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‘We’re Creating an Industrial Park’, Isa Tells Visiting Governor

By Maxwell Otumfo, in Owerri

Emeka  Iheadioha became the first host governor and the highest ranking, elected Public Servant to visit the Waltersmith operated Ibigwe field in Imo State last Friday.

“Apart from the Minister of State for Petroleum who did the ground breaking of the refinery, he is the highest public official and the first elected official of his level to visit”, Abdulrazaq Isa, chief executive of Waltersmith, told Africa Oil+Gas Report.

Ihedioha was elected governor of Imo State in March 2019. He took charge of the office at the end of May.

Waltersmith has produced oil from the Ibigwe field for 11 years now and it is one of the largest industrial enterprises in the state, which lies on the eastern flank of the Niger Delta basin.

“We told him we are creating a hub for an Industrial Park and an export free zone”, Isa explained.

Waltersmith is 60% advanced in the construction of a 5,000BSPD crude oil refinery on the Ibigwe field, but that facility is considered, in the company’s planning, as a first phase of an Industrial park which includes a 30,000BSPD crude oil refinery, a power plant and a service hub for manufacturing hydrocarbon related products.

“We have to utilise the hydrocarbon resources we extract from the ground for the good of the country”, Isa says.


10 companies, Carefully Chaperoned, Will End the Niger Delta Crisis

By Akpelu Paul Kelechi, in Ogbele

Layi Fatona, Managing Director of the Niger Delta Petroleum Resources, says the way to go for Indigenous Nigerian E&P Companies is to become integrated and convert the hydrocarbon resources, from raw molecules, in situ.

He was speaking to the highest ranking personnel in the Nigerian regulatory agency, on site for a Pre-commissioning visit to the 5,000Barrels Per Stream Day refinery on the Ogbele oil field facility in Rivers State, in the east of the country last weekend.

“Ours is a story of marginal field that has fed itself, treated its own gas, processed its own crude”, Fatona told his guests, who included Ahmad Shakur, Acting Director of the Department of Petroleum Resources; Ibidun Toweh, Deputy Director and Head, Engineering &Standards,  Sanya Bajomo, Deputy Director and Head, Gas Monitoring & Regulation, Mohammed Alaku, Deputy Director and Head, Downstream Monitoring & Regulation and Paul Osu, Head of Public Affairs.

“10 companies like this, carefully chaperoned by DPR could solve the problems in the Niger-Delta”, Fatona said. “Ten companies like this that are strategically placed some 20km radius from each other, first to do what we have done, can solve the problems of this country either in terms of youth restlessness or otherwise”

The regulators were visiting Ogbele in the same weekend that Emeka Ihedioha, governor of Imo State, was visiting the Ibigwe oil field facility, operated by Waltersmith Petroman, another Nigerian independent, and located 120kilometres to the east of Ogbele. Like NDPR’s doing in Ogbele, Waltersmith too is constructing a 5,000BSPD refinery on Ibigwe. “We told the governor we are creating a hub for an Industrial Park and an export free zone”, Abdulrazaq Isa, chief executive of Waltersmith, told Africa Oil+Gas Report. The Ibigwe refinery construction, which commenced late 2018, is 60% advanced and it is considered, in the company’s planning, as a first phase of an Industrial park, which will include a power plant, an expanded refinery and site for construction of hydrocarbon related products.

Like Fatona, Isa has severally argued that the model of extracting crude oil and exporting all of it from Nigeria, a country with nearly 200Million people consuming imported petroleum products, is wrongheaded. And the companies with the moral responsibility for leading the charge in beneficiating the raw hydrocarbons are the Nigerian independents, who already operate over a quarter of the country’s total crude oil output.

Back to Ogbele, the 5,000BSPD refinery is the first of a two phase expansion of the 1,000BSPD topping plant commissioned in 2011, which produces 86,000Litres of diesel every day from 540Barrels of Oil. The facility, christened Train 2, will produce Jet-Fuel, Marine Diesel, HFO, Naphtha and more Diesel.

Technical officers from the DPR (different from the big wigs hosted by Fatona) were on site doing the actual pre-commissioning tests with NDPR technicians. “As soon as our men that are on ground here turnedin their reports and we are satisfied with the reports, we will give the go ahead for the plant to become operational”, Shakur told Africa Oil+Gas Report.

