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Apart from mere granting of licences, industry experts have started advising the government to go beyond issuance of licences to provision of attractive incentives to prospective investors in the new idea of modular refineries.
Many of the experts said it is not enough to grant only licences and expect the investors to do everything with current market prices.
According to the Deputy Director, Emerald Energy Institute, University of Port Harcourt, Prof. Chijioke Nwaozuzu, “Attractive incentives in the form of tax reliefs, customs and excise duties and Value Added Tax waivers, and accelerated capital allowances would help to boost investments in the modular refining space which is relatively new in the Nigerian oil and gas industry”.
In an interview, he noted that “Considering government’s new impetus on facilitating the construction of modular refineries, and the five minimum conditions that need to be met, it could be inferred that the government’s current policy drive is very positive”.
“However, the issues of crude oil pricing for domestic processing and product off-take/evacuation were not mentioned by Mr. Rabiu Suleiman, the senior technical adviser to the Minister of State for Petroleum, Dr. Ibe Kachikwu.”
According to him, “it was more economical to subsidise local production of refined petroleum products than subsidise their importation”.
Nwaozuzu added further that “As an added incentive, the government could initially consider discounting international spot prices for crude supply meant for domestic processing and consumption. The issues of product off-take and evacuation are as critical as guaranteed crude oil supply to modular refinery projects. Refinery storage tanks must be evacuated at regular intervals”.
“An investor cannot commit millions of dollars into constructing a refinery merely because it has been noted that there is ample national and regional demand for refined products, and also a deficit in the local market for petrol and diesel.”
“The Nigerian National Petroleum Corporation (NNPC) might consider taking a minority shareholding in prospective modular refining projects whereby its subsidiary, the Products and Pipelines Marketing Company, could guarantee the products’ off-take.
“Guarantee of foreign and domestic equity and debt capital is also crucial, and government is making great strides in that direction. However, the government should also engage with some of the regional financial institutions, such as the African Development Bank.”