First Bank, 5 Others to Finance $100m Refinery
US Exim Bank to provide cover
By Mike Oduniyi
The recent involvement of local banks in the energy sector has taken another leap, as a consortium of six banks led by First Bank Nigeria Plc, is putting together a financing package for the construction of a private oil refinery expected to cost $100 million (N13.3 billion).
Other banks in the consortium are Intercontinental Bank, Standard Trust Bank, Diamond Bank, First Atlantic Bank and Zenith International Bank.
The consortium is charged with the task of raising loans for funding the project as well as packaging the equity financing for the construction of the refinery owned by an indigenous company, Total Support Refineries and will be sited in Calabar, Cross River State.
Mr. Taiwo Okeowo, Head, Corporate Finance of First Bank told THISDAY that 60 percent of the total financial package for the 12,000 barrels per day (bpd) capacity refinery, will be raised through debt financing while the remaining 40 percent will be through equity financing.
Okeowo said the United States Export-Import Bank (Exim-Bank) will provide guarantee for the offshore portion of the loan package, up to 85 percent, through the New York-based Commerze Bank.
All the financial packages are expected to be in place before the end of October this year.
"In the last 18 months, we have been checking the figures with the Total Support group and Ventech Engineering (the main contractors). We have got to build a petroleum economic model.
"In the last couple of months, we have put together information memorandum and placement memorandum to raise both equity and debt financing for the project," Okeowo added.
The Total Support refinery whose ground breaking ceremony was performed on Monday, signaled the eventual take off of a private refinery in Nigeria, more than two years after the Federal Government first granted preliminary licenses to 18 companies.
The refinery, located within the Calabar Export Free Zone, is also the first out of the five companies that have so far received approval from the government to construct.
Speaking at the formal launch of the refinery, the Director, Department of Petroleum Resources (DPR), Mr. Mac Ofurhie, said the project developers must ensure that the design and construction of the plant followed the Federal Government's laid down guidelines on local content in the oil and gas industry, while the DPR must be involved in the engineering, procurement, construction and installation (EPCI) process.
Ofurhie said in line with the condition attached to the private refinery scheme, the promoters would also need to apply for licence to operate at the end of construction and installation.
Also speaking at the occasion, the President of the Total Support Group, Mr. Ubani Nkaginieme, said crude oil feed stock for the refinery will be sourced from either ExxonMobil's Qua Iboe Crude Oil Terminal or from indigenous oil producer, MoniPulo. The two oil producing firms have their operations some few kilometers away from the refinery.
He said the refinery, expected to be on stream in 2006, will initially take crude oil supply through the use of two self-propelled barges with installed capacity for 24,000 barrels each.
Nkaginieme said unlike other refineries which utilize about 30 per cent of its gas output for power supply requirements, the private refinery will utilize 80 per cent of its gas for power supply requirement.
On the level of emission expected from the refinery, the company president said it will be three per cent less than that of any refinery. He added that the refinery is designed to be the most environmentally-friendly.
He also said the refinery was planned to be an export refinery, but that since Nigeria imports about 70 percent of its fuel supply needs, the refinery will be producing for local market.
"The refinery will operate on the hydro re-formative technology. We will not use the fluid cracking technology because ours is a small refinery. Only refineries which have 60,000 barrels per day installed capacity can use the cracking system because it is quite expensive," he said.
In line with the downstream deregulation policy of the Federal Government, the Petroleum Resources Ministry had in June 2002 shortlisted 18 firms out of the 31 that filed applications for preliminary licences. The other companies included Ilaje refinery and Petrochemicals, NSP Refineries, Oil Services Ltd, Ode-Aye Refinery Ltd, Orient Petroleum Resources Ltd and Owena Oil and Gas Ltd.
Others are Southwest Refineries and Petrochemicals Company, Starex Petroleum Refinery Ltd., The Chasewood Consortium, Tonwei Refinery and Union Atlantic Petroleum Ltd.
While these companies are expected to be ready to commence operation within the next two years of being granted the preliminary licences, the ministry has, however, declined to withdraw the licences as stipulated by the guidelines. The ministry said it noted the hurdles facing implementation of the deregulation policy.
The private refineries are to compliment the four ailing state-owned refineries, which have combined installed capacity of 445,000 bpd and to relieve the pressure on importation of petroleum products, where the Nigerian National Petroleum Corporation (NNPC) said it was incurring about N500 million loss daily.
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