Femi Olaniyan, head of the Ogbele refinery project, told the visitors that the 1,000BSPD topping plant had produced about 137Million litres and the company had sold 134Million litres to the public, in the eight years of operation. “We have barely consumed about 3Million litres while the balance has been sold to the public”, Olaniyan explained. “The first turn-around maintenance was done in 2014 just about 2-3 years after the plant became operational and we did not find any surprises, we just cleaned the equipment’s and restored it back online.

“Capacity utilization has been 90% but we have had constraints because it is a mono product refinery so the rejects from the refinery go back into the pipeline. So, when we had the rude boys in the creeks damaging Shell pipelines, we have tank-tops and can’t return the rejects into the pipelines. That affects our up time on the refinery and it is part of the reason why we are doing multi product slates in the expansion.

“It’s a small plant with a small footprint of 1900sqm and we pride ourselves as producing the best diesel in the country. Look at the properties: Flash point ranging 66-72oC, Specific Gravity is 0.86 and it has a clear appearance. People always come back here to buy the diesel. We have this network provider MTN and they always send their suppliers to come and pick up diesel from here to run their masts because it is efficient and reliable and of good quality”.

Mr. Shakur, the DPR director, responded warmly to the NDPR management. “With the regulatory powers residing with us”, he told Fatona, “nothing would prevent us from making you a reference point to other marginal field operators.

“We will replicate your type and just like you said, if we can have ten of your types, the issues of Niger-Delta restiveness would reduce, the money that the government is using for “cost recovery” if I many use NNPC slang, would have gone away and then you can see the backward integration that this could have had in our economy”.


Dangote’s Upstream Asset May Start Production in 2019

The NNPC/WAEP Joint Venture has refurbished parts of the production facility on the Kalaekule field in Oil Mining Lease (OML) 72 in shallow offshore, Central Niger Delta Basin, off Nigeria.

The partners are hoping to achieve some production by the end of 2019.

WAEP is a subsidiary of the Dangote Industries Conglomerate.  It purchased 45% of OMLs 71 and 72 from Shell, TOTAL and ENI for $300Million in March 2015, right in the thick of the crude oil price crash.

The plan had always been to put the Kalaekule field, the only asset in the two acreages with a history of production, back at work. “We have established that some wells can flow and we have done minor refurbishment of the platform”, say ranking officials at the National Petroleum Investment Management Services (NAPIMS), the arm of the state hydrocarbon company NNPC which oversees the project with WAEP.

Kalaekule produced crude oil between 1985 and 2002, peaking in 1999 at 22,000BOPD.

The partners have finalised integrity assessment and status evaluation and what remains is to do enough repair works to flow some crude, perhaps 2,000BOPD, to begin with.

“Everything points towards some output by the end of the year”, the NAPIMS sources say.

The news about Dangote Industries have been focused on the massive, 650,000BSPD refinery it is constructing a in Nigeria. Edwin Devakumar, Group Executive Director of Dangote Exploration Assets, an upstream subsidiary of the group, recently said that the conglomerate  aims to pump around 20,000 barrels a day from OMLs 71 and 72, at some point in the near term. He didn’t give a timeline, but he said this much: “Crude oil production is where the majority of our cash flow from the refinery will go to. We’ll focus on that after we start the refinery.”


Stale News: Sonangol Signs Deals to Build New Refinery, Upgrade Old One

By Prospectus Mojido

Angola’s state hydrocarbon company Sonangol reported early this week (June 4, 2019) it has signed two agreements with EPCC companies, first for a new build refinery in the Cabinda enclave, and second for installing a unit in the old refinery in the capital city, Luanda.

They are stale news.

  • The “partners’ agreement” with United Shine to construct a 60,000BOPD in Cabinda, was consummated as far back as February 2019. United Shine, which won the two yearlong competitive tender launched by Sonangol, will fund the project and operate the refinery with 90: 10 equity share with the government company. The main products expected from the plant include diesel, gasoline, fuel oil and Jet A1. United Shine is on course of raising the money for the construction.
  • The contract award to Kinetics Technology (KT), for constructing a unit in the 61 year old Luanda Refinery, to quadruple the volume of gasoline produced, was initially announced in November 2018. In fact, KT is the winner of an international tender held by ENI, the Italian major, through the instrumentality of a Cooperation Agreement signed by Sonangol and ENI in 2018 for the re-launch of Angola’s refining sector.

In compliance with that agreement, Sonangol says, “ENI successfully and safely completed a refinery maintenance campaign which resulted in an increase in its reliability and started a programme currently underway in Italy for the training of 40 Sonangol technicians focused in the management of refineries”.  The next phase of that programme was to award a contract for upgrading the gasoline producing capacity of the Luanda refinery to KT.

