.

Do you want to put a figure to that?

No. We see ourselves scaling up in steps. It’s not going to be a single jump from where we are to an Eldorado number. We would rather take it in a series of steps to match the feedstock supply potentials that we’re able to secure. And also match that with the infrastructure for evacuating that.

 

 


Uganda Finalises Funding Talks with New Refinery Investors  

Final negotiations for the financing and construction of Uganda’s $4Billion domestic refinery began on January 16, 2024, after Alpha MBM Investments from the United Arab Emirates was chosen by the government of Uganda as preferred bidder.

The breakthrough was announced by Ruth Nankabirwa, Uganda’s Minister of Energy and Mineral Development, at the first of a series of press conferences due to run quarterly giving up-to-date overview of the country’s transformative oil and gas project.

As a strategic investor in the 60,000Barrels Per Stream Day facility, Alpha MBM Investments will replace the Albertine Graben Energy Consortium (AGEC), whose Project Framework Agreement (PFA) was refused extension after it expired in June 2023.

After the AGEC had been shown the door for apparently lacking a sense of urgency, Ugandan President Yoweri Museveni called for renewed search for a new lead investor.

“The Ministry of Energy and Mineral Development engaged stakeholders to develop a strategy for the refinery project and received Expressions of Interest (EOIs) from several potential investors and evaluated,’’ Mrs. Nankabirwa said.

Four investment groups expressed interest in the refinery project but Alpha MBM, which began preliminary talks with the Ugandan government last September, was successful.

“After thorough consultations and evaluations by the government, a Memorandum of Understanding (MoU) was signed on 22nd December 2023 between the Government of Uganda and Alpha MBM Investments LLC from the United Arab Emirates, outlining cooperation and negotiation terms for the Refinery Project”, the minister told reporters.

“I am happy to report negotiations of the key commercial agreements between the Government and Alpha MBM Investments LLC commenced on 16th January 2024 and are expected to be concluded within three months,’’ Nankabirwa explained.

Alpha MBM is a UAE-based investment house led by His Highness Sheikh Mohammed bin Maktoum bin Juma Al Maktoum, a member of the Dubai Royal Family.

Alpha MBM is a pioneering investment company and describes Uganda as “an untapped market with the power to create opportunities where none were perceived’’, the Minister noted.

Final talks began between the two sides on January 16 in Kampala for what will be East Africa’s first major refinery, ending the region’s reliance on refined products imported expensively from overseas.

“Since the landmark discovery of oil in 2006, Uganda has upheld the highest environmental, industrial, legislative, and regulatory standards,’’ she said.

And the construction of the refinery at Hoima in the west of the country will transform Uganda’s energy security profile as it will no longer rely on neighbouring countries for transshipment of critical fuel supplies.


Dangote Refinery Starts Up With 350,000BOPD, Will Work with the Market for Supplies

The Dangote Petroleum Refinery, which announced its commencement of production over the last weekend, started by utilizing 350,000Barrels of Oil Per Day from its storage, to output diesel and aviation fuel, for now.

The facility, located in the Lekki Free Zone in the eastern flank of Lagos, Nigeria, has a name plate capacity for 650,000BOPD, but the 350,000BOPD, Africa Oil+Gas Report learns, is a precautionary startup rate, because all the units are not yet ready to start. The company is avoiding production of giveaways, as it calls them: “products we have to sell at low prices”.

Dangote Petroleum Refinery is also using the startup period to test the equipment and plants under actual conditions, crude oil processing and high temperatures.

The company has been upfront about its challenges of procuring feedstock, informing the public step by step as it received million after million of barrels of Nigerian crude until it reached six million barrels in its storage. The announcement of commencement of production happened on January 13, 2024, five days after the six million mark was declared.

For a six-million-barrel storage, the 350,000BOPD input would suggest a 17-day supply, but that’s not how it works. Africa Oil+Gas Report learns that 11Million barrels are being contracted for, and will be delivered to the refinery, starting shortly. The Dangote Petroleum Refinery will stock the storage tanks to ensure maximum freedom to operate at optimal rates as conditions and the market warrant.

