The petroleum refining industry is indeed a strategic industry that refines crude oils into   transportation fuels; petrochemical feed stocks, lube base stocks, asphalts and other essential products useful in our daily life. A recent close study of the industry shows that refining industry has experienced volatile conditions over the last five years. Rising crude oil prices powered revenue growth as refiners have passed costs down the distribution line.

The Refining Industry is a thriving sector of the economy of the United States, United Arab Emirates, Russia, Venezuela, Nigeria, Angola, Canada, Saudi Arabia and Kuwait. In the case of the United States of America alone this  Industry generates a whooping sum of well over $369 billion annually by processing hundreds of thousand barrels of crude oil daily with the support of  from over 135 crude oil refineries, big and small,  located in different part of the country[1].

Establishing a standard crude oil refinery, not only requires a very large investment and time to build but also beside huge land mass is also pretty expensive to run it. Over a period of time some essential factors like availability of crude of particular nature-as in USA [2]. national security in terms of fuel supplies, logistics and development concerns have given rise to the birth of a scale down version of  standard or large capacity refineries,  commonly termed as “ Modular-Mini crude oil refineries” as a part of refining business. To name a few this includes system of “TEAPOT “or independent refineries operating in China. These refineries play a significant role in refining oil and account for a fifth of Chinese crude imports [3].According to Bloomberg [4] Nigeria, Africa’s top oil producer, the government licensing has given the green light to construct a series of mini-plants -a total of 40 mini-refineries in an effort to help end its dependency on fuel imports.

Mini refining has been embraced in many regions of the world. Emirates National Oil Co.’s (ENOC) subsidiary Cylingas and UK-based Pyramid Engineering plans to build a 7,500 bpd modular refinery in Fujairah, UAE. Iran is also building eight new mini-refineries to serve the South Pars gas field [5].Similar plans are being unveiled in Indonesia and sub Saharan African countries as well.

It may perhaps will not be out of place to mention here, that India, presently one of the major oil refining nation in the world, now having 22-24 oil refineries, made its beginning in this industry, in early 1960’s, by installing three small scale refineries each with a capacity of around 20,000 BPD at three different locations, all based on local crudes available from the oil fields of Assam and Gujarat. However due to large scale increase in petroleum product demand in the country, the refining industry moved towards large scale refineries, primarily based on imported crudes. Never- the-less the country still operates three small scale refineries with simple to complex configurations, located at Digboi and Bongaigaon in Assam and a very small ONGC refinery in Tatipaka located in the south east part of the country-Andhra Pradesh.

Modular-mini refinery units are essentially capable of processing from 1000–40,000 barrels per day (bpd) of light or heavy crude oil within API gravity of 35°–50°, into naphtha, diesel, kerosene and fuel oil and other specialty fuel products. Such small scale version of refineries are ideally suited for remote locations and are viable for investments by private and public sector groups as a source of rapid production of primary fuels and raw materials for petrochemical downstream industries. In addition such refineries are much more environmentally friendly than traditional refineries, with reduced risk of accidents leading to costly environmental remediation, and are Paris Climate Accord Compliant [6].

There is no universal definition of Modular-Mini refinery. Many vendors dealing with such installations have defined Modular-Mini refineries as per the need and circumstances. Definitions proposed by Refinery Equipment of Texas, The Cenam Energy Partners and Rocky Costello have been most prevalent in Industry. H. Singh in his publication [7] has elaborated on each of these definitions. In general terms Modular-Mini refineries may be defines as below:-:

“A mini refinery is typically, a small refinery that fractionates less than 5000 barrels of crude oil per day by atmospheric distillation. A modular refinery is a refinery that is built in sections or modules so that it can be easily transported or relocated. Most mini refineries are modular in design. Refineries even upto 40,000 bbl/day have been designated as mini refineries andin some cases, as small refineries in certain locations.”

The Nigerian government however follows the definition propagated by Chemex of USA, i.e., that a modular refinery is a processing plant that has been constructed entirely on skid-mounted structures. Each structure contains a portion of the entire process plant, and through interstitial piping the components link together to form an easily manageable process [8].

