Cutting costs: NNPC to use co-location for crude refining

The Nigerian National Petroleum Corporation (NNPC), has revealed that the organization was looking at significantly reducing the cost of refining crude oil within the country through resource co-location.
According to the Group Managing Director of the corporation, Dr Ibe Kachikwu, with the co-location model, which is still at the proposal level, the corporation will ensure that new refineries are situated together in clusters, which will allow for sharing of critical infrastructure like power, pipelines and technologies, among other resources; and also targeted at encouraging the private sector to invest in refineries.

He disclosed that at the moment, over 440,000 barrels of crude oil were meant for local refining, but that a large proportion of this quantum was not utilized because of the near-comatose state of the refineries, except for Port Harcourt plant which had shown some level of improvement in recent times.
He maintained that co-location model for new refineries was feasible and had the capacity to drive efficiency in the midstream segment of the petroleum industry, especially in the area of crude refining.
He added that NNPC was open to Nigerians willing to key into the model and give the petroleum sector a lift.

He said: “The co-location model for the refineries is actually a proposal. I will like a situation where we will deal with our own existing refineries and then find individuals who are willing and ready to invest in other refineries.”
Speaking on how the model would work, Kachikwu further that in a co-located area, the refineries would share common tanks, common pipelines, common power, and this would obviously bring down the cost of building refineries, and that the effect of that was that there would be huge cost efficiency.
“We have to do our marketing very well and get people who are willing to do this.”
He added that the hope of the NNPC was to get the existing refineries to work, saying that the model all over the world today was that the value obtainable from crude was at the upper level of the value chain.

He explained that to produce crude, there was no much technologies to be deployed as crude was the same everywhere.
“The only time you get an incremental value in terms of pricing, is when you refine. Crude is cheap, and you need to refine to make some quick returns. There is the need for us to expand our refineries and grow more refineries and ship out refined products to the rest of Africa because there is a lot of market for them. Unfortunately, ours havent really worked and we need to get them to work.”