Akin Omole, the Chief Executive Officer of the Dangote Petroleum Refinery, in a January 9, 2024 statement, four days before the announcement of the Refinery start up, declared that Liquefied Petroleum Gas  (LPG) would be included among the startup products of the facility “before subsequently progressing to the production of Premium Motor Spirit (PMS)”.  Although LPG wasn’t included in the final statement announcing the Refinery take off, Africa Oil+Gas Report learns that the facility has, in its sights, early production of Propane and Butane. The latter is cooking gas.

Dangote’s struggle with feedstock procurement was surprising news to some of those who had followed the course of the project from the earliest days of construction.

The company had declared, as far back as 2017, that the refinery was designed to receive and process crude from many parts of the world. But foreign exchange availability has moderated that vision. The main supplier now is (the state hydrocarbon company) NNPC, which, in the view of the Dangote Petroleum Refinery, can supply in equivalent dollar, payable in Naira, since the products will be for Nigeria initially. The thinking is that the transaction will relieve the foreign exchange pressure on Nigeria very considerably.

But this is a two-way street: as Dangote snaps up a significant portion of NNPC’s share of crude, which is the Federation crude, and pays in Naira, it also increases pressure on availability of foreign exchange in the wider Nigerian economy. This is an interesting debate for economists, as 350,000BOPD is easily around 20% of the country’s total output..

The Dangote Petroleum Refinery can load 2,900 trucks a day at its truck-loading gantries. The products from the Refinery will conform to Euro V specifications. “The refinery design complies with the World Bank, US EPA, European emission norms, and Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) emission/effluent norms. Employing state-of-the-art technology”, the Refinery notes.

 


‘The Catalytic Reformer is Too Expensive’ ((OPAC)…’No We Can Afford It’ (ARADEL)…

Nigeria’s small scale crude oil refiners have been producing diesel, kerosene, jet fuel, high pour fuel oil, even naphtha, for, in some cases, over the last 12 years.

Now that a chunk of the government’s subsidy on Premium Motor Spirit has been removed, some of the companies are mulling ideas about secondary refining, which takes them to the point of producing Premium Motor Spirit (PMS), also known as gasoline.

But the readiness and/ or capacity to invest in the production of PMS depends on which refiner you are talking to.

“The catalytic reformer helps you to go into second secondary refining”, says Momoh Jimah Oyarekhua, CEO of OPAC Refinery, located in Delta State, but “part of the reason why most modular refineries today don’t have or cannot produce PMS is because they’ve not been able to purchase the units that will make them to go into secondary refining”.

Oyarekhua, who is the chairman of the Crude Oil Refinery-owners Association of Nigeria (CORAN), says that “the catalytic reformer, is a very expensive unit. Only three or four companies, globally, have the license to provide the equipment, so it’s not cheap”. He says that CORAN is advocating for some form of intervention fund from government so that refiners can invest in installing catalytic reforming units in their processing lines.

But Oyarekhua is not speaking for all modular refining companies when he says that government intervention fund is required to install a catalytic reformer.

Indeed, Aradel Holdings, operator of the Ogbele field and owner of a three train 11,000BPSD refinery, is in the process of completing the installation of one such reforming unit. “We are not into any partnerships and we have not received any government funding for that”, Gbite Falade, the company’s CEO, Africa Oil+Gas Report. “But it’s true, it is expensive. The cost of the reformer unit itself, was as much as, if not more than what it cost us to install the refinery trains 2 & 3 combined, which have a collective capacity of 10,000BPSD. So, it’s really expensive and it is the reason why most modular refineries would not contemplate doing it but for us, we have a long-term vision”.

Ultimately, Falade  explains, “we would like to scale up to capacities that are much higher, for which the 11,000BPSD that we are grappling with right now will look like a proof of concept”.  Falade says: “Today, we have a PMS station that is mechanically completed so what we’re getting into now is the commissioning in 2024”.

 


Nigeria’s Ongoing Turnaround Maintenance: Refining Economics 101 and why it matters

By Dimeji Bassir

In April 2021, the Nigerian government announced it had let out a $1.5Billion contract to Italian Marie Technimont for the rehabilitation of its 210,000 barrels a day portharcourt refinery which became operational in 1965. The news generated a lot of furore within the citizenry with a prominent Nigerian Banker stating the government was about to embark on a brazen and expensive adventure.

