Listen: What CORAN actually seeks in an emerging market – Iheanacho
On ‘CEOs Talk Business,’ the Chairman Board of Trustees, Crude Oil Refiners Association of Nigeria (CORAN) and CEO of Integrated Oil and Gas Ltd., Capt. Emmanuel Iheanacho, sits with us At The Marina Today, and shares on new plans by the association to stimulate investors’ interest as well as have the government consider some important areas of support to enable this emerging market grow and be properly developed for the economic good of the country.
Let us talk about what your association has been trying to do lately
Iheanacho: Yes, you know that I am a member of the Crude Oil Refining Association of Nigeria I am actually the Chairman Board of Trustees of that Association.
It is an industry association where people who have an ambition to develop refineries for refining our crude into refined products for exports. This is an umbrella organisation that has convened to articulate their objectives, what they do, their activities and all of those things.
So, you will find that in the next few days you will have quite a bit of news about CORAN and what it plans to do and what its aspirations are.
So, what are some of these plans?
Iheanacho: Basically, everybody, people have come to realise that a greatest value will be derived from exploiting hydrocarbon resources through a process that allows that we can bring the oil onto the surface and we don’t just export it without adding value; add further value to it by building refineries locally and refining the products, therefore making it a passion to turn this place into a hub for the trading of refined petroleum products.
Ok, what has been the challenge overtime? Because, I know that for some time now, people like you have been trying to be established. What are the developments? What are the Challenges?
The challenges are actually numerous; it depends, from one particular entrepreneur to the other. For instance, we conceived of a plan to build a 20,000 barrel per day modular refinery on Tomaro Island in Lagos here.
One characteristics of Tomaro Island is that it is an Island and it is actually a virgin Island. We don’t have any docking structures or infrastructure developed there. so in comparison for instance to a potential refinery owner who is located in a very close proximity to the sources of crude, we have to make provisions for building a jetty, building pipelines, building storage infrastructure and building quite a number of things and providing electricity on the island. So, that impacts upon the ultimate cost that we are subject to.
But besides the cost of putting those facilities in place what are the issues or has it been smooth sailing when you talk about the building of the refinery?
Iheanacho: Well, the issues are there. This program we are talking about is really a program that would really facilitate our economy lead to greater jobs being created, leading to technology being transferred to us. So the government really needs to have quality policy interest in our success that goes beyond just wishing us all the best.
So, what are these things that the government could to do? The government is in control of crude oil and how that crude oil is dissipated in sale. So, the government could actually give a guarantee from the beginning that if you have the resources to establish a refinery, we would support you by making sure that you get supplies of crude oil without going through so much hassle. There’s also the issue of the pricing of the crude that we would buy. Again, the government could create a situation where if they gave us a discount on the current market value of crude for instance, that would create an attraction for foreign investors who will see that yes these guys are able to buy crude and they’re able to buy it in their local currency and they’re able to buy it at a discount and therefore look at the profit that would be made, therefore, let us go and invest there.
So, these are some of the things that the government must do. if you listen to reported pronouncements by the GMD of NNPC in relation to what the government is willing to do for Dangote Refinery for instance, he said that the government had signed an agreement with Dangote Refinery to guarantee them 300,000 barrels of crude supply on an everyday basis.
The government has also; this is the report I am quoting now, that the government has given a guaranteed to uptake the output of the Refinery. So we are going to give you crude and when you refine we are going to guarantee that it would be sold. So these are some of the things that the government has actually guaranteed to do to Dangote Refinery. And we feel that the government should be able to guarantee to anybody who has gone through the rigors of articulating a plan – front end engineering, detailed engineering all other related plants for establishing a refinery and spending money within this time.
The government should be able to guarantee for a supply of crude, sign an agreement with them on the uptake and possibly take an equity interest in the refinery like they said they have taken 20% equity interest in Dangote, Which in monetary terms is about 2.5 billion dollars that would be returned back to him. So, we would like to benefit equally from such a treatment by the government.
So, that is for your Association. Now, let us talk about your own investment- integrated Oil and Gas. We know you have been working on your modular refinery for some time; what is the latest development?
Iheanacho: Well, the latest development is that we have finished all the technical articulation and we got to the point where we went to the market in the hope of attracting strategic partners or investor partners; it hasn’t been easy to get one, in the absence of these incentives that I have told you. If these incentives were there, that is a catalyst that would trigger outside interest in investing here. If I do all of these things and articulate plan and they say what about crude?, are you guaranteed the crude? And I say no I am not guaranteed crude. Why would they want to invest here? And they say oh “are you guaranteed uptake? And you say no.” Why would they want to invest here? Is there any specific discount or any particular thing that the government is giving to you that would make us leave investing in our own home and come to invest here? If the answer is in the negative, then you understand that it is going to be difficult. And that is what has held us back, because the amount of money that is required to do all of the things that I told you about, it is close to 138 million dollars and it’s a lot of money; it is the sort of money that some small African countries would budget to run their economy for a whole year. So, that is where we are. We are constrained by a lot of investment funds. We are absolutely here waiting and open to offers from people who wish to invest in emerging markets like in Nigeria; we are willing to talk to them.
I believe your association is a strong one and these issues that you mention now have you at any time put them forward to the government?
Iheanacho: Well, it is now that we have formally organised ourselves. Prior to now, everybody was speaking for themselves. So, then we have realised that it is actually much better if we sit down as a group and we looked at common problems that everybody suffers from and we then take that to government for resolution. And other problems that you can assign to individual organization, then they would have their management to deal with those issues.
I think that is just the best way to go forward
Iheanacho: That is it; the only way to go forward.