Reps halt $400m loan for upgrade of refineries

Leadership of the House of Representatives on Wednesday halted ongoing process for the acquisition of $400 million loan for the upgrade of the four refineries initiated by the Nigerian National Petroleum Corporation (NNPC).

The House also recommended the outright suspension of the proposed restructuring/privatisation of the four refineries following the breach of extant regulations in the Bureau of Public Enterprises (BPE) and the delay in the inauguration of the National Council on Privatisation (NCP) by the Presidency.

To this end, the House promised to formally communicate its resolution to President Muhammadu Buhari on the need to adhere to due process and avoid pitfall of previous commercialisation and privatisation exercises.

Quoting BusinessDay Newspaper’s of last Tuesday, titled “FG diversification drive wobbles as investors seek policy clarity,” Sunday Katung, member of the House Committee on Commercialisation and Privatisation, expressed concern over breach of policy guidelines and extant regulatory framework and undue rivalry among government agencies.

According to NNPC document submitted to the Committee and obtained by our correspondent, “in 2015, the refineries posted combined losses of N82 billion and processed only 8 million barrels of crude in total.”

The lawmakers also expressed displeasure over the failure of the NNPC management to produce copies of the approval allegedly given by Mr. President on the proposed improvement of the refineries’ capacity utilisation to 80 percent within one year on the basis of the subsisting ownership structure.

The lawmakers also expressed reservation over the $50 million agreement signed by NNPC with a Chinese company, without any clear work plan.

Anibor Kragah, group executive director (Refineries), who spoke on behalf of NNPC, who denied the report on the privatisation of the refineries, argued that the “proposed investment proposals do not involve commercialisation or any transfer of ownership, assets, shares or control of the three refineries NNPC owed refining companies and are fully aligned with the current administration’s drive to ensure that the midstream and downstream sectors of the Nigerian Oil and Gas industry become self-sufficient in refining of petroleum products in the shortest time frame to ensure the country’s economic growth.

“The need to rehabilitate the refineries is also in alignment with the aspirations of the National Assembly as communicated to NNPC at several engagements.”

According to him, the refineries have recorded very poor performance over the last decade (30% average capacity utilisation vs. global benchmark of 90%).

Kragah further argued that the Corporation does not need to subject the process to BPE approval, however noted that “BPE also shared its concerns on the viability of utilising JV arrangements for the rehabilitation exercise and the potential implications of the proposed activities on any FGN privatisation plans in future.”

He further assured the Committee that the exercise has been put on hold in line with the directive of the House, adding that the Corporation has so far placed tender for investors to expressed interests.

On his part, Vincent Akpotaire, BPE acting director-general who denied knowledge of the entire process, noted that the privatisation of the refineries had always been part of the Bureau’s work plan tagged ‘potential transaction.’

He maintained that previous exercise for privatisation of 51 percent equity stake of both Kaduna and Port Harcourt refineries to Bluestat Oil Services Limited (preferred bidder) for $561 million and $160 million were trauncate due to the political mood at the time due to the death of late President Umaru Yar’Adua, and cancellation of the sale and refund of the bid money and accrued interests to the two bidders.

While calling for close review of the funding challenges in the oil and gas sector, Akpotaire warned that “the glaring inefficiencies in the sector couple with the bureaucratic nature of NNPC that the JV model has a gloomy future and is very unlikely to succeed given the that it is the same agency and people that have been unable to run the refineries that will be called upon to regulate and supervise the joint venture operations.”

While ruling, Ahmed Yerima, chairman of the Committee on commercialisation and privatisation directed BPE to take over the process.

He also directed NNPC to suspend all the activities pit in place as the House will not throw its support on such project without recourse to relevant regulatory agencies.