About the same time, the global oil and gas multinational, Shell, announced it had taken the decision to scale back its global refinery footprint by greater than half, having permanently shuttered its 240,000 barrel-a-day convent refinery in Louisiana a few months earlier.

The coincidence, and contrast in strategy between one of the largest global international oil companies and the eleventh largest OPEC country by reserves size couldn’t be more stark.

For Shell, the objective of downsizing its downstream business is to prioritize its most profitable assets while divesting from businesses that no longer align with its strategic objectives. Basically, a move towards strategic optimization.

In the case of Nigeria, a country which at best could be described as a sleeping oil giant that consistently underutilizes a lot of the things it is naturally endowed with. The West African OPEC nation has consistently underperformed its OPEC quota for close to ten years. Despite having an installed production capacity of two million barrels a day, its average daily oil output in September 2023 was 1.35 Million barrels per day, the highest it had been in the entire year.

The context of the outrage surrounding the announcement of the $1.5Billion rehabilitation contract lies within the May 2023 report which showed that the government had spent $25 Billion between 2013 and 2023 on fixing the refineries and yet had spent $10 Billion on petroleum subsidies in the year 2022. Juxtaposed with reporting from an ICIR report which revealed that the Port Harcourt refinery had posted losses five years in a row (2014 – 2018) totalling ₦206Billion. The story of the Nigerian refineries cannot be told without invoking raw emotions among the country’s  citizenry who are desperately yearning for available and affordable petroleum products.

To underscore the absurdity of Nigeria lacking everything it has, the country which has been described as oil rich and energy poor is blessed with an abundance of natural gas—north of 200Trillion cubic feet—which represents about a third of Africa’s total gas reserves. Yet commercializing its gas molecules to meet domestic power demand in a sector begging for critical structural reforms remains a mirage. 45% of the country’s two hundred million people remain without access to the power grid.

The passage of the Petroleum Industry Bill in 2021 birthed the Petroleum Industry Act (PIA) with one of its core mandates being the transformation of NNPC, the government-controlled agency, to a commercially driven limited liability entity. Theoretically, the impact of this transformation is expected to manifest in a restoration of operational oomph which had been lacking in the NNPC going by its track records of under-performance over the years.

Delivering capital projects with speed and efficiency has always been a major challenge, both for private and public corporations. Project performance data studied across governments and organizations globally shows that projects delivered under budget and ahead of schedule are the exception, not the norm. Data presented in Figure 1 below supports this point.

Figure 1:

Projects don’t go wrong but in many instances simply just start wrong. But it’s seductive to think that the only thing that separates us from the project delivery results we desire is one unique secret sauce we are yet to learn. Whereas in reality, there are a number of missteps which conspire and eventually derail capital projects, having been left unfettered for so long along the way.

Figure 2: Some causes of project derailments Source: PWC

While all megaprojects are susceptible to veering off track, some are more vulnerable than others, particularly those under the wrong stewardship. Project controls help, but they must be kept very tight. Due to the mission-critical and costly nature of the ongoing revamp works at the Nigerian refineries in Warri and Port Harcourt, the least desirable scenario is where project owners and managers are consciously or unconsciously stuck in a state of ineptitude and/or profligacy, what the writer refers to as the “Naija factor,“. The affliction of the Naija factor and its close cousins; cronyism, political meddling etc is rife. But those are not the focus of this article and will not be dwelt upon.

NNPC did not do much construction of any sort in the thirty years between 1990 and 2020 and a lot of organizational knowledge has certainly been lost in this period. We can infer therefore that the refinery revamp projects being spearheaded by NNPC are much bigger than the individuals leading them, particularly with little to no operational history to leverage—in planning and executing the projects—along with ingrained cultural inefficiencies to contend with. In the context of the three plants’ dismal operational performance over the years as earlier outlined, it’s no surprise that there’s been more than a few promised completion days albeit all botched.

