Why modular refinery operators can’t access bank loans



Operators of modular refineries have blamed their inability to access bank loans on the government’s reluctance to release feedstock (crude oil) guarantee letters to them.

An executive member of the Crude Oil Refineries Owners Association of Nigeria (CORAN) told The Nation yesterday that banks are hesitating to finance their operations.

The member, who spoke in confidence, added that CORAN members were yet to access the required volume of crude oil. Besides, the source noted that the Federal Government has not accepted the CORAN member’s request to purchase crude oil in naira for domestic refining.

He said the Nigerian Upstream Regulatory Commission (NUPRC), which has conceded to implement some aspects of the 2021 Petroleum Industry Act (PIA, was yet to kick-start the full execution of the law.

When asked to confirm if the commission has agreed to sell crude oil to the local refiners in naira, he said the NUPRC has issued some guidelines in that regard.

His words: “Yes they have agreed to implement the PIA on this aspect and NUPRC has issued guidelines towards it. But the full implementation has not started.

“Many CORAN members have not got the quantity they need for refining and the issue of payment for feedstock in Naira rather than dollars is not yet resolved.

“Those developing refineries need the Letter of Guarantee for their bankers to finance their development. “They have not been given such feedstock guarantee letters which is holding up their financing.” But a source from the commission, who also pleaded for anonymity, said payment in naira is not automatic. According to the insider source, it could be made in dollars or naira, in line with the PIA.

“The payment in naira is not automatic. According to Section 109 (4)(C), it may be in USD or naira as may be agreed between the lessees or supplier and the licensee of the refining license,” said the source.

Alluding to Section 109 of the PIA 2021, he explained that “local refiners are to approach the applicable lessee and agree based on willing supplier and willing buyer basis.

“There are also conditions attached – crude oil may be sold to holders of crude oil refining licenses whose refineries are operational

“Supply shall be commercially negotiated between the lessee and the crude oil refining licensee. However, most lessee current have their crude committed while others are battling with crude oil theft.

Head, Public Affairs and Corporate Communications NUPRC, Mrs. Olaide Shonola, had earlier issued a press statement, saying that the agency was set to enforce domestic crude supply obligation.

The statement noted that more refineries have given notice to commence production.

The statement reads in part:” As more private refineries indicate readiness to commence production soon in Nigeria, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is taking all necessary steps within the prescriptions of the Petroleum Industry Act (2021) to ensure adequate and consistent supply of feedstock to operators.

“It cautioned that there would be consequences for sabotaging the process.

“The pre-emptive steps are being taken because it would send wrong and unbecoming signals to the international business community if operators of domestic refineries in one of the world’s largest crude oil producing countries start importing feedstock for their production.”

“It was in contemplation of this that Section 109 of the Petroleum Industry Act (PIA) 2021 introduced the Domestic Crude Supply Obligation (DCSO) to Nigeria’s oil industry in a bid to ensure that domestic refineries are not starved of crude oil supply for their operation.”