Key Drivers/ Motivations

The growth of Modular-Mini refineries is being driven by the following three key Drivers [9]:

• Rise in government initiatives to increase local refining capacities by investing significantly in modular refineries, primarily based on local crude supplies, to convert it into ever increasing demand for refined products, to reduce fiscal deficit, ensure security of transportation fuels, enhance power generation and secure LPG supplies.Demand for refined products is rising at a rapid pace in such countries. As a result, their import and burden on economy is also increasing. Creation of these facilities further enables governments to add to their economic growth and job opportunities for local youths.
• Quick installation time and lower investment costs are other key drivers of the market. Modules of these refineries are pre-built and tested before shipping to the site; therefore, their installation requires comparatively much less time than conventional on-site building approach. These refineries are much smaller in size and processing capacity; therefore, they require comparatively low capital investment than conventional refineries. These refineries can be relocated depending upon the situation and requirements.
• Country specific reasons: Nigeria says the gap between petroleum product demand and supply in the country is due to the sub-optimum state of their domestic refineries. Indonesia, an archipelagic country, faces challenges in supplying fuel to various remote regions. Solution evolved is to build mini refineries with appropriate processing capacities to maximize the potential of existing oil reserves, reach remote areas and meet domestic demand [10].

BRICKSTONE list the following five considerations as the motivating factors for the establishment of Mini refineries in Nigeria [11] namely: Establishment of Oil and Gas Free Zone, Incentives from Government, Adequate Security, Friendly Regulations and Uninterrupted Access to Feedstock.

The simplest is a topping plant, which consists only of a crude distillation unit and probably a catalytic reformer to provide on grade gasoline. Yields from such a plant would most closely reflect the natural yields from the crude processed. Typically, only condensates or light sweet crude would be processed at this type of facility, unless markets are readily and economically available for heavy fuel oil. Modular mini-refineries generally fall into this category. This is the result of increasing refinery Complexity.

The next level of refinery is called a cracking refinery. This refinery takes the gasoil portion from the crude distillation unit and breaks it down further into gasoline and distillate components using catalysts, high temperature and pressure. A sophisticated modular mini-refinery can be configured in this way.

The last level of refining is the coking refinery. This refinery processes residual fuel from the crude unit and thermally cracks it into lighter product in a ‘coker’ or a hydro-cracker. The addition of a fluid catalytic cracking unit (FCCU) or a hydro-cracker significantly increases the yield of higher-value products like gasoline and diesel oil from a barrel of crude, allowing a refinery to process cheaper, heavier crude while producing an equivalent or greater volume of high-value products.

Figure 1 Compares Yields by refinery type with "Heavy Crude Oil as an example". The obtainable product slates change drastically as one moves from topping to coking/cracking refinery at the cost of reduction of heavy fuel oil into more distillate and gas-C3/C4. This shift in product yields clearly depicts how the changes in the configuration of a refinery(from too low to  high Complexity) leads to a balanced or more normalized  product slate [Figure 1].

Figure 1: Comparison of Yields by Refinery Type. "Heavy Crude Oil as an Example"(12).

Mini-refineries are typically available in unit capacity varying from 1,000 to 40,000 bpd in different configurations with increasing degree of sophistication: low, medium to high complexity. A modular mini-refinery provides full flexibility and can be built in a phased manner. Pyramid E&C in its  report on modular refining solutions [13] provide a detailed account of  six different types of Modular plants starting with  Diesel Field units  to carbon Black  Plant.

Perhaps it will be more appropriate to further explain the above thoughts/concepts on configuration with a practical case study for the benefits of the readers and better appreciation.

Accordingly here are the details of an ongoing/under construction Modular-Mini Refinery project, in Indonesia with an expected target startup and 1st phase completion schedule in 2nd half  of 2024 [14].

• Project Name: Maloy Refinery -A modular refinery with 24,000 BPddesign capacity
• Location: Maloy special economic zone, Kalimantan, Indonesia -see [Figure 2].
• Feedstock & Refined products plan—Characteristics of crudes to be processed: OAPI Attaka,40.7,Bonny Light 35.Sulphur content: Attaka, 0.07%,Bonny Light 0.14 to 0.16%,see [Table 1].
• Major product --- Diesel due to high demand in coal mine fields see [Figure 3].

The process flow diagram of Maloy Modular refinery is shown in Figure 4. It is a simple hydro skimming refinery with facilities to obtain 92-RON  (octane) gasoline, low  sulphur high  quality diesel along with Biofuels,Mto2020 and heavy fuel oil.

Figure 2: Maloy Refinery project Location.

Figure 2 show the location of Maloy refinery at the end of Kalimantan Island. This  site is directly connected with the world’s largest market by the sea route that avoids restricted passage ”Chke Point” straits and politically disputed south china sea.