Refining Economics 101 and why it matters:

Refining operations are complex with extremely tight unit economics. Financial performance is largely driven by two variables- the cost of feedstock i.e. crude oil, and price of refined products e.g. gasoline, jet fuel etc. The difference between a barrel of crude oil and the petroleum products refined from it. This concept, called the crack spread provides an indication of refining margins. Like most commodity play, a refinery operator has no influence on what it pays for feedstock or the price it commands for finished products. Refineries simply fill the market with products until margins, or profits, for refining the products drop. At this point, operators scale back on production to induce supply versus demand balances. This balancing act inevitably separates out those operators who are able to run their facilities efficiently from those who can’t. One of the biggest differentiators between the two groups is reliability which can mean the difference between operational excellence and mediocrity, perhaps even profitability versus bankruptcy.

In short, reliable operations are the strongest correlative indicator to profitable operations as reliability drives utilization which in turn drives profitability.

There are about 700 refineries globally with less than 300 of them accounting for 80% of the world’s approximately 100Million barrels per day refining capacity. Data gleaned from the global refining economics of reliability report shows that North American operators are the paragon of executing optimal reliability programmes. This is primarily driven by the fact that they are 100% private sector owned and operated, do not receive subventions or support from the government, and are driven mostly by a singular incentive which is to consistently deliver value to shareholders.

There are variable and fixed components to refining costs. 80% of the costs in a refinery go to feedstock. Operations & maintenance-related costs are independent of the quantity of crude processed and are fixed regardless of the plant’s overall utilization.

The difference of what is left over after backing out a refiner’s single largest cost from its theoretical revenues is what is available to cover the rest of its costs. Narrow crack spread implies that refiners have fewer resources to invest in sustaining their plants’ operations.

Better reliability enables increased utilization, lowers downtime, and significantly lowers operations and maintenance costs.

The prudent approach to refinery revamp:

Maintenance is the lifeblood of refinery operations, given the extreme degradation that physical assets are subjected to during the course of operations. But it’s important to establish that assets undergo non-age related functional failure. Over 70% of equipment studied in industrial plants experienced the phenomenon called infant mortality whereby there is a high probability of equipment failure shortly after being commissioned to service. While this data is not representative of industry in general, it challenges existing belief of a correlation between asset reliability and operating age, which led to the idea that the more an item is overhauled, the less likely it is to fail. This belief had formed the basis of designing preventive maintenance schedules but is now known to be largely untrue in the world of modern maintenance. Converse to that debunked idea, scheduled overhauls could actually increase overall failure rates by introducing infant mortality into otherwise stable systems. This is why a broadly defined reliability framework that synthesizes all the critical components of modern-day understanding of how machines function and knowledge of maintenance best practices should be adopted by every operator of asset-intensive plants.

Figure 3: Equipment failure shows no correlation to age Source: Reliability Centered Maintenance Book by Nowlan & Heap

In the intricate world of refining, a scheduled revamp aka turnaround, or shutdown, is a large-scale maintenance activity where the entire process unit is taken off stream for comprehensive maintenance related activities. The primary objectives are inspection of equipment, completing replacement of deteriorated parts, installing new facilities, upgrading or revamping the processes or capacities to restore the overall health of the plant and improve safety, health, and environmental conditions. Increased reliability correlates positively with the profitability of refineries.

Think of a revamp as a megaproject consisting of several thousands of integrated tasks that must be completed within extremely tight timelines and stringent specifications in order to restore the plant back to production timeously. Preparation for refinery revamps should ideally take anywhere between six to twenty four months. Avoiding false starts on these complex projects should be the goal of the organization and it means beaming a laser on discovering the unknown unknowns early on at the preparation stage.

A typical 120 thousand-barrel-per-day refinery would have tens of thousands of unique SKUs in equipment count. Any revamp, such as those ongoing in the Nigerian refineries, which had been moribund for years prior to the initiation of revamp works, required that a comprehensive, granular, reliability-based audit (gap analysis) is conducted to determine the as-is condition at each system, equipment, and component level. The deliverable from that molecular exercise should then serve as input into the detailed scoping of the rehabilitation works.

