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GE Linked Company Leads SPV Winners For Uganda’s Refinery

Nuovo Pignone International SRL, a General Electric Company located in Italy and the EPC Contractor SAIPEM SPA, also Italian, are the most recognisable of all the partners in the Special Purpose Vehicle who won the bid to build, operate and partly own the much anticipated 60,000BOPD refinery in Uganda.. 

The Albertine Graben Refinery Consortium (AGRC), as it is known, includes YAATRA Africa (Mauritius) and Lionworks Group Limited (Mauritius) as well as the Uganda National Oil Company (UNOC), which is a limited liability petroleum company owned by the government.

The SPV will now build the oil refinery in Hoima District after the signing of the Project Framework Agreement between the government and the AGRC.

The composition of the nationalities in the consortium was not lost on Yoweri Museveni, the Ugandan President who, like his peers, have recently been keen on doing business with China. He said the composition of the AGRC showed that Western companies were also waking up to realize Africa’s potential. He challenged Western companies to take interest in “helping” Africa explore its resources potential, saying the continent presented immense business opportunities. “Africa and the West share a lot of history together and there is a need for them to use these past linkages to further economic business,” said the President.

The signing of the PFA means pre-Final Investment Decision (FID) activities like Front End Engineering and Design (FEED), Project Capital and Investment Costs Estimation (PCE), Environmental and Social Impact Assessments (ESIA) can commence.
Under this agreement, AGRC will be responsible for funding the pre-FID activities listed above and will also proceed to construct and operate the refinery. The consortium has also been tasked to ensure Ugandans get jobs and skills out of the project.

The refinery, which will be developed as a commercial undertaking with focus on the regional market, will supply products like kerosene, petrol, diesel, heavy fuel oils, among others.

The entire project will be implemented by a Special Purpose Company, the Refinery Company, that will be incorporated by the private investors and the Uganda Refinery Holding Company, which is a subsidiary of the Uganda National Oil Company.
AGRC commenced negotiations in 2017, in 2017 following the fall out of Russia’s RT Global Resources, with the Government of Uganda, after talks collapsed with the ministry, around RT’s request to scale down the size of the refinery while SK Engineering the alternate bidder showed disinterest with the project thereafter.

Sahara Raked the Highest Losses in Crude Oil Processing

By Sully Manope, in Abuja

Of all the four, loss making Offshore Processing Arrangements (OPAs) for Nigerian crude, the deal between NNPC and the Sahara Group incurred the most debit in 2015, NEITI has reported.

The country as a whole lost over $723 Million in the year to those arrangements, forged between the Petroleum Product Marketing Company (PPMC), a downstream subsidiary of the state hydrocarbon company NNPC, and each of four companies, namely: SAHARA, AITEO, Duke Oil and NAPOIL, the 2015 audit report of the Nigerian Extractive Industry Transparency Initiative (NEITI), has disclosed.

The report, released in Abuja in the closing weeks of 2017, indicated that the arrangement with SAHARA Petroleum incurred a loss of $323,129,180.50; the AITEO arrangement recorded a loss of $221,095,575.24; the DUKE OIL arrangement recorded a loss of $160,658,295.07 ($, whereas the NAPOIL arrangement recorded a loss of $44,553,458.59 ($44.5Million), making a total loss of $723,285,929.70. The exception to these losses was the arrangement with CALSON, where PPMC made a profit of $26,150,579.70.

OPA is one of several options used by NNPC to import supplies of petroleum products in exchange for Nigerian crude. The Nigerian populace consumed 18.2Million Tonnes Per Annum (MMTPA) of petroleum products in 2014, of which 71% or 12.9MMTPA was gasoline. But the country’s government owned refineries cannot refine the requisite volume of crude to deliver these volumes, so NNPC resorts to these crude oil for petroleum product deals to satisfy the market.

Yet huge losses like this make the country’s vocal, intellectual minority dismiss those deals as nothing but ways of siphoning public funds.
OPA had been used before, then discontinued. Just prior to its reincarnation in 2015, the option used by NNPC was Crude-Product exchange also known as SWAP. It was discontinued in 2015 while OPA was re- initiated, to process white fuels PMS, AGO, and DPK at cost and sent back to Nigeria. The offshore refineries retain and pay for other products such as VGO, LPFO, Fuel Oil, Propane, and Butane at the current market price to NNPC.

