Refineries not for sale – NNPC

By Clara Nwachukwu, Sebastine Obasi & Michael Eboh

LAGOS — Hopes for the Federal Government divesting its interest in the nation’s refineries, as being expected were dashed, yesterday, as the Nigerian National Petroleum Corporation, NNPC, said the facilities are not for sale.

Managing Director of the NNPC, Mr. Emmanuel Kachikwu

Rather than selling the refineries as being expected, the Group Managing Director of the NNPC, Dr. Ibe Kachikwu, said joint venture partners with established track records of success in refining would be invited to support the running of the refineries to make them more efficient.

Kachikwu made the disclosure during an official tour of the Okrika Jetty and the Port Harcourt Refining Company Limited, PHRC, in Rivers State, yesterday.

The NNPC boss also disclosed of plans by the corporation to  unbundle the Pipelines and Products Marketing Company Ltd, PPMC, into three companies

Refining operations

Recall that for decades, the Federal Government has been constantly urged to privatise the four state-owned refineries with combined capacity of 445,000 barrels per day to make them more efficient and profitable.

The refineries were bugged down by lack of proper Turn Around Maintenance, TAM, which left them almost comatose for decades, leading to huge wage bills on petroleum products importation.

Ironically, colossal sums were wasted by successive governments on TAM, which did not make much difference in the refineries operations. For instance, the late Gen. Sani Abacha, was said to have awarded a major contract of $215 million in 1997 for the Kaduna Refinery, while the Abdulsalami Abubakar administration in 1998 set aside about $92 million for the refineries.

During his tenure, former President Olusegun Obasanjo, between 1999 and 2003, also awarded contracts estimated at between $254 million and $400.4 million for the rehabilitation of the refineries and pipelines while in 2007, another $54 million went into the TAM for Kaduna refinery alone.

Again, former President Goodluck Jonathan commenced a $1.6 billion phased TAM, scheduled to begin in January 2013 and ending October 2014, but which commenced in October 2014 and now rescheduled to end in March 2016.

Attempts by Obasanjo to privatise two of the refineries in the past also failed, as the decision was revoked by his successor, late President Umar Musa Yar’Adua.

Obasanjo in a recent television interview recalled that the two refineries in Port Harcourt were sold to business mogul, Aliko Dangote, leading a consortium of investors in a $750 million deal.

However, the late Yar’Adua cancelled the sale due to “pressure” and refunded the money to the Dangote consortium.

Managing Director, PHRC, Dr. Bafred Audu Enjugu, disclosed that the ongoing phased rehabilitation of the refinery cost a little less than $10 million, adding that the job was holistically carried out by indigenous engineers without any foreign support.

Although Kachikwu did not give details about the joint venture arrangement, he noted that the ongoing phased rehabilitation of all the state owned refineries would be given an accelerated vigour with the aim of reducing petroleum products importation.

He added that at full capacity, all the refineries could supply only 20 million litres of premium motor spirit otherwise known as petrol on a daily basis.

PPMC and pipelines operations

With regard to unbundling the PPMC, Kachikwu also said the marketing subsidiary of the NNPC was being split into three to ensure lean, efficient and profitable operations.

He said the split would be along the lines of: a pipelines company that would focus primarily on the maintenance of the over 5000 kilometers pipelines of the Corporation; a storage company that would maintain all the over 23 depots, and; a products marketing company that would market and sell petroleum products.

He added that efforts are in top gear to fix all the crude and petroleum products pipelines in the country.

He disclosed that the military will also be enlisted in the protection of the pipelines, with the Nigerian Air Force to providing aerial survey, the Nigerian Army Engineering Corps fixing damages, while the Police and the Nigerian Navy will provide marine surveillance for the network of pipelines.

He said the move will ensure that the right sets of skills are rightly positioned and the numbers of leakages in terms of pipeline breaks and products losses are reduced to the barest minimum.

On her part, the Managing Director, PPMC, Mrs. Esther Nnamdi-Ogbue, assured that the company would think outside the box to provide solutions to all the challenges confronting it.

 

Refineries not for sale – NNPC

Buhari approves 65 licences for private refineries

*Decision taken within 10 days in office

*DPR feigns ignorance

By Clara Nwachukwu

President Muhammadu Buhari has granted licences to 65 Nigerian companies to construct modular refineries.

General Buhari

The companies were selected from about 285 applications that were screened for the purpose.