But very often, missing data—e.g. equipment health (obtained from predictive / condition monitoring technologies), equipment operations and maintenance history, etc.—prevents the conduct of a thorough and granular level equipment reliability-based gap analysis as needed. In such an instance, scoping the revamp is done blindly or based on assumptions rather than being data-driven. In addition to a detailed gap analysis as mentioned above, critical to the success of a revamp is the development of a comprehensive plan that identifies precise worklists, establishes realistic schedules, resources needed, and accurate cost estimates. Important to capture with precision the work to be done and in addition, have the work sequenced correctly. Rigour in risk analysis as well as scope challenge sessions that test for various scenarios on paper should be incorporated into the planning process preferably facilitated by experienced independent third-party consultants.

Recognize the value of experience: Leadership is the key to success on any project or major task. Given the immense responsibility, a refinery revamp manager must be a highly experienced, focused, creative minded and dynamic professional who continually strives for excellence. He must exhibit a leadership style that shows decisiveness, a clear methodology and approach to problem solving and bring a breadth of successful delivery of several revamp within the domain. They must have an innovative, entrepreneurial bent with an open-mindedness to accept divergent thinking and explore new technology that can drive revamp efficiency. They must be someone with deep domain practical experience and a proven track record of success. They will be tasked with assembling the right team, establishing a cohesive team culture, and cascading the project philosophy and ethos throughout the execution team.

Plan slowly, execute swiftly: When it comes to megaprojects, haste makes waste at the start. Bent Flyvbjerg avers in his book ‘ How Big Things Get Done ‘ that planning is the safe harbour as costs of its iteration are relatively low. Furthermore, he talks about the window of doom stating that projects that fail tends to drag on and those that succeed zip along and finish. The author advocates the maxim: ‘Think slow, act fast’ throughout the book. Errors are cheap and often fixable during planning. At execution, they are often fatal. This might seem intuitive but the data suggests that the 0.5% of 16,000 projects studied that succeeded were those where slow and meticulous planning preceded speedy execution.

“The irony of megaprojects is that many are late because not enough time is spent planning.”

Project controls underpin flawless execution: The complexity, notoriously tight timelines and high dependency of tens of thousands of maintenance tasks to be coordinated and completed on a refinery revamp project mandates it to be managed and organized with sound project management and advanced project control techniques. The sheer volume of activities and resources involved, along with millions of manhours, high costs, tough deadlines, a multitude of stakeholders all portend extremely high risks. However, the global best practices to replicate are in the open and available for the open-minded to adopt. Data from the aforementioned pinnacle study shows that the most profitable refineries are those in North America primarily due to the sustained high utilization and lower per barrel spend on reliability.

Figure 4: Correlation between refinery Utilization & Profitability Source: Pinnacle Study

It is no coincidence that the use of robust project controls software applications purpose built for turnarounds in process facilities is highly prevalent in North America. Effectively, these tools, which facilitate efficiency in turnarounds, help to build work packages, dynamically pull in engineering, equipment, BOM and cost data, manage logistics, facilitate management of change, document control etc. within one cloud based application. They are customizable to any project’s unique needs, make it easy to track project progress and enables forecasting with accuracy. They enhance project governance and controls, provide excellent visibility and reporting and obviously correlate positively with operational excellence.

It is immensely difficult to proactively recognize the onset of project challenges and understand the right levers to deploy in order to correct course. Without the right tools, processes and systems, incoherent coordination and ad-hoc decision making prevail, ultimately becoming an albatross on the project. This confluence of ills, have been responsible for derailing even the best planned projects leading to significant cost and schedule overruns.

North American refineries have consistently scored high in those metrics that correlate with top reliability performance such as maintenance cost and inventory value as a percentage of the plant value, percentage of assets on BOMs, work split between predictive and preventive maintenance etc.

Operational readiness facilitated by experts from independent third-party outfits underpins the ability to wrap up a revamp project efficiently and transition effectively to commissioning with the least amount of surprises during startup.

Setting the business up for long term success: Broadly speaking, the refining process encompasses the following steps; The separation of crude oil into different fractions – The improvement of quality of some cuts – The transformation of heavy cuts into light cuts – Blending to derive the finished products.