NEITI’s 2015 audit report disclosed that Grand total losses from 2010 to 2015 for OPA and SWAP have been $2,549,328,360 ($2.54Billion). “NNPC benefited from NIGERMED arrangement in 2010, however discontinued the contract in 2011”, the report says, adding that the country’s loss because of the combined OPA and SWAP arrangements peaked in 2011 at $928,868,083 ($928.8Million). The highest loss in terms of the OPA arrangement in any year, however, was the $723,285,930 ($723.3Million) loss in 2015.

French Consortium Tasked to Revamp Cameroon’s Sole Refinery

By McJohn Ntonto, in Douala

A consortium of French contractors have won the contract to modernise and extend the effluent treatment plant at the refinery of the National Refining Company (SO.NA.RA) in Limbé, Cameroon.

SUEZ,SOGEASATOM and INGENICA, wona$25.84Million of which SUEZ has a share of about $7Million. It is SUEZ’ first venture in treating effluents from the refining industry in sub-Saharan Africa.

For SOGEASATOM, which is handling general revamp of the refinery, West Africa is a familiar business place.

SUEZ has made a lot of noise about its $7Million effluent treatment contract, which is a significant part of the revamp. “It will make significant improvements to the quality of the treated effluents before they are discharged into the natural environment, thus helping to limit the SO.NA.RA refinery’s environmental impact”, the Paris based company says in a widley distributed press release. “Ensuring these effluents are treated optimally is a key issue for Limbé, one of Cameroon’s beach resorts, in order to protect the coastline and enhance the region’s attractiveness”.

SO.NA.RA’s site – the only refinery in Cameroon – is 82% owned by the government, and produces almost 2Million tonnes of refined hydrocarbons per year. “SUEZ will equip the plant with POSEIDON™ technology, a solution which has an excellent reputation for pre-treating effluent using flotation in the refinery”, the company claims.

Dangote Refinery Contracts DuPont Technology for Clean Emission

DuPont Clean Technologies announced that Dangote Oil Refinery Company Limited has commissioned a range of advanced proprietary equipment from DuPont for the construction of a new refinery in Lekki, an emerging seaport and manufacturing hub, located in the east of Lagos, Nigeria’s top commercial city.

Construction of the new refinery is part of a strategy to boost the country’s refining capacity. Dangote plans to turn 650,000Barrels of crude oil per day into 59 Million litres of gasoline; 20Million litres of Kerosine and 29Million litres of diesel per day, at peak performance.

“The innovative DuPont technology will allow Dangote to maximize quality and profitability while minimizing its environmental impact”, DuPont Clean Technologies says in a statement. “DuPont will be supplying Dangote with proprietary equipment for STRATCO® alkylation unit, MECS® sulfuric acid regeneration (SAR) unit, MECS® DynaWave® sulfur recovery unit (SRU) tail gas scrubbing, and BELCO® EDV® fluid catalytic cracking unit (FCCU) stack scrubbing that will help Dangote meet gasoline pool octane and emissions requirements”. The MECS® DynaWave® and BELCO® EDV® scrubbing technologies are leading refinery scrubbing technologies, also licensed and designed by DuPont. They offer ultimate emission control reliability and continuous operation.

At 650,000BOPD input, the Dangote refinery, on course for commissioning in 2020, is set to become the largest single-train refinery in the world. Within the same complex in Lekki, a petrochemical plant delivering 1Million Tonnes of polypropylene, a fertiliser plant with capacity for 3Million Tonnes of Urea Per Annum and a 3Billion cubic feet per day gas project pumped through 1,100km of subsea pipelines from the country’s south east to Lagos, are collocated.

“We are delighted to be supporting Dangote on a project that is of such critical importance to creating economic growth and opportunity in Nigeria,” said Eli Ben-Shoshan, global business leader, DuPont Clean Technologies. “Our aim is always to enable our customers to meet their emissions targets easily and efficiently with the help of cost-effective technologies and services that offer them value and flexibility while minimizing the impact on the environment.”

