Modular Refinery Association Of Nigeria Forum

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SPEECH DELIVERED BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA AT THE MODULAR REFINERY ASSOCIATION OF NIGERIA FORUM ON THE 15TH OF JUNE, 2017

PROTOCOLS

Distinguished ladies and gentlemen, let me say how extremely pleased I am that this particular engagement is going on.  I was invited last year to participate in this meeting, the Modular Refinery Association Of Nigeria event, but I could not make it. But I felt that it was important that I at least attended one of the events.

The reason is that we do owe ourselves as a nation, a responsibility to exploit for ourselves indigenously, the raw materials that we have.

This is exactly the motive behind our trying to establish modular refineries across the Niger Delta region in particular, and wherever we can find oil and gas resources.

A lot of the interest around modular refineries possibly began around a sense that if we’re able to provide an alternative. I’m sure many of us are familiar with the illegal refineries all over the Niger Delta, and the very serious environmental damage that is being done, and this is asides from the fact that, of course, the crude is stolen and even in the process of stealing the crude, a lot of environmental damage is done.

But a lot of those young men and women out there feel that well, this is a resource that is available, there is no opportunity to exploit it, why don’t we exploit it by whatever means possible, including the illegal. And that of course, has caused severe damage all over the Niger Delta.

So there’s a very serious reason, an environmental reason and also a reason of law and order to ensure that we regulate the processing and production of oil.

The second and possibly the more important reason is the fact that the raw material is there. There is no nation on the face of the earth that would help the sheer amount of oil and gas resources that we have, and that would not be innovative and creative about it is processing and production.

The Indonesians took palm oil from us and they now have palm oil plantations everywhere and there’s practically nothing the Indonesians do not use palm oil to do.

They have a whole palm oil sub-economy and ecosystem that deals entirely on palm oil. So there is an opportunity for local processing, there’s an opportunity for the higher flying type of processing, there’s an opportunity for every grade and level of business that wants to partake of that ecosystem.

That’s exactly why we need to do what we’re doing about modular refineries. There are those who have argued that modular refineries are not lucrative; they’re not cost-efficient, and there’s no reason to build modular refineries. And they made some important points, especially around the fact that it is under 2,000 barrels a day so you may not make money.

The examples they usually cite are examples of countries that do not have the sheer range and amount of resources that we have. If you have the resources that we have, then it is really just a matter of modulating your business model such that you are able to deal with a particular sub-sector you want to deal with.

I’m sure some of us are familiar with the Niger Delta Processing Refinery that is in Ogbele, Rivers State, it produces a thousand barrels of oil a day, but most of it is diesel and it uses it all and sells everything. And of course, it is very lucrative. There is another two thousand barrels a day modular refinery which is also doing very well.

Why are they able to do so well? First, they have a good business model. Secondly, there’s good private sector involvement in it.

The government cannot go setting up refineries, if governments set up a refinery and give it to people to run, it won’t work and we have a good example of all the refineries we’ve seen.

If you look at all the refineries we have in Warri, Port Harcourt, Kaduna, the primary reason they are not functioning today is because they are government-run. Whoever says anything different isnt telling the truth.  Government cannot do business, government is meant to create the enabling environment. At best, the government will put some investment into it.

Like I said earlier, one of the reasons why these refineries are working is because they are private sector run, and if they are private sector run, the efficiencies are there.

What we’ve been trying to do with modular refineries now is develop a framework that we believe would work.  Anybody who wants a license and is able to present a sensible business case will be given a license to operate a modular refinery.

We’re trying to develop a very robust set of guidelines that will help people do this well. We’ve gotten so much interest all over the country and practically everywhere, around the world, and especially from young people in the Niger Delta, who wants to be involved in the modular refineries business, so many young people.

Many of them are coming in with private sector investors, and what we want to do which is the New Vision for the Niger Delta involves the Federal Government, State Government, the communities and the private sector.

