Refineries: NNPC, Chinese Firm Sign $28.5bn Deal •To be sited in Lekki, Brass, Lokoja •Imported refined petroleum products gulp $10bn

Written by This Day Friday, 14 May 2010

A major step in the nation’s quest for self reliance in petroleum and associated products production was taken yesterday when the Nigerian National Petroleum Corporation (NNPC) and China State Construction Engineering Corporation Limited (CSCEC) signed an agreement for the joint sourcing of funds for the construction of three Greenfield refineries and a petrochemical plant estimated to cost $28.5 billion.

Speaking at the signing ceremony in Abuja, Group Managing Director of NNPC Shehu Ladan said the three Greenfield refineries are to be located in Lekki in Lagos State, Brass in Bayelsa State and Lokoja in Kogi State, while the site for the petrochemical plant is yet to be decided.

Ladan said the corporation’s aim is to accelerate the construction of new refineries in the country to stem the flood of imported refined products, which according to him, is currently estimated at $10 billion annually.

Under the memorandum of understanding (MoU), the Chinese company is expected to source 80 per cent of the funding in form of contractor financing and supplier credits from the China Export and Credit Insurance Corporation (SINOSURE) and a consortium of Chinese banks, while NNPC would provide 20 per cent.

Ladan said the operational mode of the new refineries would be different from that of the existing ones, adding that government would have no shares or financial contribution to make in the construction and management of the plants as the entire project would be executed with loans sourced by NNPC and the Chinese firm.

In addition, the refineries are to be managed by CSCEC consortium upon completion until the full recovery of their loan used on the project.
He said on completion, the three Greenfield refineries would add about 750,000 barrels per day capacity to Nigeria’s refining infrastructure and position NNPC to engage profitably in the international trading of refined petroleum products.

In addition, he said the proposed petrochemical plant would source natural gas from what would be generated under the Nigerian Gas Master plan to produce polymers, solvents and particularly, gas-based fertilizers that are required to boost Nigeria’s agricultural production.

On what Nigerians stand to gain from the execution of the projects, the GMD said the new refineries with a combined capacity of 750,000 bpd would go a long way in helping to eliminate the reliance on imported petroleum products.

He said on completion of the hydrocarbon processing plants, Nigeria would save in excess of $10 billion annually from the elimination of imported refined petroleum products and an estimated $1 billion from the importation of fertilizers and chemicals.

“These new plants are capable of generating direct and indirect employment for an estimated 20,000 Nigerians covering the periods of construction and operations. Over the next decade, NNPC desires to eliminate completely, the current flood of imported petroleum products into Nigeria’s domestic consumption.  In order to achieve this, an estimated 750,000bpd of additional refining capacity shall be required at home as well as international joint ventures with other refineries abroad,” he said.

Ladan said the execution of the refineries/petrochemical projects would run for a five-year period, with construction of the refinery in Lekki commencing this year.

Speaking further on the importance of the project deal, the NNPC boss said the planned building of the new refineries would gladden the hearts of members of the labour movements, who had been clamouring for the building of additional refineries in the country as a condition for supporting Federal Government’s deregulation policy in the downstream sector.

Vice-President of CSCEC Mr. Yu Zhende who signed on behalf of the company, pledged that the firm would do everything possible to fast-track the execution of the projects and would abide by the provisions of the Local Content Act in the construction of the plants.

Chief Executive Officer of Lenoil Group, the local content partner of the Chinese conglomerate Mr. Leno Adesanya said the company was part of initial effort to bring in the Chinese firm to partner NNPC in the execution of the refinery project.

He said Lenoil was leading other local consortium of companies which were being positioned to take part in the provision of engineering and procurement services needed for projects in conformity with the local content demands.