Minister of Petroleum Resources Emmanuel Ibe Kachikwu said that the federal government has initiated plans to achieve 100 per cent local fabrication of modular refineries in Nigeria and has entered into discussions with Original Equipment Manufacturers, OEM, in this regard.
He said that oil production, excluding condensates, for the month of July was slightly below 1.8 million barrels per day. Speaking on the sidelines of an event in Abuja, he said there had been issues with aging pipelines.
“We continue to have challenges, some of our pipelines are old, so these are basically technical. They are not militancy-induced stoppages, but they are basically maintenance-induced stoppages,” he said. The Minister said that the Federal Government intends to set a deadline for the local fabrication of oil vessels and Floating, Production, Storage and Offloading vessels, FPSO, while the Bank of Industry, said the newly launched $200 million intervention fund can be used for by oil companies for contract financing and loan refinancing.
The BoI also stated through the fund, the BoI would take over the loans of oil companies in commercial banks, slash the interest rates on such loans and reduced the burden on the companies. Speaking at the Memorandum of Understanding (MoU) signing ceremony on the implementation of the $200 million Nigerian Content Intervention Fund, NCIF, between the Bank of Industry, BoI, and the Nigerian Content Development Monitoring Board, NCDMB, Kachikwu said Nigeria cannot continue to award contracts, but most set deadlines on when to localise most of the vessels and projects in the country.
He said, “Specifically, areas dealing with vessel fabrication and offshore platforms, FPSO, we must set a benchmark for when we can exit. No country in the world has been able to achieve this by just sitting around and giving contracts. We must be able to see that in 10 years time all FPSO in Nigeria would be localised. We must begin to drive that.” Furthermore, Kachikwu lamented that over the years, Nigerian companies have found it difficult competing with their counterparts from jurisdictions where funding is accessible for 5 per cent or less as compared to our market where bank lending rates hover around 20 per cent. He noted that some Nigerian banks are still unable to provide long-term financing required by the local supply chain to build needed capacity, adding that the banks also lack sufficient knowledge of the oil and gas sector.
“It is a known fact that the exorbitant cost of funds in our market is partly responsible for the high cost of service delivery by Nigerian Oil and Gas Service Providers (NOSPs) and this feeds into the unacceptable high cost of crude oil production,” he argued.
Kachikwu further disclosed that NCI Fund being launched today is a portion of Nigerian Content Development Fund (NCDF), and is drawn from one per cent of all contracts awarded in the upstream sector of the oil and gas industry. He said the Federal Government would further engage with the NCDMB, BoI, oil companies and multinational agencies on how to increase the fund from its initial outlay of $200 million to $1 billion.
Speaking in the same vein, Executive Secretary of the NCDMB, Mr. Simbi Wabote, stated that the Board has keyed into the drive to discontinue petroleum products importation in Nigeria, adding that its strategic initiative is to achieve 100 per cent local fabrication of our modular refineries.
He said, “We have commenced discussions with OEMs, local fabricators to make this a reality. We have set aside areas in our oil and gas scheme for practical training on operations, maintenance and running of modular refineries as a sustainable business model and for fabrication of the units.”
He added that efforts are on to ensure that the Dangote Refinery, when operational, would be managed and maintained by Nigerians and Nigerian companies.
He said, “The Dangote Refinery project needs all the support it can get to make it succeed, both in the ongoing project execution phase and with subsequent operational phase. We have agreed to provide list of Nigerian companies with capacities for patronage by Dangote Refinery for the development of the project to meet cost schedule, timelines.
“Similarly, a compendium of anciliary businesses required to sustain operations on the refinery would be developed for interested entrepreneurs, so that the 650,000 barrels per day refinery promise can be met, while maintenance operations phase of the plant would be supported by capabilities within Nigeria.”
Also speaking, Managing Director of the BoI, Mr. Olukayode Pitan, said the fund would be used to increase capacity in the industry, generate employment, create linkages that would affect and lead to the growth of the oil and gas sector. He said, “The fund can be used to acquire assets for those who have contracts. The single digit on that kind of facility it would not exceed $10 million and the interest rate on it would not exceed eight per cent. Also we have taken into account community contractors because this fund is trying to ensure that they also are carried along and it even make it much easier.
“For community contractors they can access up toN20 million and the interest on that would not exceed five per cent per annum.” He further stated that the fund can be used by oil companies for contract financing and loan refinancing. This is due to the fact that we are aware that some of you in the industry, because this fund was not operational then, had to go to other banks to borrow money and you are paying 15 per cent and 16 per cent per annum in dollars, and when you are paying that type of interest rate it becomes difficult to make money.
“So for the contracts that are qualified and are running in other commercial banks we might be able to take them over and your interest rates reduced and burden reduced. That would not exceed eight per cent per annum. All you have to do is to apply to us attach your documents and come to us and that would not exceed $10 million. The tenure for the facilities under this intervention fund will not exceed five years and is five years maximum at the interest of eight per cent except for the communities, whose interest rate would not exceed five per cent.”
