Bitumen Mining and Processing in Nigeria; The Feasibility Report.

‘Oil sands’ or ‘tar sands’ are a mixture of sand, clay, and water that contain an extra heavy crude oil variant known as bitumen. Bitumen is highly viscous, meaning it does not flow unless it is heated or mixed with lighter hydrocarbons.

To extract the bitumen in the oil sands, conventional oil drilling techniques cannot be used because bitumen is too heavy to be pumped and sticks to sand grains. Therefore other extraction techniques have been developed. The most common methods to extract bitumen are open-pit mining and in-situ, which is Latin for ‘in place’.

The method used to extract bitumen from the oil sands depends on the depth of the deposit. If the deposit is near the surface, the oil sands is mined and sent to a bitumen processing plant. For deposits that are deep below the surface, bitumen is extracted in-situ (or in place). Both facilities produce a relatively clean bitumen product which is mostly free of sand and water.

Bitumen within seventy-five (75) meters of the surface is open-pit mined. First, huge clumps of oil sands are shoveled into large trucks. They are then taken to crushers, where they are broken down and mixed with heated water to separate the bitumen from the sand. Once the bitumen is released, it is sent for further processing.

Around eighty percent (80%) of the oil sands are found seventy-five (75) meters below the surface; therefore, to extract them, in-situ or underground methods must be used. The majority of the in-situ operations pump steam underground through horizontal wells with the purpose of liquefying the bitumen which can then be pumped up to the surface – a method called Steam Assisted Gravity Drainage (SAGD).

Produced bitumen is heavier than conventional sources and requires a special process called upgrading to give it properties similar to conventional oil. Once processed, bitumen is refined just like conventional oil into common petroleum products.

Nigeria has an estimated thirty-eight billion (38,000,000,000) barrels of extra-heavy oil and bitumen reserves. While this amount is significant, and roughly equivalent to its present conventional oil reserves, this amount is much, much smaller than Canada’s two trillion, four hundred billion (2,400,000,000,000) barrels and Venezuela’s two trillion, one billion (2,100,000,000,000) barrels.

In Nigeria, Bitumen is found across Lagos, Ogun, Ondo and Edo States. Geologists and engineers predict that Nigeria would use similar methods to extract bitumen as Canada, as the reserves are geologically similar.

An oil sands deposit consists of four (4) distinct layers:

– Muskeg: A wet top layer of peatland (or peat bog)
– Overburden: A layer comprised mostly of sand and clay containing very little bitumen
– Oil Sands Ore: A zone of bitumen-rich sand, which typically also contains layers of fine clays and aquifer water
– Rock: A layer of rock normally sits below the oil sands, most commonly limestone or granite.

Nigeria’s oil sands contain on average about seven to thirteen percent (7-13%) bitumen, five percent (5%) water and eighty-eight to eighty-two percent (88-82%) solids. Most of the solids are coarse silica sand. Oil sands also contain fine solids and clays, typically in the range of ten to thirty percent (10-30%) by weight.

Petroleum products are produced from the oil sands through three (3) basic steps:

– Extraction of the bitumen from the oil sands, where the solids and water are removed
– Upgrading of the heavy bitumen to a lighter, intermediate crude oil product
– Refining of the crude oil into final products such as gasoline, lubricants and diluents.

Inspite of the huge bitumen deposit in Nigeria, there exist no commercial mining of bitumen in Nigeria.

The epileptic performance of our refineries, only about twenty percent (20%) of the total of about six hundred and sixty-five thousand (665,000) tons demand for bitumen is gotten locally.

Nigeria has a huge infrastructural deficit. About N 1.7 trillion is needed to deliver two hundred and six (206) federal roads covering over six thousand (6,000) kilometres, an estimated deficit of about seventeen million, three hundred and seventy thousand (17,370,000) housing units, from juxtaposing the population estimate of one hundred and eighty million (180,000,000) with fertility rate of six point one percent (6.1%).

The implication of these is that the country demand for bitumen is growing, expanding and sustainable.

This report examines the financial viability of eastblishing a small scale surface bitumen mining and processing plant in Nigeria. The operation would cover the mining and processing of bitumen for use in road construction.

The plant consists of the following unit operations:

– An open-pit (or surface) mine
– A bitumen production circuit where the bitumen is separated from the solids and water
– A tailings storage facility or pond, where solids are stored and process water is recovered
– A tank farm, which holds the required inventories of product and diluent, and
– A utilities plant, which supplies steam, power and water to the facility.

Once the mined oil sands are hauled to the processing plant, bitumen is separated from solids and water within the Bitumen Production facility, which consists of three (3) basic steps:

– Ore Preparation: Hot/warm water is added to the oil sands producing a slurry that can be pumped to the processing plant. This slurry is roughly forty percent (40%) water, eight percent (8%) bitumen and over fifty percent (50%) solids by weight.
– Bitumen Extraction: Bitumen is gravity separated from the coarse solids (mostly silica sand) producing an intermediate bitumen froth product.
– Froth Treatment: Solvent or diluent is added to the bitumen froth, reducing the bitumen viscosity and allowing for removal of remaining water and fine solids. The bitumen froth product produced in extraction contains about sixty percent (60%) bitumen, thirty percent (30%) water and ten percent (10%) fine solids by weight.

The investor would use mechanized method of mining to produce fifty-two thousand, five hundred (52,500) tons of oilsand/tar sand per month with a minimum of seven percent (7%) bitument content and process the oilsand/tar sand using gravity seperation cells.

The capacity of the proposed flothing plant is one hundred and twenty (120) tons per day and the plant would operate for three (3) shifts of eight (8) hours shift per day working for three hundred (300) days per annum.

Table of Contents

EXECUTIVE SUMMARY 1.0 Business Overview 1.1 Description of the Business 1.2 Vision and Mission Statement 1.3 Critical Success Factor of the Business 1.4 Current Status of Business 1.5 Description of the Business Industry 1.6 Contribution to Local and National Economy 2. Marketing Plan 2.1 Description of product 2.2 The Opportunity 2.3 Pricing Strategy 2.4 Target Market 2.5 Distribution and Delivery Strategy 2.6 Promotional Strategy 2.7 Competition 3. Production Plan 3.1 Description of the Location 3.2 Raw Materials 3.3 Production Equipment and Refinery Process 3.4 Legal Requirement and Operational Guildlines 3.5 Product Cost 3.6 Stock Control Process and Expenses 3.7 Pre-Operating activities and expenses 3.7.1 Operating Activities and Expenses 3.8 Project Implementation Schedule 4.0 Organizational and Management Plan 4.1 Ownership of the business 4.2 Profile of the promoters 4.3 Key Management Staff 4.3.2 Management Support Units 4.4 Details of salary schedule 5. Financial Plan 5.1 Financial Assumption 5.2 Start - up Capital Estimation 5.3 Source of Capital 5.4 Security of Loan 5.5 Loan Repayment Plan 5.6. Profit and Loss Account 5.7 Cash Flow Analysis 5.8 Viability Analysis 6.0 Business Risk and mitigation factor 6.1 Business Risks 6.2 SWOT Analysis

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