Modular refineries are mini-refineries with capacities ranging from 1,000 to 10,000 barrels per day, bpd, which can be assembled and separated easily for enhanced performance and efficiency.

The decision to award Licence to Establish, LTE, which was taken within 10 days of his assuming office in June, may not be unconnected with his desire to see the increase in domestic refining capacity to meet local demand, thereby reducing huge import bills for subsidy.

Although the Department of Petroleum Resources, DPR, the industry regulator, feigned ignorance of the development, one of the beneficiary companies confirmed to Vanguard that the measure is also meant to cushion the impact of crashing oil prices at the international market.

The shock is not only in the period the approvals were given, but also in the numbers granted considering the fact that 18 LTEs were granted in 2002, but only one of them had come on stream with just 1,000 barrels per day, bpd, capacity.

The refinery is operated by Niger Delta Petroleum Resources, NDPR, which produces only automotive gas oil, AGO, popularly called diesel.

How approvals were granted

Chief Executive officer of the beneficiary company, who spoke in confidence, said the number was not unilateral, but “the mop up of all applications for private refining since 2007.”

He admitted that the process took a period of six months, dating back to former President, Goodluck Jonathan’s administration, adding “the process was rigorous as they looked at many issues including, land, investment, technical competence, design and a host of many others.”

He added that licences were offered on a two-year tenure, after which it will elapse, and that “the beauty of these awards is that there was no lobbying, as the whole exercise followed due process.”

In his opinion, there is nothing wrong with the high number of awardees, arguing that “for a country like Nigeria, the more in-country capacity, the better for us, because in a falling oil price regime, the more you refine, the more value you add and the more revenue you earn from your crude.”

DPR guidelines

A top management staff of DPR, when contacted, simply told Vanguard on telephone: “I am not aware of any such huge approval.”

When prodded further, he added: “What I know is that DPR recently released guidelines for the establishment of refineries, and we had road shows in Lagos, Port Harcourt and Abuja, to sensitise investors.”

Ordinarily, there are three levels of approval for setting up private greenfield (new) or modular refineries in the country.

They are Approval to Establish, LTE; Approval to Construct, ATC, and Licence to Operate, LTO.

An investor must overcome the requirements in each level of approval before proceeding to the next, as shown in the guidelines.

DPR had explained that the guidelines for the establishment of modular refineries in Nigeria was configured with the aim of shortening the approval time for licensing of refineries.

To woo investors to the project, DPR also reduced the licensing fee for new refineries from $1 million to $50,000. Government is desirous of refining at least 50 percent of its crude output in-country, not only to reduce import dependence, but also be an exporter of refined petroleum products.

Challenges

Also confirming the development, a petroleum expert from the Emerald Energy Institute, University of Port Harcourt, Profesor Chijioke Nwaozuzu, said he was more concerned with the challenges for establishing such refineries.

According to him, such challenges are tied to political, land, funding, crude feedstock and market availability.

He said: “These refineries are going to be located mainly in the Niger Delta, and the state governments may want to get involved because it is a high revenue earner, which grants only 28 days credit cycle.

“Also, refinery requires huge land, and there may be issues with acquisition from the land owners and to cap it all, refinery of any capacity requires huge capital. You need at least $30,000 per barrel, which is a huge sum even for a 1,000kbpd refinery.”

Feedstock… as in power sector

Furthermore, he noted that if Federal Government does not guarantee feedstock for those who complete the approval cycle, Nigeria may have a repeat of what happened with the initial 18 licences granted in the past.

Nwaozuzu, urged government to guarantee feedstock to the refineries, as it is doing with the existing 445,000 combined capacity four refineries, in addition to also guaranteeing the off-take of the products for the local market.

He noted that “if there is no guaranteed market, we will face a similar situation like what is happening in the power sector, where meter manufactures have manufactured millions of meters, but the distribution companies refused to take them.”

Also, in the area of funding, he noted that “some modular refining equipment manufacturers in the US can partner with the licencees by contributing their equipment as equity investment in the project, while some can work with the US Export-Import, EXIM, Bank to finance their equipment.

“However, the bank will need government collateral or guarantees.”

… on incentives

Against this backdrop, he urged government, through the Central Bank of Nigeria, CBN, to provide such collaterals for ease of take off for the refineries.

