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Kachikwu’s deliberate foozles to sell refineries

By Sonny Atumah

The Nigerian National Petroleum Corporation, NNPC rose from an Annual General Meeting last Tuesday in Abuja, with a resolution to comprehensively rehabilitate the refineries. The Corporation’s Group General Manager, Public Affairs Mr. Ndu Ughamaduin a statement quoted the Chief Operating Officer, Refineries, Mr. Anibor Kragha as saying that the rehabilitation of the refineries would be the priority of the corporation in 2017.

Kragha said that: ‘’the plan for next year (2017) is to get the comprehensive rehabilitation programme done.The situation is like having three cars in your garage that have not been maintained for 15 to 20 years while you expect optimal performance from them. Changing one fuel pump here, one compressor there is not helpful. What we are doing now is to step back and take a holistic approach and do a full rehabilitation of all the refineries.’’

Indeed funds have been wasted in the 445,000 barrels per stream day, bpsd supplied to these refineries; wages, salaries and overheads were expended on redundant staff through no fault of theirs.Late as it was in coming one appreciated the efforts to rehabilitate the refineries which underscored the submissions some of us have consistently madethat the NNPC must be alive to its responsibilities having failed in the last 20 years.

In the same breath, the Minister of State for Petroleum Resources, Dr. IbeKachikwu addressed members of the House of Representatives Committee on Petroleum (Upstream) led by the Chairman Hon. Victor Nwokolowho had oversight visit to the Ministry. The Minister explained that for the purpose of efficient management of the refineries, the Federal Government will no longer invest in the repairs of the country’s refineries, and would also not concession or privatise the refineries. Rather, prospective private investors will bring in their money, take part in managing the refineries and from there recoup their investment.

One actually wondered whether the Minister’s address and that of the Refineries’ Chief Operating Officer were corresponding on this matter. While the AGM stated that the NNPC will rehabilitate the refineries in 2017 the Minister of State was hoping investors will bring in their money, take part in managing the refineries and from there recoup their investment. The scenarios made watchers confused and equally think they are deliberate moves to let go our refineries. Kachikwu had an earlier package of $500 million to have the refineries back to full capacity and meet the government’s target of ending importation of petrol in 18 months.

From the Minister’s address it was obvious he was contemplating outright sale of the refineries. On November 1, 2016 he told State House reporters shortly after President MuhammaduBuhari unveiled the administration’s petroleum sector policy document – the seven big wins that the government has opted to fix the refineries first and then consider selling them at optimum values. Really one thought the Minister’s over one year on the saddle would have witnessed rehabilitated and possibly upgraded process plants.It is obvious our refineries may not come on stream due to clear cut policy of not revamping them.

On April 19, 2016 he advertised for investors to bid for Joint Venture agreements to fund, rehabilitate, and jointly operate the moribund refineries. The NNPC tender bid was to integrate the technical, operational and financial requirements needed to rehabilitate the refineries for 100 percent capacity utilization. The move to partner technical investors to revamp the refineries was part of the plan to increase domestic crude oil refining capacity from the current 445,000 barrels per stream day, bpsd to 695,000 bpsd.

NNPC said it would jointly operate the refineries with selected investors for a defined period until their investments are fully recovered and gave investors May 30th 2016 to submit bids. It was ones opinion that no investor would put his money to fund, rehabilitate and jointly operate a refinery with the NNPC based on parameters that may not be transparent. Accepted standards and indices for ease of doing business are not yet in place for such a venture. That is what the Minister would have worked on to inspire the confidence of prospective investors.

Unfortunately Nigeria would continue to waste scarce foreign exchange importing refined products from non-producing consumer nations.  A non-producing consumer nation is that which oil production is 10 percent or less of their consumption. Japan, Germany, South Korea, France, Italy, Spain, Netherlands and Turkey are in this category; most of Nigeria’s refined petroleum products are imported from West European countries.

While handing over to his successor at the NNPC, Dr. MaikantiKaccallaBaru he gave an impression of an operating profit of N273.74 for the month of May 2016having reversed the losses of N35 billion made by NNPC over the last 15 years. The monthly report then stated that PPMC recorded a net gain of N17.69 billion as against the net loss of N6.91 billion in April 2016. On May 11, 2016, the PPPRA announced a price increment of PMS with immediate effect by 68.60 percent from N86 to N145, household kerosene, HHK rose from N50 to over N200 per litre, an increment of 300 percent, the source of profit.

Nigerians were startled to pay exorbitant rates even when international crude oil prices were falling withglutted markets for refined petroleum products. Nigerians are again waiting for NNPC that would soon give reasons of the recent production cuts by OPEC and non-OPEC, NOPEC as excuse for pump price hike of imported products. The price modulation Kachikwu introduced a year ago would soon be reviewed upwards because the templates are determined by the vagaries of crude prices in the international market.

The signs are already there because NNPC has been reduced to a marketing and distribution company for imported products.The monthly NNPC Group Financial Report for October 2016 showed that the national oil company posted zero revenue in the review month, incurred an expense of N14.84billion and recorded a total deficit of N14.84billion. The deficit for the 10-month period beginning from January this year was put at N161.76billion.

The Minister’s impression that imported fuel is available is not well thought out because it is not affordable to many under privileged Nigerians.

The law that established the NNPC in 1977 was for the Corporation to refine, treats, process and generally engage in the handling of petroleum for the manufacture and production of petroleum products and its derivatives.

Nigeria is in recession and the place of petroleum critical infrastructures like local refineries are to stop importation of refined products and stop the drain on our scarce foreign exchange. Refining is a key to government’s revenue generation, energy, technology, skills, employment, income, investment, increased GDP and indeed diversification of the economy. President MuhammaduBuhari’s administration can leverage on petroleum refining as a fulcrum to jumpstart the Nigerian economic development. It has not happened and it bothers everybody.


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