Economic Viability

Together with the telecoms industry, Oil and Gas rank as the top investment opportunities for the discerning investors. This is based on the ever growing demand for refined petroleum products fuelled by the growth in population and production activities around the world.

The project target is to produce petroleum products that are low in sulphur which makes it environmentally friendly and acceptable in both Europe and Asia. The demand for these products are expected to grow at an average of 4% annually in Asia and the developing economies, while demand for low sulphur products in Europe and America grow at an average rate of 2.5% if the laws on environmental projects are enforced. However, most refineries in Europe and America have been directed to reduce sulphur emission and upgrade their facilities to standards.

The third world/developing (emerging markets) are currently experiencing shortages in demand due to upsides in developmentl projects being sponsored by the World Bank and other financial institutions. Besides the above supporting global economic trends, the project also enjoys special support from the Nigerian government through the availability of tax incentives, for example. The raw materials can be sourced very quickly and at favourable terms. Low production costs and high quality products output for the international petroleum market also add to the comparative advantage over all other refineries outside Nigeria. The project will also provide socio-economic benefits to her host community and enhance global poverty reduction programme, while meeting the ever growing demand for quality refined products in the world.

The estimated payback period for the project is between ten and twelve years, assuming a debt/loan servicing of about 80% of yearly profit, with projected annual net assets value increase of 7% for the first 5 years.

Up to 2004, there was a steady decline in refining operating margin in Europe and America. However this trend has now been reversed due to increase in global energy requirements and the resulting higher prices, thereby making the refining business lucrative again.

The development of alternative energy sources will definitely take so much time and resources as all the pilot projects have shown less attractiveness with respect to cost and sustenance of production. However, it is noted that such projects will help reduce the pressure of demand which has been difficult to meet, particularly in Asia, Eastern Europe and Africa.