Don’t waste more money on refineries

The recent announcement by the Nigeria National Petroleum Company Limited (NNPC Ltd) that it has entered into a partnership with two Chinese firms to resuscitate the Port Harcourt and Warri refineries is an unnecessary distraction and must be treated as such. NNPC said it signed a Memorandum of Understanding (MoU) with two Chinese companies: Sanjiang […]

The recent announcement by the Nigeria National Petroleum Company Limited (NNPC Ltd) that it has entered into a partnership with two Chinese firms to resuscitate the Port Harcourt and Warri refineries is an unnecessary distraction and must be treated as such.

NNPC said it signed a Memorandum of Understanding (MoU) with two Chinese companies: Sanjiang Chemical Company Limited and Xingcheng (Fuzhou) Industrial Park Operation and Management Co., Ltd.  for collaboration through a potential Technical Equity Partnership (TEP) to support the completion and operation of the refineries.

The company said the proposed framework would cover the completion of outstanding work at the two refineries, as well as the operation and maintenance of both facilities to achieve what it described as best-in-class, sustainable performance. It added that the planned expansion and upgrades would elevate both facilities to cleaner and more profitable product standards. However, there is no clarity on what the Chinese firms are bringing to the proposed partnership or what they stand to gain from it.

In our view, this venture is belated and has been overtaken by time and events. The company, formerly a corporation, had ample opportunity to manage its four refineries efficiently and allow Nigerians to enjoy the benefits of a steady supply of refined petroleum products, but it chose to squander that opportunity.

NNPC engaged in frivolous turnaround maintenance exercises that yielded no benefits to citizens except enriching the pockets of interested individuals. We handed the refineries over to politicians who fronted for so-called technical partners. The brigandage was so reckless that, within seven years, Nigeria spent N12.05 trillion on refinery maintenance, rehabilitation and fuel subsidies between 2015 and 2022. At the time, it was argued that the amount was enough to build a new 650,000 barrels-per-day refinery, the same capacity as the Dangote Refinery, which has now redefined the sector in Nigeria, as well as another refinery with a capacity of 325,000 bpd. Thereafter, billions of naira had been wasted again without any results apart from fake commissioning and false optimism.

Now that the refining segment of the oil industry is beginning to take shape through the efforts of a single Nigerian entrepreneur, NNPC appears to have awakened from its slumber and is seeking to disrupt the visible momentum. We remind Bashir Bayo Ojulari, the GCEO of NNPC Ltd, of his remarks upon assuming office, when he said the company’s management was still deciding what to do with the refineries. After several months, is this truly the outcome of those deliberations?

As is characteristic of NNPC, this MoU is opaque and lacking in detail, which is one of the reasons Nigerians find it objectionable. What exactly are the terms of the agreement? Transparency is essential in this proposal. We insist on full disclosure. The absence of transparency is one reason Nigerians do not trust the government.

The idea of bringing in Chinese firms as technical partners is, frankly, shameful. When the refineries were built, Nigeria had engineers who understood the plants and their operational challenges. Some of them are still alive, yet those in charge of the refineries never deemed it necessary to consult them. We neglected the refineries until they all collapsed.

NNPC should therefore open its books and let Nigerians know the terms of the technical partnership it has entered into with the Chinese firms. If the Chinese are to be involved in managing these assets, Nigerians deserve to know the equity contributions they are bringing and the justification for such arrangements.

It is even more surprising that discussions between NNPC and the two firms reportedly lasted more than six months, yet the official statement remains short on details.

Given the current circumstances and the scant information released by NNPC Ltd, Daily Trust hereby calls for the sale of the refinery assets, including the Kaduna Refinery, which the statement did not mention. These national assets must not be disposed of as scrap. We demand that proper valuations be conducted on all four refineries to determine their true worth before any sale is undertaken. The government should not spend another kobo on the refineries because NNPC Ltd is now a limited liability company.

Once the valuations are completed, the Chinese firms or any other interested investors  may purchase the refineries if they still wish to operate them.

Should they, or other investors, prefer to pursue greenfield projects in the local refining sector, Nigeria has vast expanses of land across the country where new refineries can be established. This was the approach adopted by the Nigerien government, which provided Chinese companies with virgin land to build refineries. If that model succeeded in our neighbouring country, Nigeria should consider adopting a similar approach. Once such investors obtain the necessary licences, NNPC should support them in whatever legitimate ways it deems appropriate.