MODULAR REFINERIES IN NIGERIA REQUIREMENTS – DPR

In this blog, we explained the general requirements and guidance Information for the establishment of Modular Refineries in Nigeria.

It also highlight some important general and technical requirements for interested investors in refineries to enable smooth implementation of the initiative.

Top points: Modular Refineries In Nigeria Requirements, Key Objectives of the Modular Refinery Initiative , Scope, Technical Specification , Financial Status, Fiscal Incentives , Government Support, Community Involvement , Qualification Requirements, Investors Category, Modular Refinery Business Model, Location and Carrying Capacity, Legal Framework.

The strategy to reposition the Nigeria Oil & Gas industry, a roadmap of short and medium term priorities aimed at developing a stable and enabling Oil and Gas landscape with improved transparency, efficiency, stable investment climate and a well-protected environment, tagged “7big wins” was developed and launched by His Excellency, Mr. President in October 2016.

The strategy was anchored in fourth initiative in the roadmap, “Refineries and Local Production Capacity” seeks to transit Nigeria from being an import dependent Nation into a net exporter of refined petroleum products.
Thus, presenting huge investment opportunities in the mid – downstream sector that will result in GDP growth and jobs creation.
A key component of this initiative is Government support for the establishment of third party financed Greenfield and modular refineries for in-country petroleum products sufficiency that will stimulate products export.

 

Read: FG FINANCIAL SUPPORT FOR MODULAR REFINERY IN NIGERIA

 

It is the intention of government that the refineries should be scalable and located within refinery clusters for effective operations and minimal environmental footprint.
This document therefore highlights essential guidance information, some important general and
technical requirements for interested investors in refineries to enable smooth implementation of
the initiative.

Key Objectives of the Modular Refinery Initiative

• To promote availability of petroleum products in the country.
• To conserve foreign exchange utilization for the importation of Petroleum Products.
• To promote socio economic development in order to stop restiveness, criminal and illegal refinery activities thereby sustaining peaceful coexistence in the Niger Delta Region
• To mitigate and eliminate environmental degradation associated with illegal refinery activities, crude oil theft and pipelines vandalism.

Legal Framework

The process for establishing a Petroleum Refinery in Nigeria is regulated by the Department of Petroleum Resources (DPR) through Polices and Regulations promulgated by the Ministry of Petroleum Resources and Minister of Petroleum Resources respectively. The regulatory procedure is laid out pursuant to Regulation (2) and (3) of the Petroleum Refining Regulations (PRR) of 1974 made under section 9 of the Petroleum Act 1969. Furthermore, under Regulation 47 of the PRR, the Director, Petroleum Resources may from time to time, give directions as to the manner of compliance with any matter provided for under the PRR regulations.

Consequently, DPR has concluded the review of the guidelines that shall apply for the establishment of Hydrocarbon Processing Plants and also issued an addendum “Supplementary guidelines for the Design, Construction and Operation of Modular (mini) Refinery Plants in Nigeria” which details mandatory requirements, processes and procedures that will significantly simplify
compliance.

 

Read: Company/ Business Registration Service

 

Scope

The guidelines shall cover all refinery establishment. However, establishment of modular refinery plants, shall be with design capacity not more than thirty thousand barrels per day (30,000BPD). When the plant capacity exceeds 30,000BPD, the plant shall be upgraded to a full conventional refinery.

Location and Carrying Capacity

The location of a modular refinery shall be strategic and influenced by proximity to the source of crude oil, producing marginal fields and tie-in to supply infrastructure or clusters

Government also recognizes that there is a limit on the carrying – capacity in each of the oil producing states, consequently, establishments would be based on the acceptable carrying capacity indices of each state which is determined by the production capacity, access to infrastructure and limit of the environmental degradation.

Modular Refinery Business Model

Government envisages amongst others, a model that will be private-sector led partnership with equity participation from the state government or its agencies, registered local cooperative societies and the integration of the regional refinery stakeholders, with the private investor having majority equity as well as operate the Joint Venture.
State Government contribution could be in the form of land-for-equity and or paid off shares.

Investors Category

The Federal Government seeks the participation of credible investors and integration of key stakeholders in the modular Refinery initiative. The size of the investment structure will determine significantly the investor categorization and selection process.

The prospective investors will be categorized as follows:
A. Private Investor with financial and technical capacity, preferably with established Nigerian presence or partnership

B. Public-Private Partnership with credible participation from relevant stakeholders such as foreign technical partners, State Government, MDAs, Local Govt. Council, organized private organizations, cooperative societies, community equity contribution etc.