A refinery consists of several distinctly disparate parts; The process units where crude oil is separated to fractions or cuts and additional processing takes place to improve the grade of products – The Utilities i.e. where fuel, power, steam etc. necessary for the refining process are generated – The storage, blending and shipping facilities. A refinery could sit on several tens of hectares with majority of this space comprising of the storage facilities.

The most commercially viable refineries globally are of the fluid catalytic cracking (FCC) type (or equivalent process units), which are capable of transforming heavy distillation fractions into lighter fractions—gasoline, jet fuel etc. While these facilities have the dual advantage of high fuel efficiency and moderate investment cost, they introduce an order of magnitude of complexity into refineries as they became relatively more sophisticated. The introduction of capabilities for deep conversion (residue hydrocracking, coking with coke gasification etc) increased the complexity of the refining system (and of course the equipment spread required to achieve the detail of processing became more advanced).

Capital, whether in the form of investment in a new refinery or the cost of replacing systems / units in an existing one must be recovered as depreciation.

A combined projected spend of over two billion dollars on the ongoing revamps of Port Harcourt, Warri and Kaduna refineries is reflective of the depth of intervention being undertaken and the new administration’s laser focus on completing the protracted turnarounds sooner than later to abate further revenue losses from deferred production, along with costs and schedule completely run amok could not be a more urgent imperative.

The oldest of the four Nigerian refineries was commissioned in 1965 but have barely operated in the last decade. The oldest continuously running refinery in North America was commissioned one hundred and forty two years ago. Refineries that old would ordinarily be fully depreciated. But the four Nigerian plants had been moribund and in some instances cannibalized prior to the commencement of the revamp projects. This means the intervention works to be undertaken are of a very extensive and invasive nature involving system level replacements on a relatively broad scale. This introduces depreciation costs that could triple operating cost per barrel. For example, total refining costs for a 160,000 thousand barrel a day refinery could be as high as $10 per barrel of crude processed (assuming 100% utilization) as opposed to $2 – $3 for a fully depreciated asset.

A plant’s technical limit is an unattainable state where it runs 100% of the time and spends zero dollar on maintenance or repairs. Equally inconceivable is the contrasting scenario exemplified by Nigerian refineries, where tens of billions of dollars have been expended on “ maintenance and repairs “, yet the facilities scarcely operated over the past decade.

Constantly shifting revamp completion deadlines provide the strongest evidence that the ongoing revamp projects are in jeopardy and that the sponsors remain stuck in a state of unconscious incompetence, hence, flailingly grasping at straws.

The influence of existing paradigms prevents humans from embracing novel concepts and has the potential to obscure new opportunities for business leaders. Driving sustained operational excellence requires a paradigm shift, particularly at the leadership level. In order to mirror the operational performance of North American refiners, the entire organization need to adopt a philosophical volte-face and expand beyond their traditional thinking and maintenance work practices. In short, the thinking “ that got us here simply will not get us there “. And to the dismay of ired Nigerians, they will soon learn that the monstrosity of refinery operations & maintenance does not succumb to conjured operations commencement dates. Any startup dates promised in the future, again pulled out of thin air, will equally pass with nothing to show for it.

Stakes are incredibly high and refinery leadership should have the incentive to embrace new philosophies and thinking. It’s impossible to correct course without transitioning through conscious incompetence to conscious competence. This will be evident when they adopt the holistic use of the right tools, systems, techniques and methodologies needed to get the protracted revamps in Warri and Port Harcourt back on track, avoid startup and commissioning hiccups whenever the time comes, and offer the opportunity for Kaduna to start on the right footing.

Adopting a reliability-based maintenance strategy is the key to setting the business up for success in the long term and unlocking value on a sustained basis in Nigerian refineries. This involves instituting foundational elements; (establishing corporate standards for work management in line with best practices, stores and inventory optimization, defining equipment hierarchy/classification/naming convention, accurate equipment master list development, criticality ranking, adoption of RCM techniques, effective use of CMMS, PM/PDM optimization, addressing culture change etc.). These activities, when holistically weaved together and implemented will eventually bring the plants’ operational DNA in line with those of top performers globally. From past experience and also looking at several case studies over the years, value begins to manifest in savings on maintenance spend, increased uptime, higher throughput, reduced fuel costs etc. The right work is being done right, relevant performance indicators are developed and tracked with rigor, time-based preventive maintenance is optimized (PM) to only be performed on no more than 25% of the asset population and over 50% of daily work activities are driven by asset condition data obtained from a robust predictive maintenance (PdM) program.