The new 27,000 Barrels Per Stream Day (BPSD or1,060 KMTA) alkylation unit and the 260 Metric Tonnes Per Day (MTPD) SAR unit will allow the facility to produce high octane, low sulfur, low RVP alkylate with zero olefins. Designed to meet world standards for particulate matter and SOx emissions, the DynaWave® wet gas scrubber will ensure full-time compliance with emissions regulations on both 115 ton per day SRUs, and the BELCO® EDV® wet gas scrubber will reduce the stack emissions from the FCCU as well as provide a purge treatment to condition the scrubber effluent. Both of the SRUs and the FCCU are supplied by other licensors.

Despite producing 2.12MM BOPD crude oil in 2015, Nigeria traditionally imports 80% of domestically consumed refined product, as national refining capacity is low, at 0.002BPD per capita.

“Licensed and designed by DuPont, the STRATCO® alkylation technology is the established global leader in the industry with over 90 units licensed worldwide and more than 850,000 BPSD (33,300 KMTA) of installed capacity. For over 80 years, the STRATCO® technology has helped refineries safely to produce cleaner-burning fuel with high octane, low RVP, low sulfur and zero olefins”, DuPont explains in its statement.

Why Nigeria Should Have Open Bidding for the Refineries

A Response to Mr. Kachikwu’s “No Open Bidding for Nigerian Refineries
Dear Mr. Kachikwu,

I read the statement from Daily Trust of 26th May 2017 from Vienna Austria where you were attending the 172nd OPEC meeting currently in Session. Quoting your contradictory utterances, further confirms and reinforces my humble conviction that you should use your good offices to open up these refineries for International Competitive Bidding (ICB). This will be in tandem with the philosophy of President Muhammadu Buhari and best global practices.

May I also remind you that your utterances do not reflect and comply with the simple ethical rules of Public Governance in a democratic setting.
Crude oil refinery concession or ‘farm out’ or privatization is not as highly technical as you are claiming in your statements.
We’ve been through the process before and I wish to refer you to BPE/NCP 2007 refinery privatization closure. First Boston Credit Sussie (now Credit Sussie), which isone of the top investment banks on the globe, was the privatization adviser to the Federal Government of Nigeria on the four refineries. PNB Paribas also gave advisory support to the Bureau of Private Enterprises (BPE)for the final closure of the privatization of Port Harcourt and Kaduna refineries, 10 years ago.
We still have these Nigerian professionals and expertise both in BPE and around the country to handle this your new ambitious ‘highly technical’ refinery concession through an open and fair bidding competition.

You contradicted yourself by the statement that the bidding process is open to all willing investors, but how will all the willing investors with technical and financial capabilities know across the globe if you do not advertise what you want to sell or concession with all the criteria and ground rules for them to comply with. Do you think the whole world will be aware by watching you on TV talking about the refinery concessions in Nigeria as a ‘talk advertisement’ from Houston Texas to Lagos to Vienna, yet you are going to be the umpire for the bid evaluations and awards. How?

Your claim that the Federal Government had decided to concession all refineries by August 2017 is a welcome decision but you need to ensure that the process is through an open bid competition via the appropriate statutory Federal Government bodies NCP/ BPE/ICRC to enable Nigerians have a ‘bidders beauty parade’. This is the essence of the open bid process because itshould give us the most qualified investor that could possibly come up.

As proprietary as the case with GE/Nigeria Railway narrow gauges’ advantage was, the Federal Ministry of Transport went ahead to place an advert for other ‘would be’ investors to compete with GE. At least this will to a certain extent give credibility to GE proprietary know-how in railway engineering when they eventually get declared as the final winner. It appears from your utterances in the last one month that you are bent in giving out these refineries to the crude oil swap candidates without open bid, which you would have achieved on behalf of the Presidency to enhance the transparency obligation, with a minimum of three weeks advert in some local and international media. The invitation to bid would have closed by now. The choices are open bid or no open bid, this unnecessary debate could have been avoided because you cannot win.