Each community will be able to take a percentage of ownership and of course, the private sector. All of the private sector participants we have spoken to, both foreign and local, agree that community participation is crucial.

One of the reasons for the bitterness that you’ll find amongst oil-producing communities is that they’re not involved in any way and this resource is right there in their soil. So, they obviously want to get involved and there’s no reason why they shouldn’t get involved in it. if there is damage to the environment, if the place is taken up, they are the ones who suffer the consequences.

But we shouldn’t feel a sense of entitlement around participation. This is a challenge I threw to the young people of the Niger Delta, these are young men and women who are Nigerians; aggressive, innovative and creative young people. They are not entitled to it because they live in the Niger Delta, they are entitled to it because they have the brains and the resources to be able to make it happen.

And this is what I’ve seen from my engagement with the young people in the Niger Delta, they themselves are bringing in the investment, they themselves are bringing in the investors, talking to private investors, locally and internationally.

I think we are on the cusp of a very robust engagement with young people who are going to be doing a lot of very incredible things with Modular Refineries in the Niger Delta region.

It’s not all rosy because when you look at how long it takes, there is nothing magical about establishing any industry, let alone one that is as complicated as a refinery and not just setting up the refinery, but the business of running it and selling it.

People have various complications, look at PMS for example, if you produce PMS,  there’s a challenge with costing it because PMS prices are still somewhat regulated. About a year ago, to a certain extent, deregulated prices moved up from N87 to N145 per Iitre. That was a huge jump,  and of course, it had consequences for prices, prices for transportation and all other sorts of prices.

There are those who are saying, you need to deregulate fully. Why are they saying that? Because if to a certain extent, you don’t deregulate, it’s not cost-effective for those who are producing PMS to sell, right. But at the same time, if you deregulate completely, the prices of everything else is going to go up. So, there are those complications and we’ve got to moderate all of those things.

Government has to come into a certain extent, (and this is what is even going on at the moment), to try and balance things up because you can’t have overnight another massive deregulation. If you do that, obviously the consequences will be very dire for the economy.

But diesel is deregulated and a lot of modular refineries are focusing on diesel, so there isn’t much of a business complication with producing and selling it.

Last week, I met with the Association of Chemical Engineers of Nigeria, the Executives.  These are very brilliant Nigerians who have been involved in the petrochemical industry for many years; many of them working at the highest levels at the NNPC, Shell and many of the International Oil Companies, IOCs.

They have come together now to help on this issue of modular refineries and I had an interesting engagement with them. All of them are saying the same thing, these things are possible if we all sit together and try and work it out. We know the objective is that we want to develop a petrochemical industry that justifies the huge resources that we have as a nation.

The resources are there, so much of it, the amount of gas that is flared everyday, the amount of gas that still lies there, untapped, the amount of petroleum resources untapped in this country is huge.  There is no type of petrochemical industry that we cannot have, there’s no level that we cannot do whether it is small-scale, medium,  or any of the large-scale enterprises, there is no aspect of this ecosystem that a Nigerian cannot participate in.

What we as a government are committed to, is to create that enabling environment and that’s why I think this particular meeting is important and I want to encourage the association to work very hard. But let’s be realistic, let’s look at the business of this thing. How can we ensure that this business will be lucrative? What are the issues? What are the obstacles?

I certainly will be waiting for the outcome of this meeting, but more importantly, I’ll be waiting for you to critique the work that we’re doing, especially the guidelines that are set up by the Ministry of Petroleum Resources and the Presidency. It is important that this works.

As I said earlier, our major partner in this is the private sector which most of you represent.

I’d like to congratulate you once again and all of the stakeholders who are here. This country as we always say, belongs to all of us,  we can make it work, and the best way to make it work is what we’re doing here.

Let’s organize, plan, think and work together and I’m sure if we do so, we are going to have the kind of country that we’ve dreamt of.

Thank you very much and God bless you.