The Federal Government has been urged to provide additional incentives to investors to facilitate the establishment of modular refineries in the country.
The Deputy Director, Emerald Energy Institute, University of Port Harcourt, Prof. Chijioke Nwaozuzu, said 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 refining space.
He told our correspondent, “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.”
Nwaozuzu added that he had previously argued that it was more economical to subsidise local production of refined petroleum products than subsidise their importation.
He stated, “Therefore, 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 expert said the Nigerian National Petroleum Corporation 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.
He added, “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.”
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