Yes, “People keep mentioning Agip and OandoPlc but nobody has made the final decision on those” – This your statement being quoted in full further portrays your bias for Oando and Agip as you have become like a ‘sales agent’ to them, are Agip and Oando the only repairer and operators in the world. Part of your statement says “Agip and Oando are probably the front runners because they have put a lot of work on that but you are not in the technical committee”, what is the meaning of this in transparency? You are not a member of the technical committee as Mr. Minister of State for Petroleum and Chairman of the Board of NNPC but you are privileged to know that Agip and Oando have put a lot of work into this transaction. How does this help our transparency image?

My humble advice Mr. Kachikwu is for you to allow BPE/NCP or ICRC to handle this transaction in the most transparent manner. Oando for example bid along with others for Port Harcourt refinery in 2006/2007 and lost. Today any of these companies may win if they do their homework but it must be through an open transparent competitive bidding. Finally in your public declaration from Vienna you said you are the Chair of the steering committee waiting for the technical committee to finish their work before your steering committee will then take it to the NNPC Board – If this process is not yet concluded, why then have you started to talk about Oando or Agip taking Port Harcourt refineries and how then do your public utterances give confidence to other would be investors in any of the refineries??

In summary, this whole transaction appears to be a mockery of ourselves and our processes in Nigeria because we the ordinary citizens have no power to interrogate your actions and inactions. For you to use the statement ‘Hullabaloo about the transparency has no basis’, is to say the least, condescending.

For the second time I advise you to resign now because you are dramatizing but not working for the common good of the Petroleum Industry and the Nigerian Citizens.

Dan D. Kunle

Sonangol Confirms Suspension of Refinery Construction

Angolan state hydrocarbon company Sonangol, has declared, as suspended, construction work on its 200,000Barrels Per Day Refinery in Lobito, in the country’s southwest.

The company also suspended the Oil Storage Terminal undergoing construction at Barra do Danda, near Luanda.

The announcement on Sonangol’s  website, confirms what Africa Oil+Gas Report published in its Refining Gap issue, ( Volume 17, No 5), released in late July 2016.

It looks like, for some time at least, Africa’s largest crude oil exporter will continue to import most of the refined products  it consumes.

The Angolans have been quit taciturn about releasing information about the status of the refinery construction.  Until this announcement, the best you could get from  the latest Angolan update of the United States’ Energy Information Administration. (EIA), wasthe official line: “Construction on a new Sonaref refinery in Lobito started in December 2012”.

And everywhere else in the public domain, “the refinery will have an initial processing capacity of 120,000BOPD and is scheduled to come online latest 2018.”

What should interest you is thesub sentence, “although the start date has been pushed back before”.

Africa Oil+Gas Report  had noted in the cited edition  that “no construction is going on at the plant, located in Lobito in  Benguela Province, on the Atlantic Coast north of Catumbela Estuary close to the country’s southwest.The promise by project promoters, that construction of the refinery would begin in earnest in 2015, after the initial groundbreaking in 2012, never came to pass.Sonangol did hire Standard Chartered Bank UK In December 2013, provide financial consulting , but the required funding did not come.

The Sonaref refinery first came to global attention at the World Petroleum Congress in Johannesburg, South Africa in September 2005, when Songol announced it had a list of willing partners queueing up to finance the project. In March 2006, the president of Sonangol and the vice president of Sinopec signed a partnership agreement to develop the refinery of which Sonangol would hold 70% of the stakes and Sinopec 30%. The (then) $3.5Billion project was planned to have the capacity to process 200,000 BPSD. Sinopec, the sole funder of the project, expected the refinery to start operations in 2010.

The Chinese pulled out early in the transaction, almost before the ink was dry on their agreement with Sonangol. In 2007, Sinopec withdrew from the project, citing concerns about the inclement climate for refined products. Coincidentally,Sinopec withdrew from its stakes in Angolan offshore oil blocks 15, 17 and 18, almost immediately after the end to negotiations on Sonaref.

