Refineries – much ado about a concession

Ibe Kachikwu, Nigeria’s minister of state for Petroleum Resources, told the Senate Adhoc Committee probe the reported concession of Port Harcourt Refinery to AGIP/ENI and OANDO Plc without following the due process, that the ministry was misrepresented.

According to Kachikwu, the alleged planned concession story on the refinery could have emanated from concerted efforts being made by his Ministry and NNPC on new arrangement of revamping all the refineries and not that of Port Harcourt alone.

What is in the works for all the refineries by the government, according to Kachikwu is an arrangement where private investors would bring in money for their repairs to optimal capacities, which will bring about expected incremental volume in their production where their money would be recouped.

The minister maintained this arrangement is the only viable alternative for the Federal Government as far as repair work on the refineries is concerned since the turn around maintenance carried out over the years has failed.”

On his part, Wale Tinubu, Onado CEO, said the controversy was the result of a misconception that there is a concession. Tinubu said that parties in the industry must be allowed to engage the regulators in discussing solutions and possibilities and they must be negotiated and crafted into something worthy of being taken to the regulators to consider whether or not it will lead to concession or transactions worthy of regulators’ approval.

“The truth of the matter is that we do need to be allowed as professionals to carve out our position before we can present it. Along the line, as cooperates, we do meet with our regulators and many times expressions of interests have been submitted regarding how the refineries can be revamped. We call it a memorandum of understanding. In my career in the oil sector, I must have signed over a hundred MOUs with the NNPC. And those MOUs are derived because we have a meeting.”

These claims and counter claims seemed to suggest that concessioning the refineries is somewhat an untoward act. For the past two years, Nigeria has been making concerted efforts to attract more investments for the derelict refineries. As this exercise increasingly sound like a statutory witch hunt it jeopardises investors’ interests in the rotting assets.

Perhaps the Senators are not paying attention, investors are not falling over themselves to bid for Nigeria’s refineries and impeding a process where an investor has actually shown interest does not give confidence about future concessionary arrangements in the sector.

These efforts at spirited defence by the ministry and the prospective investors seem misplaced. The lawmakers need to be made to understand the intricacies involved in finding investors for a loss making operation.

It was reported that after the session, the Senate Adhoc Committee and Federal government agencies in charge of the oil refineries have unanimously agreed on the revamping, rehabilitation and maintenance of all refineries through sourced financing from private oil firms. These are hollow words because they have effectively condemned the refineries to rot further.

Nigeria’s refineries with combined installed capacity of around 450,000 bpd (Port Harcourt refinery is 210,000 bpsd, Kaduna refinery and Warri refinery are 110,000 bpsd and 125,000 bpsd) produce less than 24 percent of their capacities according to NNPC operations report for April.

Since January this year, the NNPC has been adopting a Merchant Plant Refineries Business Model that takes cognizance of the Products Worth and Crude Costs in handling the refineries yet capacity has only recorded negligible improvement. Perhaps this should be the greatest incentive to get serious about the refineries.

ISAAC ANYAOGU