Besides these guarantees, he suggested other incentives to boost the modular refining operations to include guarantee of 100 percent crude oil feedstock for all refiners for at least 10 years; discounted price of crude oil for domestic consumption; a minimum of 60 days credit for each cargo of crude oil, at least for the first five years of operations; supply of crude feedstock should commence as soon as DPR can certify mechanical completion of each new plant.

Others are guarantee of 100 percent refined products off-take by government (NNPC); government guarantee of foreign loans for domestic companies wishing to set up refineries; plants should be granted tax exemption for at least three years from date of commencement of operations;plants should be exempt from import and export duties and value-added tax, VAT, for at least five years; plants should enjoy accelerated capital allowance of about 95 percent and the percentage of assessable profit for the purpose of capital allowance recovery should be 70 percent at most.

Experts’ views

Other industry experts also noted that “these mini-refineries will not only reduce or even eliminate Nigeria’s dependency on imported products, subsidy and traffic congestion, it will also revive the local economy, make roads to last longer and be safer, and return Nigeria to exporting refined petroleum products.”

They added that such refineries are already in operation in many countries of the world, including Africa.

One of them said: “While Senegal runs one with a 27,000bpd capacity, Cameroon has one with 42,600bpd; Congo, 21,000bpd; Niger Republic, 20,000bpd; Chad, 20,000bpd; Zambia, 34,000bpd, and Gabon, 25,000bpd.”

Besides, they pointed out that “a few African countries are refining to meet their needs through the regular and modular refinery models.

“Apart from oil-producing countries like Algeria and Libya, which refine 499,000bpd and 380,000bpd, respectively, South Africa and Egypt also do same with 626,500bpd and 1,102,550bpd, respectively.”

 

Buhari approves 65 licences for private refineries

Yar’Adua canceled sale of refineries, refunded Dangote’s $750m – Obasanjo

Former President Olusegun Obasanjo has explained that the sale of two of the nation’s oil oil refineries had been concluded before he exited office in 2007, saying his successor, the late Umaru Yar’Adua, reversed the sale due to “pressure”.

Obasanjo said this in his serialised interview with ‘Book Club’, a programme on Channels Television, monitored in Lagos on Wednesday.

The ex-President said business mogul, Aliko Dangote, leading a consortium of investors, had paid $750m for two of the refineries, as the Federal Government was finding it difficult managing the facilities at the time.

He, however, regretted that instead of the Yar’Adua administration to consolidate on the sale so that the investors could turn around the fortunes of the refineries, his successor succumbed to pressure and reversed the sale of the oil facilities.

Obasanjo equally revealed that not only did his successor canceled the sale, he also refunded the $750m paid by the investors.

He added, “The refineries are old and Dangote and some investors paid $750m for two of the refineries. My successor came to office and reversed the sale; he even refunded the money they paid.

“So, I went to him and said ‘why did you do this’? He said it was because of pressure. So, I said ‘so the pressure of some people was more important than the interest of the whole nation’!

“Right now, you will hardly be able to sell the refineries for more than $250m because they are very old.”

Obasanjo explained that most people, especially leaders, failed to analyse the decisions of those before them before upturning those decisions, pointing out that most leaders yielded to sentiment than informed opinions.

Yar’Adua canceled sale of refineries, refunded Dangote’s $750m – Obasanjo

don’t sell refineries - NLC tells BPE

Labour is disturbed that the Bureau of Public Enterprises (BPE) intends to sell the four troubled refineries.

The refineries are two in Port Harcourt, one in Warri and the other in Kaduna. The Nigeria Labour Congress (NLC) said, it would oppose the plan.

There is also the proposal to commercialise certain federal institutions.

In a statement, NLC President Abdulwaheed Omar said: “It is scandalous that the same government which has always promised to use the gains from petroleum price increases, which it has received over the years, to reactivate existing refineries and build additional ones can turn around to announce the privatisation of refineries. This is clearly unacceptable, and the public have strongly opposed this attempt several times in the past, even on the floor of the National Assembly.”

Omar added: “ We are disturbed by the statement by the Director General of the Bureau of Public Enterprises, BPE, Mr. Benjamin Dikki, who was reported to have announced that plans have been concluded by the BPE to privatise refineries as well as commercialise the Nigerian Television Authority, the Federal Radio Corporation, the News Agency of Nigeria, Nigeria Films Corporation, Skypower Catering and Hotels Services and the Commodities and Exchange Commission as well as the partial privatisation of Bank of Agriculture and the Bank of Industries. He also announced the commercialization of National Parks.”

don’t sell refineries - NLC tells BPE