The refinery is expected to run on Angola’s crude oil, with refined products sold to domestic and international markets. EIA explains that preliminary estimates show that Angola consumed roughly 130,000 BOPD of petroleum products in 2015, more than double the volume consumed ten years earlier. In September 2014, the government raised retail fuel prices by 25% for gasoline and diesel, by 21.6% for liquefied petroleum gas, by 34.6% for kerosene, by 100% for heavy fuels, and by 18.8% for asphalt.

Dangote Refinery: Low Double Digit Return in Seven Years

Devakumar Edwin, Group Executive Director of Dangote Industries Limited, says he expects a “low double digit return” from investment in its 650,000BPSD crude oil refinery seven years after commissioning.

The company has spent over $500Million so far paying for land, earthworks and land reclamation, jetty construction, buying capital and earthmoving equipment and other logistics.

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Dangote Refinery Will Be Subsidy Neutral

The 650,000BOPD Dangote Crude Oil Refinery, currently under construction, will sell its products to wholesale suppliers, not retailers, according to officials of the Dangote Industries. If the price of its gasoline is higher than the subsidized price, the buyers pay Dangote Refinery in full and then get the subsidy from government.

“We will be subsidy neutral”, officials explained on a recent tour of the 2,135 Hectare refinery grounds by Africa Oil+Gas Report.

Nigeria moved towards full deregulation of the downstream of its oil and gas industry in the week of May 9, 2016, with the government announcing the removal of subsidy on gasoline, but the country’s influential trade union, the Nigerian Labour Congress (NLC) has opposed the removal, threatening to shut down the economy if the action was not rescinded.

Dangote Industries expects to buy crude at international prices once the plant is commissioned, expectedly, in 2019. Devakumar Edwin, Group Executive Director of Dangote Industries Limited, who is overseeing the construction of the refinery, the 3MMTPA fertiliser plant and the Petrochemicals plant, all co-located in the 2,700Hectare land in the Lekki Free Trade Zone in the east of Lagos, said that the refinery will be able to supply the entire gasoline requirements of the country when it is fully operationalized. He acknowledges that there is no consensus on the volume of gasoline in demand, “but whatever it is  we will be able to supply it”

Dangote Races to Complete Refinery and Fertiliser Plants by 2018/2019

Devakumar Edwin, Group Executive Director of Dangote Industries Limited, says he expects the Mechanical completion of the 650,000 BPSD Dangote Refinery by end of 2018 and commissioning to happen by 2019. He is looking forward to commissioning the Three Million Tonne Per Annum (3MMTPA) Ammonia Fertiliser plant by 2018.

On a trip to the project site last weekend, Edwin showed journalists from two media companies: Africa Oil+Gas Report and CNN the stages of construction on both the 300Hectare fertiliser site, which is quite advanced and the 2,135Hectare refinery grounds, where sand filling and earthworks are going on. “This is the largest single train refining plant in the world”, he gushed about the refinery project.

Three Single Point Mooring (SPM) Bouys on the Atlantic Ocean, will bring in the crude, which will be delivered to the plant through a 20km pipeline. Edwin, a chartered engineer and Indian national vested with the responsibility of overseeing all the plants in the Dangote Group, said that the refinery was designed to utilise all African crudes.  “One option was to reduce ourselves to Nigerian crude”, he said. But the company decided to “build in flexibility to minimise the risks”.

Work on the Dangote Refinery project commenced on February 11, 2014, according to Henri Wijnen Riems, who is director of construction, project scheduling and monitoring.

$10 Oil Soon? How did we get here?

By Olountele Dokun

On Thursday, January 14, 2016, “Oil-Price.Net”, a commodity trader, posted $30.31/barrel for the (North Sea) Brent Crude, against which our Bonny Light is indexed.

On the same day, anchor persons on BBC World Business Today, a daily Television dialogue, quoted Standard Chartered Bank analysts predicting, pessimistically, $10/ barrel for the black gold“someday soon”. The previous day, on January 13, 2016, Ibe Kachikwu, the Nigerian minister of state for Petroleum, in a CNN interview, hoped that production cuts, to boost price, could be achieved with OPEC and non-OPEC countries, Russia inclusive.

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