These arguments were made made at the just concluded Nigeria International Petroleum Summit, NIPS 2019 in Abuja where interesting statistics were thrown around to butress the pros and cons of all sides.
Executive Director, Dangote Refinery and Petrochemicals Company Limited, Mr. Edwin Devakumar, said the Federal Government should allow private sector investors to manage the refineries, while he cautioned the government against outright sale of the refineries.
Devakumar, who was represented by Consultant to the Company, Mr. Babajide Soyode, said the refineries are goldmine and are located strategically in major markets in the country.
He said, “NNPC refineries are goldmine; they are sitting in the best markets in the country. Port Harcourt, Warri and Kaduna. Dangote is going to occupy the fourth market, Lagos.
“Why can’t NNPC reactivate or upgrade its refineries. They are not old. Upgrading, as any engineer would tell you is standard in our industry. All these collocation and others are nonsense. Follow the industry standard, upgrade what you have.
“We are talking of NNPC being efficient; those refineries were built at an average of $1 million — Warri for N357 million, when you compare it with 1978, Kaduna was N377 million. That is roughly $1 million $1.3 million now. If you have been subsidising, you don’t accrue enough to maintain the refineries, not to talk of to upgrade or expand, then it is shameful that NNPC would be looking for $1 million to pay consultants for study. It’s a shame for Nigeria.”
Chief Operating Officer, Refineries of the NNPC, Mr. Anibor Kragha, in his presentation noted that the fundamental issues impacting the ability or the inability of the Nigerian National Petroleum Corporation, NNPC, refineries to deliver on their mandate had been primarily lack of funds; and the infrastructure to deliver the products.
According to him, the refineries in Nigeria are not that old on the global scale, if compared across the board, adding that the issue had been lack of funding.
“When you don’t have funding, you can’t maintain your assets. The last turnaround maintenance of the Port Harcourt refinery was in 2000; that of Warri is 2004, while that of Kaduna was 2008,” Kragha maintained.
He disclosed that efforts to get private investors to revamp the refineries had been stalled because the corporation and the proposed investors were not able to agree on the commercial terms.
Kragha noted that this made the NNPC to consider undertaking a revamp of the refineries one after the other, involving the original manufacturer of the refineries.
He said, “We keep on talking about the refineries, but without the infrastructure to deliver – there is no reason why a truck would be going from Tin Can Island to Maiduguri to deliver PMS. The thrust of the government is to go out and get financial consortia that would deliver funding and technical expertise.
“We spent time, we got consortia of traders and technical folks and spent over a year and half negotiating and at the end, by December, we were willing to do financing, because we were willing to do financing, bring in private investments, without, of course, selling the refineries and giving unnecessary guarantees. But at the end of the day, the commercial terms, we could not agree on that. What we are doing now, is that we are focusing on one refinery at a time, we are starting with Port Harcourt refinery, it is the largest one, it alone can deliver about 11 million litres of PMS.”
He explained that if fixed, the three NNPC refineries together have a capacity to produce about 22.4 million litres per day, while the Dangote refinery can deliver about 53 million litres, giving the country more than enough product for consumption and enough to export.
However, Director General of the ICRC, Mr. Chidi Izuwah, posited that the role of government is to create the enabling environment to attract investors into the sector, urged it to concession the refineries as that is the only way for the nation to reap the true value from the industry.
Izuwah said, “Government has to play a role and break the back of government dominance in the downstream sector and bring in the private sector. This is the only way to go. When you bring in the private sector, you must change the incentive structure.
“The NNPC refineries, we should concession them to the private sector. The investments would come. When you concession, they would rehabilitate, make further investments and recoup their money.
“There is a huge opportunity in refining. Petroleum is the only thing that increases in volume when you process it. If you take 42 gallons of crude oil, it gives you 45 gallons. It actually breaks the laws of chemistry and physics. It increases in volumes because of the cracks. It is a profitable business and we need to bring in the private sector.
“The same thing for the infrastructure for distribution and reticulation. The entire depot system is not functional. There is no will. The depot system has to work. The depot system is a profitable business. You should also at the same time concession it to the private sector, they would make the investment and then, those assets would start to earn revenue for government.