After Dangote Refinery, foreign investors give condition to sponsor 20 others in Nigeria

International investors who were supposed to provide funding for building roughly 20 modular refineries in Nigeria have deferred their contributions since it will be challenging to secure assurances regarding the supply of crude oil to the facilities once they are finished.

The international oil companies that make up the majority of Nigeria's crude oil producers have not been able to convince investors that crude will be supplied to the modular refineries when the facilities are ready to produce refined petroleum products.

As a result, the facility's investors have held onto their money until the federal government can persuade IOCs to give the assurances necessary for modular refiners to get their crude oil supply.

Challenge in completing refineries

Punch reported that there are now 25 modular refineries in Nigeria with licenses. There are five of them running and producing naphtha, black oil, kerosene, and diesel.

About ten are being completed in different phases, while the remaining ones have been granted licenses to open. The Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), Eche Idoko, stated.

“Only about five of our members have completed their refineries. The others are having a major challenge. This challenge is that the people who are supposed to finance them have not disbursed financing for construction because they want some level of guarantee.

“A guarantee that if they finish the refinery, they will get feedstock, which, of course, is crude oil.”

Authorities not giving guarantee

Idoko stated that the authorities did not want to assure the refineries because they think the funds may eventually not be utilised for building the refineries but selling the feedstock.

He added, “This, for us, is neither here nor there because what the financiers were asking for is not that you should supply them the crude, but that we should be able to give them what we call a Conditional Term Sheet and Heads of Terms. And this means that when you finish your refinery as an investor, you will be supplied feedstock.”

He said modular refiners as well as some downstream operators in the sector have repeatedly called on the regulator to mandate the international oil companies to supply crude to indigenous refiners first before exporting the commodity.

Idoko stated, “The financial houses know that the regulators do not own crude and don’t produce the commodity, but they want to see something from your suppliers that when you finish your refinery, they are going to give you crude under some clearly specified terms.

“But we have not been able to get the regulators to see reasons and impress it upon these IOCs to give us this kind of document. So, what we have received from them is that the guidelines state that they can supply crude when the refinery is at least operating at 50 per cent.”