Modular-mini refineries: Business opportunities in developing economies

Abstract

Despite generally low return on investment, modular-mini refineries from simple diesel production units to more sophisticated refineries are increasingly becoming a choice of flexible and cost-effective supply for oil producers in remote regions, particularly in developing economies with reasonable to rich oil resources. The new wave of mini refineries includes the modular refinery in Fujairah, Equatorial Guinea, Nigeria’s burgeoning market for mini-refineries and their increasing role in the development strategy of Indonesia. Honeywell International reports a market for its readymade mobile refineries in war-torn Iraq. Significant rationalization of the refining industry during last three and half decades and considerations like changing environmental legislations or investment incentives to mitigate security of supply issues and sudden finds of light sweet crude as in USA, have all led to change in investment pattern in the refining industry, thereby leading to the growth of modular-mini refineries in different nations. This has been further supported by factors like ability to boost industrialization growth and development of the country. Relatively low capital cost, speed and ease of construction are the other main advantages of modular-mini refineries. The necessary conditions for such viable investment usually include a location in close proximity and access to oil supplies, and being close to markets with considerable logistical advantages that reduce the high cost of distribution to remote locations. This article is an attempt to review the current status of modular-mini refineries as business opportunities in developing economies like Nigeria and Indonesia, based on published information.