With several exogenous factors outside of a refinery operators control, the sweet spot is learning to master the balancing act of achieving consistently high utilization at the lowest operations and maintenance—including turnaround—cost.

In conclusion, good refinery operations start with efficient turnaround execution which starts with in-depth understanding of how best-in-class reliability practices enhances refining operations economics. Combining enhanced technology-enabled project controls with a realibility-centric maintenance approach better attuned to new knowledge of machine health, and of how equipment functions, and fail, is the way out of the ongoing revamp fiasco and the way to set the refineries up for sustained success.

If nothing else, the opportunity to alter the narrative buoyed by a sense of accountability to its 200Million Nigerian shareholders, and perhaps personal ambition, should incentivize the project owners to seek outside help in steering the adrift revamp projects back on course, lest they perpetuate the status quo—abundance of promises and bereftness of delivery. Hope is never a strategy, neither is optimism.

Bassir is an oil and gas industry executive with international experience managing a range of major capital projects of varying complexity and scale along with experential knowledge spanning the entire Exploration and Production (E & P) lifecycle. He manages Ofserv, an independent consultancy specializing in subsurface engineering, project management, process improvement and reliability services. He is a certified maintenance and reliability professional (CMRP).


FEDA Invests in Cabinda Refinery

The Fund for Export Development in Africa (FEDA), Afreximbank’s impact investment subsidiary, has announced an investment into Cabinda Oil Refinery, an integrated modular oil refining platform in Angola being developed by Gemcorp Holdings in Joint Venture with Sonangol.

The exact amount of money put in by FEDA was not disclosed in the statement made by Afreximbank, which has, itself, earlier provide a facility o for the project.

Cabinda Oil Refinery is a 60,000 barrels of oil per stream day (BPSD) high conversion refinery, with a first phase of 30,000BPSD in the Cabinda Province of Angola, one of Africa’s largest crude oil producers. The Refinery is targeted at processing Angola’s crude oil into a variety of petroleum products including diesel, gasoline, naphtha, and jet fuel for both local and export consumption. Upon completion, Cabinda Oil Refinery will double Angola’s refining capacity, enabling the country and the wider region to gradually reduce their reliance on the importation of refined petroleum products.

“With this investment, FEDA confirms its commitment to support Africa’s industrialization and economic development, while ensuring environmental sustainability”, Afreximbank explains in the statement. “The transaction will support Angola’s energy transition by enabling the production of cleaner, high value refined products to cater for up to 20% of the domestic demand, as well reducing emissions by decreasing the need of transportation for both the exportation of locally produced crude oil and the importation of refined products.

“FEDA’s investment comes shortly after Gemcorp, Afreximbank and Africa Finance Corporation successfully led the debt raising of a $335Million project financing facility in July 2023.

“With this additional investment from FEDA, the Afreximbank Group demonstrates its unique ability to invest across the capital structure and therefore provide unparalleled support to the development of critical infrastructure across the continent”, Afreximbank concludes.

 

 


Forty Functional Modular Refineries, on Forty Marginal Fields, Will Eradicate Crude Oil Theft

By: Abdulwaheed Sofiullahi, in Abuja

The Crude Oil Refinery-owners Association of Nigeria (CORAN), has presented a solution to the incessant crude oil theft, which threatens to choke off investment in the country’s oilfield development.

The proposal involves the installation of one 10,000 Barrels Per Stream Day refinery per marginal oilfield, leading to 40 such refining plants on 40 marginal fields in the Niger Delt basin.

These 40 plants on forty fields will have a combined 400,000BPSD capacity to service different regions in the Niger Delta basin, CORAN has suggested.

