Lagos Refinery Could be 'Wishful Thinking' as Nine Other Nigerian Projects Stall

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--In January, the Daily Trust in Nigeria's capital Abuja revealed that bureaucratic delays, lack of funding and technical incompetence had stalled the establishment of nine private refinery projects that had been approved by the government. The report said that since 2002, the federal government had been granting licenses for the establishment of private refineries to address the fuel importation problem in the country, but none had taken off.

This week, Leadership, also in Abuja, reported that the 300,000-barrels-per-day greenfield Lekki refinery in the commercial capital of Lagos may remain "in the realm of wishful thinking" for the Lagos state government and stakeholders if the alleged flaws in the new Petroleum Industry Bill (PIB) are not immediately addressed. In addition to oil processing, the refinery would produce 500,000 tons of liquefied petroleum gas (LPG) annually. Delays would bring the tally of stalled refinery projects to 10.

Investors, which include international oil companies (IOCs) that have been driving the project, want the status quo in the form of a joint venture (JV) agreement with the Nigerian National Petroleum Corporation (NNPC) and the Lagos state government to be maintained. They believe it should not be reversed by the PIB in its present form.

The feeling is that the provisions of the PIB cede too much power to the government at the expense of investors, and that when the bill is eventually passed the host communities' equity participation in the upstream oil and gas industry will increase. The IOCs believe the 8% interest will move up to 10%.

An investor said that the PIB and the frequent changes in the top management of the NNPC by the federal government had made sourcing of funds for the $8 billion project difficult.

A recent inspection of the site in Lekki Free Trade Zone showed that there was nothing related to the project on the ground, which makes the proposed 2017 commissioning date doubtful. Nothing tangible had been done since the signing of an agreement between the state government and the NNPC in collaboration with a consortium of Chinese investors known as ChinaState in 2012, for the establishment of the refinery under a public-private partnership (PPP) arrangement.

The nine private refineries mentioned by the Daily Trust would have a combined capacity of 464,000 barrels per day. Licenses have been revoked for the licensees' failure to use them and then revalidated. Some of the companies involved have technically abandoned the projects, while others are yet to mobilize sites years after the issue or revalidation of licenses.

The stalled project stream is blamed by industry sources on the Department of Petroleum Resources on the one hand and the companies' failure to meet the technicalities and generate the necessary funding on the other.

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