Buhari Insists On Non Privatisation Of Refineries, Calls Them “National Jewels”

Buhari Insists On Non Privatisation Of Refineries, Calls Them “National Jewels”

According to reports, the Nigerian National Petroleum Corporation (NNPC) Wednesday disclosed that President Muhammadu Buhari has ruled out the option of privatising its moribund refineries.


Instead, the president, who is rabidly averse to the disposal of the inoperable and inefficient so-called “national jewels”, approved a new commercial model that would enable foreign and local companies to invest in the restoration of the refineries in Port Harcourt, Warri and Kaduna.

NNPC has an installed refining capacity of 445,000 barrels per day. However, owing to the suboptimal performance of the three refineries for more than two decades, Africa’s largest oil producer has had to import refined petroleum products at a huge cost.

Under the new model, NNPC said Buhari approved the engagement of strategic investors who would come in with refining experience and funding capacity to partner with local investors who understand Nigeria’s downstream oil market, to revamp the refineries.

For decades, NNPC’s refineries have operated below installed capacity, turning them into inefficient, loss-making entities that negatively impact on the state-run oil firm’s bottom line.

The corporation however stated that under the new model, this would change with the investments provided by investors who would be repaid from the incremental production of the refineries on agreed terms.

It also explained that it would not sell the refineries to any of the investors, adding that the arrangement would be purely based on invest, operate for a period, and earn returns on investment, often known as the rehabilitate, operate and transfer (ROT) model under public-private partnership arrangements.

NNPC said it has met with the original builders of the Kaduna and Port Harcourt refineries – Chiyoda and JGC, both Japanese engineering conglomerates – to undertake a technical appraisal of the refineries, from which the final funding model for the new arrangement would be agreed.

The Chief Operating Officer (COO) of Refineries in NNPC, Anibor Kragha, explained the funding arrangement when he spoke at the 2017 edition of the Nigeria Oil and Gas Conference and Exhibition in Abuja on Wednesday.

Also present were the former Managing Directors of the Kaduna Refinery and later Port Harcourt Refinery, Mr. Alexander Ogedegbe; NNPC’s COO, Downstream, Henry Ikem-Obih; and President, Nigeria Liquefied Petroleum Gas Association (NLPGA), Dayo Adeshina.

Kragha said: “Because of what is happening and the global trend, President Muhammadu Buhari gave approval for strategic investments to be made in the refineries, so the investment model is basically this way – strategic investors who can bring refining expertise and funding will partner with local partners with downstream experience to actually go into the refineries, invest money over and within 24 months to get us to 90 per cent capacity utilisation.

“We are in the preparatory stage. We had meetings with Chiyoda which was the original builder of the Kaduna refinery and JGC which built the Port Harcourt plant.

“And the idea for going with them is that because they have done this consistently, they have access and we expect them to open their supply access to us to enable us to get parts and pricing at better rates.

“We are getting a lot of expressions of interest from a wide range of people. GE (General Electric) has a consortium they are bringing; there is ENI and Oando as well.

“The ORB (original refinery builder) will sit with us and come up with an aligned cost that we will put into financial models.

“The only way we are going to do this is that they will only get paid from incremental revenues that are generated from incremental production from the refineries.

“So, essentially, they have to put their money where their mouth is and because we have technical expertise and funding, we can make these refineries work.”

He stated that the revamp of the refineries would work hand-in-hand with other plans by the government to increase Nigeria’s domestic refining capacity for petroleum products, adding that NNPC had 24 months to deliver on the new funding model for the refineries.

“There are three things — rehabilitation of the existing refineries, co-location, and Greenfield — which include modular refineries, and they are all separate works.

“Where we are right now is that there are some approved financiers by the president, but what I am looking at is what the financial backings of those guys are.

“As you know, people express interest in doing something but I have to see their term sheets. We are going to have financial advisers that will work with us to evaluate those terms sheets to get the best deal for the refineries.

“The numbers that we had as projected numbers were the old cost and we did not have current numbers, so what we are doing now is a technical study to actually get what it will cost in 2017 and that is when we will get definitive numbers. It is these numbers that will be presented to the financiers,” he said.

On the implementation schedule, Kragha added: “I need to first draw on funds latest by July, which is the only way we can meet the 24 months timeline.

“What we are doing now is the evaluation of the technical stuff and we are going to engage financial advisers to start building a model.”

He equally stressed that the government gave no approval for the sale of the refineries to any investor, saying: “I would like to clarify that there is no mandate to sell any equity in the refineries, we are not selling anything.

“This is just a strategic investment for a defined period, after which they recover their capital negotiated under terms and that will help us ramp up very quickly in the next 24 months.”

Meanwhile, a report by Reuters has indicated that Nigerian government officials have been giving diverging figures on how much crude oil the country – exempt from the OPEC production cut deal due to the militant violence – is currently pumping.

The Group Managing Director of NNPC, Dr. Maikanti Baru, said on Tuesday that crude production had steadily increased to 2.1 million bpd “due to some strategic dialogue efforts” in the Niger Delta.

Nigeria hopes to increase output to above 2.2 million bpd by the end of 2017, he added.

Last week, Finance Minister Kemi Adeosun said that output was 2.2 million bpd.

However, OPEC’s latest available secondary sources figures put Nigeria’s January output at 1.576 million bpd, up by 101,800 bpd from December.

Also, Nigeria’s crude oil exports in April are expected to drop to 1.54 million bpd from 1.65 million bpd that will be shipped in March, loading programmes compiled by Reuters showed on Tuesday.

The biggest monthly decline in planned exports is expected at the Qua Iboe oil stream, Nigeria’s largest.

Exports for April loading are set at 222,000 bpd, compared to 337,000 bpd for March, with March loadings revised up after delays had postponed some loadings previously planned for February.

According to Reuters, field operator ExxonMobil has adjusted the loading programmes at Qua Iboe several times so far this year, although the reasons for the revisions have not been immediately known.

Exxon has had to cope with closure of the main pipeline towards the export terminal, as well as strikes and a workers’ standoff in December when it had to shut its Nigerian headquarters after oil workers’ unions barricaded the office to protest the sacking of local staff.

In April, Nigeria will export more Bonny Light, Escravos, Owkwori and Usan oil, but compared to March, fewer cargoes are set for Agbami, Amenam, Brass River and Erha, despite Italy’s Eni SpA lifting the force majeure on Brass River earlier this month.

Forcados still remains under force majeure and is now the only Nigerian grade not exporting because of reasons other than field maintenance.

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3 Comments

  1. This is what you get when you have a president not in tune with modern governance. What is “national jewel”? How has the country benefited from so called “national jewel”if not as a waste and drain on the nation pocket !
    It is so sad how this man has dragged the nation back by more than 20 years .

  2. Is it naw privatization dat would solve d problem of d refinaries @marty abegi where were d past leaders when the national jewels where being delapitated ehen bros park well jare

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