C. Regional refinery stakeholders involved in artisanal activities with focus to converting the vocationally acquired skills to cognitive technical skills. They shall be considered for equity partnership with technical and financial partners.

Read: DPR Permits & Requirements 

 

Modular Refineries in Nigeria Qualification Requirements

A sustainable and transparent framework is provided for the selection of potential investors, and shall take cognizance of the existing guidelines and objectives of the Refinery Expansion plan.
The licensing processes as prescribed in the guidelines for the establishment of Hydrocarbon Processing Plant in Nigeria by Department of Petroleum Resources (DPR) are in three phases namely
(a) License to Establish (LTE),
(b) Authority to Construct (ATC)
(c) License to Operate (LTO).
To qualify and move between phases requires certain criteria to be satisfied. Section 9 and 10 of this document presents some of the key general and technical criteria which interested investors must satisfy.

General Criteria

a) Institutional Framework – Company and Organizational Structure
Evidence of CAC registration for Nigerian companies/entities, foreign companies evidence/reference by Home Country’s agency. For consortium partnership, foreign and local companies must meet standard criteria and present legal documents of partnership,
certified true copies of Memorandum and Article of Association, Evidence of joint venture/partnership Agreement, Company Profile etc.

b) Financial Status
Three (3) years Audited Account, Financial report and Tax Certificate for Nigerian companies and similar documentation for foreign companies, paid up share capital, Investment Type, Detailed financial plan with Proof and source of funding, sworn affidavit
and letter of authority allowing verification of all claims

c) Community Affairs, Safety, Health, Environment and Security (CASHES)
Health, Safety and Environment (HSE) Plans, Quality Management System, Security Plans, Management of Change Procedure, Community Affairs and Corporate Social Responsibility Plans.

d) Nigerian Content
Applicants will be required to maximize the utilization of local human and material resources in line with Nigerian content requirements.

 

Modular Refineries Technical Specification

a) Plant Philosophy Model
The requirement is as outlined in DPR guidelines for the establishment of Hydrocarbon Processing Plant and the Supplementary Guidelines for Modular Refinery Plants. Investors are expected to demonstrate a positive crack spread for the chosen refinery design.
This includes but not limited to the following: Plant description and configuration, — desired output, management of light products and by-products (Gasoline, Naphtha, LPG & Heavy-ends), Details of marketing plan/strategy, Details of technology, Crude assay and
Source, Front End Engineering Design etc.

b) Age of Modular Refinery to be located

An applicant shall not be allowed to relocate a refinery that is older than Ten (10) years in operation from the date of establishment.
Where the refinery has not been in operation since establishment and well preserved, subject to verification, it should not be older than 15years from the date of establishment.
DPR will provide a plant technical audit checklist for this purpose.

Read: Alumni Management System / Software In Nigeria

 

Community Involvement in Modular Refineries

The process of integrating the regional community stakeholders into the scheme shall involve the following activities to be anchored by the relevant State Government or its agencies using their local structures:

a) Verification of community participants: This involves the screening and capturing of data for indigenes interested in gainful employment in the refineries and small medium enterprise activities.

b) Training: Focus on formally converting community stakeholders who have acquired vocational skills to cognitive technical skills.

c) Business Integration: Integration of this stakeholders as equity participants in the refineries as defined in Investor Category C.

Government Support in Modular Refineries

The Federal Governments assistance in the establishment / Conventional of a modular refinery will
include:
a. Facilitation of crude commercial agreements from marginal and other oil fields.

b. Facilitation of Ownership-joint venture investment vehicles with organized host communities and State Governments.

Fiscal Incentives for Developing Modular Refineries in Nigeria

Modular Refineries being midstream oil and gas processing facilities shall qualify for all incentives enumerated under section 39 of the Companies Income Tax Act CAP. 60 LFN 1990. The relevant provisions of the act are;
Modular Refineries being midstream oil and gas processing facilities shall qualify for all incentives enumerated under section 39 of the Companies Income Tax Act CAP. 60 LFN 1990. The relevant provisions of the act are;

(i) A company engaged in gas utilization (downstream operations) shall be granted the following incentives, that is-

(a) an initial tax free period of three years which may, subject to the satisfactory performance of the business, be renewed for an additional period of two years;

 

Read: Debt Recovery/ Collection Service in Nigeria

 

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MODULAR REFINERIES IN NIGERIA REQUIREMENTS – DPR

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