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FG may not revoke idle oil refinery licences

By BusinessNews Staff on July 20, 2015

The Federal Government has no plans to revoke unutilised oil refinery licences given to 17 private operators over 10 years ago, investigation by our correspondent has revealed.

It was also learnt that the Department of Petroleum Resources, the government agency responsible for the issuance of such licences, had not received any letter from the private operators given the Licence to Establish refineries why the project had not commenced.

After the LTE stage, our correspondent learnt that the operators were supposed to receive another licence – Licence to Operate, which would allow them to commence operations.

As of Friday, none of the 17 operators had obtained a LTO from the DPR, the regulator of Nigeria’s petroleum industry.

Over 10 years ago, the Federal Government through the DPR had licensed some private operators to set up 18 refineries in Nigeria. Out of the 18 so licensed, according to the DPR, only the Niger Delta Petroleum Refinery is functioning and it produces 1,000 barrels per day.

A top official of the DPR, who spoke on condition of anonymity because he was not authorised to release information on the issue, told our correspondent that the DPR gave the LTE to private operators after they had applied for it and were found to have met its (DPR) requirements.

“The LTE was given and the DPR was to supervise the establishment of the refineries. After this stage, the LTO was to be issued. But the truth is that we’ve not heard from these operators. By our findings, we learnt that some of them have lost interest, while others have the constraints of finance and technology. “Some thought with the LTE, they could get crude-lifting right from the Nigerian National Petroleum Corporation. That wasn’t part of the scheme.

“The DPR has the right to take back the licence but we have not done that yet. It is true that the process for this licence issuance has been aborted, but if the private operators still want to go ahead with the projects, they must come back to revive the aborted process.”

The source also said, to show that the process for the private refineries had been aborted, the DPR came up with the idea of modular refineries.

Speaking on the failure of other 17 private operators, the Head, Downstream Monitoring and Regulation, DPR, Mr. Maigida Mudei, said at a forum in Lagos that lack of funds was one of the major reasons given by the operators for their failure.

He said paucity of funds made the operators not to secure crude that would be sold to them at international market price.

It was gathered that one of the projects, with capacity to produce 12,000 barrels a day, which had made appreciable progress in the initial stage, became enmeshed in a controversy not too long ago, leading to the halting of its operations.

But 17 of the licensed operators reportedly defaulted on the deadline given each of them to commence production.

They were also said to be displaying reluctance in renewing the mandate as stipulated in the enabling law.

Recently, it was reported that three of South Korea’s four refiners were increasing spot crude imports from Nigeria and a few other countries at give-away prices.

Refiners have been running at high rates to profit from the cheaper crudes, with throughput at South Korean refineries jumping to 90 per cent of capacity in May, up from 85.9 per cent a month ago and 78.4 per cent a year ago, according to industry data.

With the Organisation of the Petroleum Exporting Countries and other producers keeping crude taps open in spite of soft global demand growth, tens of millions of ‘unbought’ barrels have built up in floating storage sites and dragged down international oil markets.

In order to encourage investment in private refineries in the country, which will lead to the refining of crude oil locally and guarantee the availability of refined petroleum products, some stakeholders in the Nigerian oil and gas industry have urged the Federal Government to legalise illegal refineries in the country.

[Punch]

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