A plan by the Federal Government to go ahead with another turnaround maintenance of Nigeria’s four ailing refineries is still on course, despite the odds stacked against it. Since the expected gains from this ritual have remained elusive for over three decades, sagacity dictates that we get off the beaten track.
The overhaul, the authorities claim, will increase the capacity of the refineries from 445,000 barrels per day to 700,000 barrels per day within the next few years. The Group Managing Director of the Nigerian National Petroleum Corporation, Maikanti Baru, reiterated government’s adamant posture at an Offshore Technology Conference in Houston, USA early this month, during which he also solicited investors’ participation.
To achieve the target, Nigeria will borrow about $6bn from abroad. The fund is part of the $16bn foreign facility, which the state oil behemoth is seeking for the expansion of its upstream activities. Before Baru, the Minister of State for Petroleum Resources, Ibe Kachikwu, had also been impulsive about TAM, only for him to find out that a breakthrough was akin to making a rope out of sand. “It got to a point where I started wondering whether as we repair this, somebody was going out there to destroy so that contracting will be done,” the minister once lamented.
Doubling as the NNPC GMD and minister in April 2016, Kachikwu had advertised for funding and technical partnership from investors with the experience and financial capacity to put down $300m. But no investor came forward. This craven drive for foreign investment in the refineries was preceded by the N99bn the NNPC had spent on their repairs in 2015, using local engineers, after the original builders from Japan and Italy had turned down contractual offers to fix them. They broke down barely three months after.
It is difficult to reconcile the government’s realisation that Dangote’s refinery, which will be the biggest single of such investment in Africa, when operational in 2018, as envisaged, would render Nigeria’s four refineries as ‘scrap’ with its delay in selling them off. Endless repairs of the refineries, right from the administrations of Sani Abacha, Abdulsalami Abubakar and Olusegun Obasanjo to Goodluck Jonathan, have clearly been conduits for pillaging public funds.
We have seen this repeatedly. The Federal Government had sought a loan of $1.6 bn under the immediate past minister of Petroleum Resources, Diezani Alison-Madueke, to put the refineries in good shape before being sold. But this never happened. The figures keep increasing. In June 2016, the government signed a memorandum of understanding with Chinese firms to commit $1.1bn to the project when Kachikwu called the shots at the NNPC. Now, under Baru, the estimate has risen to $6bn.
However, Alison-Madueke’s forthright outburst on the refineries in an interview with Bloomberg TV Africa in London, in 2011, still rings a bell: “We would like to see major infrastructural entities, such as refineries, moving out of government’s hands into the private sector…Government does not want to be in the business of running major infrastructure entities and we haven’t done a very good job at it over all these years.”
Satisfied that the refineries had become more of liabilities than assets, the National Refineries Special Task Force chaired by Idika Kalu, which investigated their functionality level in 2012, recommended their sale within 18 months. Curiously, the government ignored the commissioned report and continued its shadow-chasing repair game. The sale advice from the task force remains the only rational option.
Besides the Dangote refinery with the capacity to refine 650,000 barrels of crude per day, the fetidness of the refineries – two in Port Harcourt; one each in Warri and Kaduna – is being compounded by Nigeria Agip Oil Company’s latest positive response to Kachikwu’s call for the oil majors to begin to refine crude in order to meet local demand. With MoU signed with the government, NAOC has agreed to build a refinery with the capacity to refine 150,000 bpd. It will start operation in 2020. Government should continue to prod similar companies to follow in NAOC’s footsteps, as these companies run similar business entities in Europe, the United States and elsewhere, where they operate business. If they comply, together with the Dangote initiative, the downstream landscape will radically change for the better.
Managers of the economy should not continue to mortgage the future with needless foreign debts. As of September 30, 2016, the external debt profile was $11.5bn. To add $6bn to the debt stock for obsolete refineries repair will amount to sheer financial recklessness and irresponsibility. Nigeria should waste no more time and resources. It spent N760.4bn in the first quarter of this year on imports of refined petroleum products, according to the National Bureau of Statistics. Such expenditure is disgraceful, given the fact that the country is a major crude oil exporter.
For decades, revenues and job losses from refining and petrochemicals have been huge as government has not allowed the private sector to drive the oil downstream. Singapore, a non-oil producing country, but the third largest refining hub globally, through privatisation, provides jobs for over 10,000 workers in this area.
With Azikel Refinery in Bayelsa State, which is licensed to produce 12,000 bpd, promising to begin operation next year and more of such enterprises in the offing, government’s total withdrawal from refining is the catalyst the oil downstream badly needs.