The two plants are each relatively small in terms of input; the new refinery will have a capacity to treat 60,000BOPD; the old refinery has 57,000BOPD capacity, which will increase to 84,000BOPD after the upgrade.

Meanwhile, the Angolan government still keeps, in view, the construction of a third refinery; the mush reported Lobito refinery (coastal Benguela Province). As recently as February 2019, Joaquim de Sousa Fernandes, chairman of the Executive Council of Sonaref, the refining arm of Sonangol, said that the Lobito Refinery will be completed in 2025. Angolan Press Agency ANGOP, quoted him as saying that Sonaref was negotiating with a group of companies to set up a joint venture and respective quotas. The forecast is to conclude in the legal aspects before the end of June 2019, then work to redefine the design of the refinery, which will be done by the American company KBL, and “only then will the indicative cost of the project be known”, Angop reported.

“The construction of the Lobito refinery was already underway”, the news agency explained, “but its cost was very high. So it went on a standstill for three years and will now be redefined for a more economical design”.



Logistics Companies Scramble For Dangote’s Import Contracts

Over 10 logistics companies are scrambling to get the nod from Dangote Industries to ferry tons of equipment for use in the construction of a massive Refinery and allied projects in Lagos, Nigeria.

Dangote Industries has ordered some 500,000 Tonnes of Equipment from China and other countries and wants them on site between now and February 2020. The company is running late in the construction of a 650,000Barrel per Stream Day(BSPD) crude oil refinery on the Lekki Port in the east of Lagos.

Around 20 large Vessels are required to transport the equipment, which are needed in the final stages of the construction of a refinery, a fertiliser plant, a petrochemicals plant and other projects, spread over 5,000 acres of reclaimed land, or 2,135 hectares.

The company recently signed a Gas Supply Agreement to receive 70Million standard cubic feet per day of gas from Chevron’s Escravos Gas Project; the molecules will be the foundational feedstock for the fertliser plant, the first of the several projects to go on stream.

Fuller story in the February 2019 edition of the Africa Oil+Gas Report


Ogbele Refinery Phase 2 for Commissioning Next Month

By Prospect Mojido

The Niger Delta Exploration and Production NDEP will be commissioning the second phase of the Ogbele Modular Refinery in March 2019.
The unit, installed near the first phase, will have the capacity to utilise 5,000Barrels Per Day of Crude, which means five times the capacity of the first phase.

The first phase, commissioned in 2011, has produced over 124.5Milliion Litres of Diesel since, mostly sold to offtakers in the Eastern Niger Delta area.

Train 2, as the second phase is called, will produce five (5) different products, including more Diesel, (AGO), Dual Purpose Kerosene, DPK, where the company aims to meet the quality specification for Jet Fuel. The train will also produce Marine Diesel, which is a grade of diesel for the marine industry; Heavy Fuel Oil as well as Stabilized Naphtha.
Train 3 of the Ogbele Refinery will be commissioned before the end of the third quarter 2019 but the unit that would enable it to add Gasoline to its products would only be commissioned in 2020.

The Ogbele oil field itself produces, at most 6,500BOPD, so the company would have to bring in crude from other nearby fields if it is to fully utilise the plants. But NDEP is about to develop the Omerelu field, its second marginal field, in the neighbourhood of Ogbele.
Layiwola Fatona, Group Managing Director of NDEP and its subsidiary companies, has always argued that Nigeria should not export a single drop of oil. “Process every barrel in the country”, he has said at various conferences. NDEP is apparently doing its bit.

AFC Closes Financing Deal For West Africa’s Top Crude Oil Refinery

Africa Finance Corporation announces it has successfully closed a €577Million debt financing  for Société Ivoirienne de Raffinage (SIR) of Côte d’Ivoire. AFC’s participation was for €192Million.

The corporation was Sole Mandated Lead Arranger for the transaction.

“SIR has an installed capacity of 3.8 Million tonnes per annum of refining capacity and is currently the largest and most sophisticated operational refinery in West Africa”, THE AFC says in a release.

The purpose of the Facility is to repay historical obligations on crude supply, provide a long tenured facility and reduce the interest rate of SIR’s stock of debt. The Facility comprises a Euro tranche with a 9-year maturity and a West African CFA franc tranche with a 7-year maturity. The long-term funding solution to refinance historical accrued debts will free up resources to enable SIR to make much needed investments in its current operations and upgrade its facility and production processes to align with current environmental emissions standards and expand its business, thereby contributing to job creation.

