Refineries’ funding: NNPC, investors disagree on commercial terms
After spending over one and half years negotiating with financiers for the revamp of Nigeria’s refineries, the Nigerian National Petroleum Corporation on Wednesday declared that it could not agree with the investors on the commercial terms of the transaction.
On November 12, 2018, The PUNCH exclusively reported that the NNPC looked set to announce investors for the proposed rehabilitation of the nation’s refineries following the corporation’s talks with financiers abroad.
Top management officials of the national oil firm had told our correspondent in Abuja that they met with financiers abroad to further negotiate terms for the proposed rehabilitation of the nation’s refineries.
Nigeria has four refineries. The Port Harcourt Refining Company is made up of two refineries. The others are the Warri Refining and Petrochemical Company and the Kaduna Refining and Petrochemical Company.
The four refineries have an installed capacity of 445,000 barrels per day, but they have continued to operate far below the installed capacity for many years.
When confronted with questions on what the management of the corporation was doing about the abysmal performance of the facilities, during a session at the ongoing Nigeria International Petroleum Summit in Abuja on Wednesday, the Chief Operating Officer, Refineries, NNPC, Anibor Kragha, said a lot of issues were affecting the refineries.
This came as the Infrastructure Concession Regulatory Commission charged the Federal Government and the NNPC to concession the refineries in order to make them functional and profitable.
Kragha further stated that negotiations between the NNPC and financiers could not work due to the recent disagreement between the corporation and the investors as regards the commercial terms of the transaction.
On the need to concession the refineries, the Director-General, ICRC, Chidi Izuwah, who was also a panellist alongside Kragha at the session, urged the NNPC and the Federal Ministry of Petroleum Resources to appreciate the gains derivable from such concession.
Izuwah said, “For me, I’m looking into the future. Let’s look at our telecoms sector 16 years ago, imagine that we had Nitel up until now, what would it be like? Our lines will still be tossed, the incentives structure will promote corruption. The government must play a role to break the back of government dominance in the downstream sector and bring in the private sector. That’s the only way to go.
“When you bring in the private sector, you will change the incentive structure. People will be incentivised and make the right level of investments. And what do I mean? Very simple; we should concession the NNPC refineries to the private sector.
“The investments will come and, on a BOT (Build, Operate and Transfer) basis you concession them, they (investors) rehabilitate and upgrade them and recoup their money. There’s a huge opportunity in refining. It’s a profitable business. So, the role of government is to attract investments to change that sector.”