- At last, FG withdraws would-be refinery investors’ licences 10 years after
With nothing to show more than 10 years after handing out the first batch of refinery licences to would-be investors, the Federal Government may have settled on wielding the big stick. At the sidelines of the just-concluded Offshore Technology Conference (OTC) in Texas, United States, Minister of State for Petroleum Resources, Ibe Kachikwu, stated that he had directed the Department of Petroleum Resources (DPR) to ensure the withdrawal of the expired licences immediately. In all, some 25 out of a total of 32 licences said to have exceeded the two-year grace given them by the agency to commence the production of petroleum products are said to be affected.
While this latest twist was expected, playing the Pontius Pilate as the Federal Government is wont to do in this instance is, quite frankly, opportunistic. To start with, if we understood the business of refining crude petroleum to be a high-tech, highly capital intensive affair, the all-comers affair under which entities that would ordinarily not have emerged as serious contenders in the fuel marketing chain were awarded licences to build refineries, would pass for unspeakable.
While that represents one side of the matter, the other side is that the Federal Government not only went to sleep after farming out the licences, it also failed to take into consideration the concerns of the hitherto knowledgeable players in the industry – a factor largely blamed for their decision to stay clear.
Today, we must admit that the terrains have changed considerably from what it was some 10 years ago. One indication is that the issue of cost recovery and the debate on subsidy that it spawned – a major pillar of liberalisation – is certainly far less acrimonious than it was 10 years ago. For, as painful as the last fuel price hike was, a consensus that somewhat emerged was that the old regime of subsidy and its associated corruption is neither sustainable nor desirable any longer.
That Dangote refinery is pushing aggressively towards the realisation of its 650,000 barrels per day (bpd) refinery has since shifted the debate from whether it is doable to one of how to get it done. This is where the failure to turn the sod would appear to suggest that the licencees have a far lot more to learn about the business than they are willing to admit. We therefore think the Federal Government is right to seek to close the chapter. Part of that would of course mean pushing more aggressively to bring serious investors on board.
That is why we welcome the announcement by Kachikwu of the decision by Agip to build a 150,000 bpd refinery in Port Harcourt. That, were it to happen, would be a major boost not just to the current efforts towards local sufficiency in refined products but also in the area of deepening the government’s liberalisation efforts. Considering that the decision is strictly a business one, we would have expected the announcement to have come from Agip rather than the minister. All the same, Nigerians cannot wait to see it happen.
Even at that, nothing in the signal by Agip makes the process a done deal. Indeed, if there is lesson that the matter of botched licences has taught, it is that nothing can be taken for granted. Government’s responsibility is to continually engage the would-be investors until the final investment decisions are made. It is about time Nigeria began to harness its vast oil reserves and endowment in natural harbors to become a global leader in refining.