Participating banks include AFC, Deutsche Bank, ICBC Standard Bank, United Bank for Africa, NSIA Bank and Bridge Bank. Counsel for the Lenders was Norton Rose Fulbright and Bilé-Aka, Brizoua-Bi & Associés.


UAE Company To Build An Oil Refinery in Guinea

Brahms Oil Refineries Limited, an Emirati based Oil & Gas company has appointed Africa Finance Corporation as Financial Adviser for the development of the Petroleum Refining and Storage Infrastructure Project (the to be located in Kamsar, Guinea-Conakry. The Project comprises of petroleum storage and transportation infrastructure, as part of a 12,000 barrels oil per day (bopd) modular refining facility.

This flagship project is being implemented by Société de Raffinage Guinéenne S.A; a subsidiary established by Brahms that will process crude oil primarily sourced from West Africa into refined petroleum products for sale into the local Guinean market.

“As sponsors, Brahms has already completed substantial early development work on the Project, including key environmental and social impact assessments, site studies and preparation, as well as key legal, regulatory and economic framework agreements in Guinea”, the company says in a release.

Africa is reliant on imported refined products to meet the demand of a rapidly growing population, while African crude oil export to North American refineries is increasingly being displaced by fast growing domestic output. Brahms Oil Refineries Limited has recognized an opportunity to develop petroleum storage and transportation infrastructure, alongside modular and scalable refining facilities in West and Central Africa to transform some of the available African supply of crude oil and reduce the dependency on imported fuel.

Africa Finance Corporation will be working alongside other appointed project advisers: Gide Loyrette Nouel (Paris) and Contax Partners (UAE) to conclude with the sponsor on outstanding development work and raising the required capital for the Project. Financial close of the Project and start of construction is slated for the Q4 2019.


Dim Prospects For South Africa’s Refinery Sector

By Charlotte Mathews

South Africa’s energy minister, Jeff Radebe, is expected to announce a development plan for Project Mthombo, a new 300,000 barrels a day (BOPD) refinery, which would inject new life into SA’s refinery sector.

The project may be controversial because arguments for a new refinery are not conclusive, and SA has a poor record in bringing mega projects on stream on time and on budget.

SA’s six privately-owned refineries have been largely in limbo for the last few years. Most are 50 years old or more and in need of substantial investment to enable them to meet the latest standards for petrol and diesel for new-model vehicles, or most will be closed in the next few years.

In 2012 SA introduced new regulations, called Clean Fuels II, to enforce the Euro V standard for fuels by mid-2017. But the effective date has been postponed while government and oil companies are at odds over how the refineries will be able to recover the costs (in a regulated fuel price environment) for making the necessary upgrades.

In the interim, the refined product needed for the latest model vehicles is being imported.

In August, Bloomberg reported Sasol, which owns a plant at Secunda making about 150,000 barrels a day of fuel from coal and gas, and a 63.64% stake in the Natref refinery with a capacity of 108,000BOPD in partnership with Total, was considering selling its Natref stake, amongst other options. CEO Bongani Nqwababa said Sasol had “found a relatively affordable way forward” on clean fuels for Secunda but Natref “is a more difficult case”.

Natref, which was commissioned in 1971, was last upgraded about twenty years ago. Apart from Natref and Sasol’s Secunda plant, SA’s other refineries are Chevron (100,000BOPD), Engen/Petronas (135,000BOPD), Sapref (owned by Shell/BP) (180,000bbl/day) and the government-owned PetroSA refinery at Mossel Bay, which converts gas to fuel (45,000BOPD).

The global trend, noted by EY in its 2018 Global Divestment study on oil and gas, is for oil multinationals to divest mature or late-stage assets. South Africa saw this last year when Chevron agreed to sell its Caltex-branded fuel stations and refinery to Sinopec. That sale foundered on the resistance of Chevron’s local shareholders, who instead partnered with global commodities giant Glencore.

In August, the country’s Competition Commission recommended the Glencore/Off The Shelf purchase of Chevron’s assets, with certain conditions including “commitment to a significant investment being made to deal with refinery capacity and related matters.”

Three years ago Petronas was reported to be trying to sell its 80% stake in Engen to PetroSA, another deal that fell through partly because of PetroSA’s precarious financial position.