About 20 members of the advocacy group, led by its chairman, Momoh Jimah Oyarekhua, were received at the office of the Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, in Abuja last week.

“This approach will enable the processing of a minimum of around 400,000 barrels of crude oil for refining, subsequently impacting petroleum prices and alleviating the current economic pressures faced by the country on foreign exchange”, Oyarekhua said.

There are currently five functional Modular Refineries operating in the country, with a total nameplate input capacity of 34,500BPSD.

But the actual input into these five plants is no more than 15,100BPSD and those numbers are very optimistic.

Out of the five, for example, only two have dedicated oilfields supplying volumes of crude in excess of 3,000Barrels of Oil Per Day. They are:

  • Aradel Holdings’ Three Train 11,000BPSD Ogbele Refining Facility, which has utilized, sometimes, as high as 6,600BPD of crude from the Ogbele field in the last three months.
  • Waltersmith Petroman’s 5,000BPD refining plant, which receives 3,000BPD supply from Waltersmith’s own Ibigwe field, as well as between 2,000BPD and 3,000BPD from Seplat’s Ohaji field in the vicinity.
  • The OPAC refinery, which receives, on average, 1,500BPD from Pillar Oil’s Umuseti marginal field
  • Edo Refinery (published: 6,000BPD capacity) and Duport Midstream Refinery (advertised: 2,500BPD), both in Edo State, collectively receive, at the most, only 500Barrels per day, by trucks from Millenium Oil & Gas/ Decklar Resources’ Oza field in Abia state of Nigeria.

What CORAN wants, is for government to help guarantee the supply of crude to modular refineries which lack “stand by”, crude oil supplies. CORAN is hoping that the government, through with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will engage the group “based on the regulation that has been passed for domestic crude obligation. That obligation compels crude oil producers to supply a share of their crude to local refineries”.

The NUPRC has once claimed in a media release that it had supported modular refineries with crude oil supplies through the Domestic Supply Obligation, but CORAN members vigorously deny this claim, in private, as they do not want to be seen as wrangling with the country’s most powerful petroleum regulatory  agency, in public.

CORAN has also advocated for intervention fund for modular refining business the way government has intervened in the natural gas business. “The buzz everywhere now is about clean energy and government has created funds that people who want to build infrastructure for gas will be able to access; and recently we hear of auto gas and some of those few things that they are trying to do in the gas space”, Oyarekhua told Africa Oil+Gas Report.  “It is impossible for you to think that gas is going to solve all the problems that people or the society will require for their energy. Fossil fuel will still be with us for a long period of time so once you’re creating some form of succour for gas to be produced, which of course will also take a period of time, you also have to support the existing energy producers like us who are in the refinery space that are providing refined products for the society, part of which is diesel, fuel oil and kerosene until such a time where the gas industry is ripe enough. I think gas and fossil fuel are going to be ranked side by side continuously for a very long period of time. But as of today, the focus is on PMS and we are saying that the kind of funds that people who are creating or building gas infrastructure could access, there should also be that kind of fund created for the refinery industry or refinery owners to access in that space. This is what we advocating for”.

At the meeting in Abuja with the Minister of State for Petroleum (Oil),  Oyarekhua  stressed: “Our foreign earnings today are being significantly affected by the importation of roughly 30 to 40 percent of refined products into the country. These are the issues we have come to discuss with the minister, seeking government intervention through reliable supply and guarantees for those in the modular refinery sector”.

 


Ghana Grows Modular Refining Capacity

Ghana’s 45,000Barrels Per Stream Day (BPD) Tema Oil Refinery is not functioning. But the country has had two modular refineries in the last five years: the Platon Refinery and Akwaaba Link Investment Refinery, which collectively have combined nameplate capacity of 8,000BPD.

Under construction is another modular facility; the 40,000BPD Sentuo Oil Refinery (Phase 1) now reportedly 80% complete and would be commissioned before the end of 2023.

The Refinery’s expansion phase is expected to add an additional 20,000BPD or 1Million Tonnes Per Year, (taking full capacity to 60,000BPD) but that is after the First Phase is delivered. Total investment at the 60,000BPD mark, is expected to reach around $3Billion.

 

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