Table 1presents the Maloy refinery product plan including some economic calculations.The data presented there in can be split into three parts for analysis

Top Part: Data presents the projections and estimates. Refinery name plate capacity- 24000bbls/day + 4000 Biodiesel bbls/day. Refinery is configured to maximize diesel fuel at the expense of Kerosene. Distillation split form two crudes show that Attaka crude  yield more light  products as visible from RON 92 naphtha feed and little lower low sulphur diesel along with others lproductsike Marine  Diesel and Marine Industrial fuel oil as against Bonny light crude. Quantities available & sale values are indicated with bonny light having little edge.

Middle part: Data in this part relates to product costs and value on per bbl equivalent basis .The data show the gross margin values on crude oils $71.79 for bonny light as compared to Attaka which is $61.90.This difference is due to  large volume of diesel being produced from Bonny light as compared to Aattaka 14.534 bbld/day vs 12.865bbls/day. Fatty acid Methyl ester (Fame) bio diesel (B30) quantities also vary.Overall gross margins for the crudes are $46.888 for Attaka vs $53, 57.These estimated figures based on projections appear very high, but directionally seems to be correct

Bottom part: Data in this part compares the overall refined product yields and value per bbl. .Attaka gives a more gas, gasoline, nearly comparable diesel & biodiesel but low in heavy products, 15.6% vs 28.7 %. Value yield/bbl of Bonny lightis higher

Table 1: Maloy Refinery feed stocks and product plan.

Figure 3  : Diesel fuel Demand –Coal Miners.

Figure 4: Refinery Flow scheme, processes& Products.

Figure 4 show the refinery processes and other facilities to make on spec products for sale and makes a mention of required loading & terminal facilities. In terms of processes and product finishing facilities,the Atmospheric Distillation Unit (ADU) block consists of following units:

• ElectrostatikDesalter 24k BPD
• Crude Heaters 2 x12k BPD @ 380oC
• ADU 2X12K BPD,4 side draws, two blank
• Side cut Steam Stripper
• Fuel Gas vapor Liquid separator
• Gasoline Finishing Block 11k BPD Full range naptha in   1st phase and2nd phase  finishing block
• Diesel Finishing Block 12k BPD in two phase of 6k each
• Residual Finishing Block 2x2k BPD each to produce MFO2020

Adu set up is typical of any refinery meant to split crude oil into fractions corresponding to prefixed cut temperatures as feeds tock for subsequent processing. The planned refinery proposes to complete installation of all facilities in two phases. The gasoline finishing block consist of  full range naphtha to be split into light and heavy naphtha as per the feed requirements of requirements of Continuous fo Catalytic Reforming(CCR) and Isomerization units.Both units will yield   high octane gasoline which on blending will correspond to RON 92(Research Octane).Heavy naphtha feed for CCR will undergo hydro desulphurization to meet sulphur requirements of the CCR feed stock.In addition this block will also act as LPG recovery unit as well.

The Diesel finishing block is meant to produce high quality diesel meeting Eruro IV sulphr specs(Sulphur 50 PPM) and in the s  phase 2 it will move to Euro V specs corresponding to high quality diesel with 10 PPM sulphur. Accordingly this block includeHydrodesulpurization unit as well the block will also prepare B20 diesel FAME diesel by blending bio diesel and Fame with the refinery produce diesel.

The residual fuel oil finishing block is mostly with blending facilities to produce residual marine fuel oilc with a capacity of 4k BPD.Fuel meting IMO 2020 specs  (Sulphur 0.5%)will also be produced  through appropriate finishing step as well.

Recent scientific reports emanating from oil companies, design organizations and host countries embracing mini refineries have listed large number of benefits thatform the basis of their adoption as a path of economic development for their countries and justify these lower capacity units as stand-alone profit generators.

 Summarized version of the benefits/advantages of building of Modular-Mini refineries over traditional refineries include [7, 9,11,15].

• Small capacity refining units as equipment modules are constructed off-site in a specialized fabrication shop and built to customer specifications. These are assembled and tested before shipping to the site. Installation of the modules is much faster compared to a conventional stick building approach.
• While the traditional larger refineries have improved economy of scale and can produce a wider variety of refined products.Modular-Mini refinery units can be integrated into petrochemical operations and offer more flexibility with the following benefits namely: lower investment costs,sized for lower local demand,modular fabrication off-site for higher quality, shorter completion schedule,Possibility of future relocation,boost to economy &societal drivers andcan produce a wider variety of refined products.

