Downstream

How decentralisation can support the expansion of Africa’s refining sector

VFuels fabricated the crude distillation unit (CDU) for the upcoming 30,000 bpd Cabinda Refinery in Angola.

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by Souheil Abboud, Managing Director, VFuels LLC.

Africa’s refining capacity has traditionally been concentrated around key hubs in Algeria, Egypt, South Africa and Nigeria. Combined, these four countries represent almost 75% of Africa’s installed refining capacity thanks to large-scale refineries that operate with various levels of reliability.

However, Nigeria and South Africa have lost their status of refining hubs in recent years. Nigeria because of under-investment and lack of maintenance in its three state-owned refineries, and South Africa because of the gradual shut-down or conversion of its own facilities.

As most African nations seek to secure their fuel supplies by building their own refineries, modular technologies and designs have been on the rise. While the trend first emerged out of Nigeria, it has quickly spread across the continent and modular refineries are now being built from West to Southern Africa.

Modular technology solutions make it possible to address several critical challenges and needs of emerging markets, especially in Africa. They notably offer clients the opportunity to set up a refinery in approximately 13+ months from inception to start of production. This compares favorably with the 3+ years for a traditional “stickbuilt” refinery. Such decentralized assets also avoid a lot of the regular land, infrastructure, and logistics challenges associated with larger projects.

Modular refineries have a quick return on investment (RoI) of approximately 2 years, enabling developers and their investors the ability to recoup their invested capital sooner. They offer a lot of flexibility when it comes to capex and opex, and the ability to gradually invest in additional modules to support capacity expansion over time.

Finally, the modular refining technology makes project’s development simple and efficient. It notably requires less manpower and direct supervision, which in turn provides significant costs savings and reduced operating expenses.

At VFuels, we have developed a solid track record of executing modular refinery projects for African clients. These include the 5,000 bpd Waltersmith refinery in Nigeria, the 10,000 bpd Conex refinery in Liberia, and the 30,000 bpd Cabinda refinery in Angola where factory acceptance tests (FAT) were completed in May 2022.

As we continue to support Africa’s energy security agenda with modular refinery solutions, we also believe in the sustainability of African infrastructure assets. Earlier this year, we entered into a joint venture agreement with Earth Technologies to develop and install clean energy infrastructure for African oil & gas assets, including refineries. We also set up a collaboration with EMCO Engineering to develop water treatment facilities and deploy controls and digital solutions across various sectors in Africa.

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Abuja’s State High Court halts Seplat Energy’s acquisition of Mobil Producing Nigeria

Last week, the State High Court of the Federal Capital Territory of Abuja made an ex-parte order of interim injunction restraining Mobil Producing Nigeria and its shareholders from completing the Share Sale and Purchase Agreement previously signed with Seplat Energy. In February 2022, and after months of negotiations, Seplat Energy had announced a $1.283bn cash proposition to acquire the shares of Mobil Producing Nigeria from ExxonMobil Corporation. This remains the biggest oil & gas transaction of the year so far, and one set to significantly expand Seplat Energy’s business in Nigeria. Mobil Producing Nigeria holds the entire operate shallow water business of ExxonMobil in Nigeria, representing some 95,000 barrels of oil equivalent per day (boepd) of working interest production. It also includes the Qua Ibo export terminal that exports oil to global markets, and the Bonny River Terminal that processes natural gas liquids into cooking gas notably. The NNPC had very early on expressed its disagreement over the deal. The state-owned giant, set to be officially unveiled as new commercial entity later this month, has sought to expand its upstream portfolio in recent years. Last year, it notably pre-empted a deal by Nigerian independent ConOil from acquiring Chevron Nigeria’s interest in OMLs 86 & 88. However, because Seplat Energy’s acquisition of Mobil Producing Nigeria is a corporate transaction and not an asset-based one, the pre-emption matter has remained subject of debate. In May, Seplat Energy had notably confirmed that it had received a letter from the NUPRC declining its consent on the transaction.    The ex-parte order of interim injunction made by the State High Court last week is a response to NNPC seeking to declare a dispute between itself and Mobil Producing Nigeria in relation to their interpretation of pre-emption rights under their Joint-Operating Agreement (JOA).

Increasing LNG availability in Nigeria will support new sustainable development models for Nigerian industries

by Ken Etete, Group CEO, Century Group. Nigeria is one of the world’s biggest LNG exporters. Since the first train at Nigeria LNG was commissioned in 1999, the country has built a massive LNG export complex with a capacity of 22.5 million tonnes per annum (mtpa). Last year, it held a 6% market share of the global LNG export market and was the world’s 6th largest exporter of the commodity. But while Nigeria’s gas has benefited industrialization and power generation overseas, LNG has remained relatively absent of its domestic market. This is now changing along with the government promotion of gas as a transition fuel and increasing private sector investment into virtual gas pipelines. At the Century Group, we have always believed that gas was meant to play a bigger role in supporting Nigeria’s industrialisation and energy access. As early as 2011, we set up Gas Plus Synergy (GPS) to support the monetization of associated gas and reduce carbon emissions across the country’s oil & gas sector. In 2021, our efforts paid off with the signing of a Sales & Purchase Agreement with Nigeria LNG for the delivery of LNG to the domestic market. Moving forward, we will continue to expand Nigeria’s domestic gas value-chain, and are committed to incentivize the switching from diesel to gas across sectors such as manufacturing and transport. This will support new sustainable development models for Nigerian industries, and ultimately make the economy more resilient. As Nigeria recovers from a recession caused by the Covid-19 pandemic and crash in oil prices, there are several reasons to be bullish on the future of its domestic gas market. To begin with, the country has increasingly become aware of the potential to develop its 206 Tcf of gas reserves both for the domestic and for the export markets. The 2020-2030 period has been declared “Decade of Gas” and is seeing several incentives to boost gas monetization. Nigeria has also taken a clear stance in favor of gas even as it thrives to reach net 0 emissions by 2060. Market dynamics are also evolving in a favorable way and will be providing positive grounds to support gas adoption moving forward. Throughout the end of 2021 and first quarter of 2022, fluctuating commodity prices have sent diesel prices soaring, generating significant operational expenses for Nigerian industries that heavily rely on diesel for power generators and logistics. As a result, demand for cheaper and cleaner fuels such as CNG and LNG is growing. It is now up to Nigerian companies and financiers to step up and meet the needs of the hour.