Sale of government-owned refineries: Matters arising

Against the backdrop of the daily growing clamour for the sale or otherwise of the country’s four government-owned refineries located in Port Harcourt, Warri and Kaduna lie a few common grounds for both sides of the debate. One of such common grounds is that the facilities have been poorly managed and operated. The second common […]

Against the backdrop of the daily growing clamour for the sale or otherwise of the country’s four government-owned refineries located in Port Harcourt, Warri and Kaduna lie a few common grounds for both sides of the debate. One of such common grounds is that the facilities have been poorly managed and operated. The second common ground remains the prospects of maximum dividends yielded to the country from the future of these facilities, whether sold or retained.

For the protagonists of the outright sale agenda, the failure of the government to sell the facilities now unmistakably moribund facilities constitutes the postponement of the evil day and the diversion of good, as well as valuable financial resources into a waste drain. They cite several reasons why the continued retention of the facilities by government remains uneconomically viable, even on the basis of business considerations, especially now that private refineries are in the business of supplying refined petroleum products with Dangote Refinery leading the charge. With an installed capacity of 650,000 barrels a day, the facility alone dwarfs the combined capacities of 460,000 barrels a day of the four government-owned facilities.

Also in their argument is the contention over the ages of the facilities and the possible obsolescence of the technology behind their operations. The times of building the various plants were as follows: Port Harcourt 1, 1965, Port Harcourt 2, 1989, Kaduna 1989 and Warri 1989. So why bother with decaying, never-do-well plants that offer no positive dividends, both for now and in the future, they easily argue. However, such an argument qualifies to be taken with a pinch of discretion as there are still operational refineries across the world that were built in the 1920s and against which the Nigerian facilities are relatively infants. 

On the other hand is the lobby that is still fixated on the retention of the facilities and advocate the restructuring of the management with the hope that such would change their status. For this second lobby, while the campaign for immediate outright sale of these facilities may seem valid, there are certain factors associated with the history of outright sale of public assets in Nigeria that call for caution and may be relevant with respect to the current debate on the refineries’ outright sale. One of such is routine loss of control of such facilities by Nigerians and diminished promotion of public weal for the country. Examples in this respect abound across the country, with the sensitive nature of the refineries making the concern over their future acute.      

It is, therefore, for good measure that even as the clamour for the sale of these facilities may be raging is the plan by the House of Representatives Committee on Petroleum (Downstream) to embark on a comprehensive investigation into the circumstances surrounding the status of the facilities and their much-touted sale.

According to the chairman of the committee, Ikenga Imo Ugochinyere in a recent press conference, the legislators’ concern is how billions of naira that was spent on turnaround maintenance over the years and the recent rehabilitation exercises have failed to change the moribund status of the facilities, leading to the clamour that they be sold outright. Also of interest to the legislators, and by extension, most Nigerians, is the general state of the entire petroleum sector that may be contributory to the endemically prostrate condition of the facilities and by implication provide insights into how to save the huge investments in them over the years, as well as perhaps save them from plans to sell or privatise them.

Apparently, the committee shares the perspective with not a few Nigerians that these facilities still remain national treasures and require a more discretional view about their future.

Speaking at the same press conference, Ugochinyere expressed concern that the much-celebrated return of the Port Harcourt and Warri refineries to production was short-lived as operations have again ground to a halt.

To further situate the import of their investigation, the committee also announced a probe into the bottlenecks faced by local and modular refineries in accessing crude oil, including the controversial requirement for local refiners to travel abroad, specifically to Switzerland, to negotiate for supply of crude oil, which may include exportation, to drive local processing. This situation is a measure of how far the rot in the oil sector has deepened.  

Meanwhile, just in August 2024, the Senate had also launched a probe into the Port Harcourt refinery over the deployment of the sum of $1.5 billion, which was released in 2021 by the Muhamadu Buhari administration for its rehabilitation. Nigerians are still awaiting the report of that investigation and the recommendations for remediation of whatever anomalies in the set up.

In that context, the new initiative by the House of Representatives will mark the second time in one year the refineries will be probed by the National Assembly.

Against the backdrop of the long wait for the report of the Senate probe of the Port Harcourt refinery lies a deep sense of reservation over the plans for a fresh probe by the House of Representatives Committee, as well intentioned as it may be. While the plans for probing the refineries may be valid, the outcome of such exercises often remains beyond the reach of the general public – a situation that breeds public mistrust of the intentions of the legislature.

Nevertheless, the planned probe of the refineries by the House committee still enjoys ground for its justification, which include the wide scope it envisages to address. Among the most significant caveats for the new probe includes the consideration that in the case of the eventual sale of these facilities, guarantees of a wide ownership base by Nigerians must be assured.