Local refineries : Experts call for massive investment, put average cost at $250m

POTENTIAL investors have been called upon to collectively invest in the construction of new refineries because of high cost of construction estimated at $259 million. Speaking at a panel session, former Executive Secretary of Petroleum
Products Pricing Regulatory Agency, PPPRA, Reginald Stanley, said investors should collaborate and invest in developing refineries in the country.
According to him, a single marketer may not be able to build a refinery because it costs over $250million for 20,000 barrels refinery today.

Stanley said, “Refinery is not going to work with the present structure of management. This is a very tough business and should not be under government management in order to achieve its purpose. Today, refineries are such that you must be extremely efficient, because it’s a tough business as it is only the toughest that will survive.”

Dr. Gabriel Ogbechie, Group Managing Director, Rainoil Limited, explained that “with the increase in the price of petrol at N145 per litre and the exit of subsidy payment, the sector has also brought a
lot of challenges for the downstream sector,” noting that “regardless of that, we are still optimistic that there are a lot of opportunities in the sector for a country of 180 million people moving around by
cars. This is the time for us to look at the downstream and factor a way forward.” Ogbechie, further called for the speedy passage of the Petroleum Industry Bill, PIB, as the industry awaits its passage for development. “The industry needs the PIB and for those of us in the sector, we are aware that the bill has been with the National Assembly for years now for political and vested interest. We need to take down the PIB and pass it in bits and pieces. But people are protecting their own vested interest and that is what is holding down the bill’s passage. I think the national assembly needs a political will to pass the PIB.” He also called on the Federal Government to deregulate the downstream sector “and allow it to run seamlessly. Why placing a cap on the price of petrol, why not sustain the subsidy regime? It is pretty difficult to play under that scenario. What the government needs to do is to address a lot of these challenges which can be achieved through right and constructive policy initiative.” He, however, noted that his company is committed to supporting the federal government’s plan towards regular supply of petroleum product to the market. “The secret is non-stop investment. We started this business from the basics and over the last twenty years we have gone from one petrol station to 51 stations; from building one tank farm to two with twenty tank trunks.“ When you don’t stop investing somehow, you build that internal capacity to be able to absorb shock as they come. Rainoil today is a company with a national spread as we have petrol stations across the country. That is why we are able to play in various markets at the same time despite the storms,” he said. The Chairman of Depot and Petroleum Products Marketers Association, DAPPMA, Mr. Dapo Abiodun, called for the total
deregulation of downstream sector in order to attract more investment. According to him, “The downstream business is at the verge of shut down over the huge debt of $2billion owed marketers. We need a
deregulated downstream to allow market forces drive the industry. Our challenges range from under-optimise facilities, FOREX challenges, as well as policy inconsistency.”