Modular-mini refineries are best utilized in emerging economies and in remote locations where gasoline, diesel and fuel oil are most needed. The local crude oil is normally of lowest cost is the feedstock because the transportation costs are minimal. The key selling point of these mini and mobile refineries is that they allow production in one third of the time of a regular refinery i.ethe diesel or the gasoline is obtainable in one third of the time.

The challenges likely to be faced or being faced by the small version refineries can be  discussed in two parts:

One of the major challenges  small version refineries likely to face is the presence of government owned refineries and well  established mini refineries within the location of new plant/refinery. The only way to avoid this challenge is to create your own market.

Another challenge that  such small refineries owners  are likely to face is economic downturn; if the economy is in bad shape, businesses such as mini refineries and the likes usually struggle to maintain their old customer base or even welcome new customers.

Also, there is the challenge of unfavorable international oil prices and government policies; challenge of security, militancy/insurgency. In such situations one need to stay positive that things will work well soon.

A recent publication in global scientific journal [16] talks of the following  five challenges being experienced by  the Modular Refineries in their developments in Nigeria:

• Challenges of operation: In a volatile nation like Nigeria, large scale refining has some profound disadvantages that has over the years been proven by the non-functionality of plants and the heavy dependence on fuel import even after the plants were built.
• Uncertainties: The Nigerian oil and gas industry is heavily regulated at least by three regulators.According to the Nigerian Extractive Industries Transparency Initiative (NEITI), Nigeria loses an estimated $15 billion yearly in foreign investments due to regulatory uncertainty.
• Security: Industrial sabotage, crude oil theft, illegal refining operations, pipeline vandalism and piracy present significant challenges in the oil and gas industry. Modular refinery investors feel apprehensive of this as they desire an environment, where their investment is not only safe but also secure. Security issue is therefore a major challenge.
• Infrastructure: Damaged pipelines, shallow channels and the absence of an effective logistics backbone are some major infrastructural impediments that have constrained growth of refineries.
• Feedstock Access: It is one of the biggest challenges which local and new modular refineries are most likely to be faced with, is how to access feedstock supply on a regular basis is a big impediment. Guaranteed feedstock access has not been possible due to inadequate infrastructure, insecurity and unstable production.

In Indonesia, the challenge is of different type. Domestic crude production is projected to decline, with the total state entitlement volume estimated by Pertamina at only 449,000 bpd as of 2020. Thus, the state oil firms will increasingly need to turn to imports. Given that sour crude is cheaper Indonesia is expected to import significantly higher volumes of sour crudes, which will require existing refineries to be reconfigured as they were designed to process only sweet crude with low sulphur content. All refineries will need to increase their complexity by introducing hydrodesulphurization and sulphur-handling capacity, as well as adapt to more stringent product quality specifications [17].

The answer to this big question lie in the analysis of reasons and Government initiatives taken nation wise with respect to country’s reliance on petroleum as source of energy and its role in economy. This approach is backed by the argument that the prevailing conditions are different and specific to a nation. As such let us first look at the situation in Africa as a Continent and Nigeria as the lead nation.

According  to Brahms Oil refineries Ltd., A UAE Company that is promoting“Development of Modular refineries in sub Saharan African countries,in Guinea and other selected areas“ [18]  list the under mentioned  seven factors that promote Mini Refineries as positive strategy, in African Continent :

• Today, Africa does not have an internationally competitive refining industry and the historical performance has not been satisfactory. Therefore, Africa has become increasingly reliant on importing refined products to meet the needs of a rapidly growing population.
• African crude oil production is increasingly being displaced from US refineries by fast growing domestic production. This situation intertwined with a growing shortfall of African refining capacity creates an opportunity for puttingup small indigenous refineries in certain countries to absorb some of the African supply of crude oil while reducing the dependence on imported fuels.
• In particular, West & Central Africa today are experiencing a large gap between the output of the existing refineries and the actual demand for refined products. African Downstream Consultancy-CITAC estimates a current shortfall of 23.7 million MT a year which is expected to grow up to 46.3 million MT a year in 2025, depending on whether some of the various refinery projects and/or upgrades have materialised by then or not.
• Whilst large existing refineries have generated poor returns in Africa, there is an option which constitutes an appropriate alternative to fulfil the existing oil products’ demand: Modular refineries.
• A turn-key modular refinery has several trump cards: It provides full flexibility, can be completed in stages and be tailored to the specific needs of the area where it is located.
• A refining activity produces added value for the local economy while providing impetus for broader industrial development and job creation generating a socio-economic value contribution.
• A refining activity with the latest technology allows to meet better product specifications thereby making a contribution to achieving clean transport fuel targets in the country.