Other oil multinationals might find it difficult to divest from SA because flat fuel sales render their petrol forecourts unattractive and the cost of refinery upgrades or closures presents a substantial capital commitment for the future.

Government and the oil companies have remained tight-lipped on the shape of an agreement on the refinery upgrades. With SA’s pump prices at record highs on the back of higher oil prices and a weak currency, and consumers recently having to swallow a 1% hike in the VAT rate, government has little room to manoeuvre on adding more taxes to the fuel price.

While upgrades are deferred, it becomes increasingly likely the existing refineries will close in the next few years and SA will become reliant on refined fuel imports. It currently imports about a quarter of its petroleum products. Consumption of both petrol and diesel has exceeded supply for the past decade, according to the department of energy’s “Overview of the Petrol and Diesel Market in SA 2007-2016”.

Project Mthombo would ensure SA retains refining capacity. Each of SA’s last three energy ministers has talked enthusiastically about it. They say it is needed to secure the country’s energy supply and preserve refinery jobs.

Although originally mooted as a project partnership with Sinopec with the local Industrial Development Corporation as funding partner, Sinopec’s defeat on the Chevron deal may alter these plans. Clearly Mthombo would need substantial foreign funding – it would cost at least $7bn, based on an estimated cost of $25,000 per barrel of capacity.

But there are many critics of Mthombo.

SA does not have the cost advantage of being a crude oil producer. It may have some offshore oil, but that is unproven. According to a March 2010 World Bank study, “Petroleum Markets in Sub-Saharan Africa”, for countries with no domestic oil, “it is not clear that importing and refining crude oil enhances supply security any more than importing refined products.”

Middle Eastern and Asian Pacific countries, notably Saudi Arabia and India, have recently built large, efficient refineries with plenty of export capacity, and plan to expand further. They could easily supply SA’s needs.

Refineries are not big employers. The World Bank study cited Valero, the largest refiner in the US, which employed an average of only 510 workers at each 200,000BOPD refinery.

AT Kearney said in a recent paper: “Refining 2021: who will be in the game?” that “Asia Pacific is the region with the highest activity in terms of numbers of refineries opened and closed, even as small, polluting, and less efficient refineries are being closed and world-scale state-of-the-art facilities are coming on line.

“In this highly attractive market, international oil majors are becoming much more involved in joint ventures to build petrochemical plants, attracted by relatively high economic growth in many countries.”

In principle, the South African government could try to find foreign partners for Mthombo. But unfortunately the country does not offer the high economic growth rates that AT Kearney is referring to. Its second quarter GDP growth was a negative 0.7% and the highest growth rate it has achieved in the last eight years was 3.3% in 2011.

SA’s weak growth rate and joblessness would benefit in the short term from a substantial infrastructure project funded by foreign investment. But a new refinery has long term consequences. It cannot be a purely political decision. The economic argument for it must be sound.

Charlotte Matthews is a former Energy Editor at the Financial Mail of South Africa. She wrote this piece specifically for Africa Oil+Gas Report.



The Business Case for A Small Scale Refinery

By Foluso Ogunsan

Abdulrazaq Isa, Chief Executive of Waltersmith Petroman, has responded to the prevailing opinion that small refineries are inherently loss making.

“That modular refinery does not make money? I do not hear that. I do not see it. I have gone to a global financial institution, the African Finance Corporation (AFC) and convinced them to give us money to fund our project”.

Waltersmith Petroman is holder of the Ibigwe marginal field in OPL 2004, on which a small (5,000BSPD) refinery started construction two months ago.

Isa points to the basic financials of the refinery project situated on an oil field in the Niger Delta, and in the vicinity of other oil fields.

“Let us look at the cost structure for producing and exporting oil from where we are. Just the cost of producing the oil, putting it in the line and exporting it is almost $8 per barrel. This is the transportation cost alone. This cost has been growing. We probably started at about $5 per barrel. So, if I produce crude and it is sold at $50 per barrel, you have to first remove $8.

So by putting that refinery right in the field, where we produce the oil from that field, or take oil from nearby fields, we have eliminated that $8 cost. This is a huge margin for us, before we even do the refining”.

Isa also provides details on converting the challenges of pipeline losses to profits by insitu beneficiation.

Full story is published in the November 2018 edition of the Africa Oil+Gas Report, circulated to paying subscribers and to delegates at the Nigerian Association of Petroleum Explorationists (NAPE) conference in Lagos. Follow this link for a copy.


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