In respect of  Nigeria as nation, the analysis of recent publications, particularly in respect of role and importance of Modular –Mini refineries, leads to following noteworthy statements that support Mini refineries as the positive strategy in  its economic development:

• At the 2017 Second Business Clinic Program organized by the Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry (LCCI) the President,  Nike Akande, said the nation’s downstream sector was still grappling with many regulatory issues.“An increase in investment in modular refinery and even bigger refineries will bring a lot of value to the Nigerian economy.” She further addeding that it would boost the inflow of foreign capital in the country as well [19].
• The refining business in Nigeria remains unsaturated beyond 2020. The modular refineries remains economically viable and competitive and the revamping of the local refineries and the Dangote 650,000 bpsd refinery pose no threat. The Modular Regime needs to thrive as it remains the sure road from importation to the export [20].
• Modular refineries proposal should go with the establishment of oil and gas free zones in all oil producing states as a means of diversifying the country’s economy. Sitting modular refineries in the oil and gas free zones would cut investment cost. Modular refineries should be modeled after the U.S. export-oriented refineries to produce special products such as petroleum, aviation fuel and industrial raw materials [11].
• The total refinery capacity is 445,000 bpd as per the nameplate in Nigeria, remains a mono- cultural economy with dependency on importation of refined product to the tune of 80% of the current domestic demands. Green modular refineries have been identified and recommended to put an end to fuel importation in expectation to transforming the country to becoming self-sufficient or net exporter. However, the roles of government are essential and key. They must invest in building modular refineries, not as a competitor but rather a demonstration of fate and strong believe in the modular refinery development towards self-sufficiency and becoming a net exporter, if possible [21]

Republic of Indonesia has declared construction of new small scale crude Oil refineries as “National Priority” projects for development and have been designated as “Pioneer Industries”, in a April 2018 tax law issued by Ministry of Finance. Pioneer Industries are entitled to substantive “Tax Holidays” on corporate income tax” [14].

Above discussion and statements leads to the fact that “Nigeria” and “Indonesia” are the two lead nations who are exploiting this concept to help overcome the challenges typical for developing economies.

With a view to confirm the applicability of concepts discussed, the statement of SouheilAbboud, Managing Director of V Fuels, a Houston-headquartered full-service oil and gas engineering, design and fabrication company made to “The Energy Year”about the appropriateness of modular refineries to the Nigerian context and the company’s recent and future projects in the modular refinery and gas spheres [22] holds great relevance.Hisstatement runs as below:-

“Nigeria provides the perfect environment for decentralizing assets, especially when it comes to power or refining on a small to medium scale. Modular assets help overcome the challenges typical for developing economies in terms of infrastructure and logistics. This model offers countless advantages in terms of capex, opex, schedule and competitiveness. Modular refineries can be completed in under two years and once built, they are a lot simpler to operate and maintain compared to conventional refineries. Modular designs require less space and are easier to construct at site. Today, a modular refinery in a particular location will be able to cover the needs of a local community and surrounding economies more cheaply than a centralized one simply because of logistical difficulties and their associated costs. Modular refineries, due to their efficiency and advantages, will provide continuity in developing the Nigerian economy via transfer of technology, job/wealth creation, energy security and increasing foreign direct investments. Decentralization is thus the way forward and corresponds to the realities of the country. Laudable efforts in encouraging this decentralized trend by the Government departments are fostering the right environment for the development of modular refineries and modular gas plants – an environment which is attractive for investors.”

The above statement although made  in the context of Nigeria’ is by and large  applicable to any developing economy.

V fuels beside working on mini refinery projects in Nigeria are also engaged in other African countries like 10,000-bpd refinery project with Conex Petroleum Group in Monrovia, Liberia, Equatorial Guinea and onthe Cabinda Refinery in Angola which is slated to process 30,00-bpd at the initial stage.

Indonesian mini refineries are a key part of the country’s strategy to double oil output by 2025. There is growing national demand and problems with aging local facilities that means production levels are falling. Mini refineries offer a quick route to high-value products and can help meet the need for increase capacity quickly.Another advantage of moving towards a mini refinery route is that this gives suppliers the flexibility to scale up or scale down production to meet demand and to avoid devaluing their own products. At present, most of the extracts are intended for the domestic market, but there is particular interest in producing high-quality, low-sulfur content fuels. Currently, there are 10 mini refineries in various stage of development being supported by a number of international investors [23].

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