Kachikwu says NNPC to sign Refineries’ Revamp Agreements by October

 

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said that the Nigerian National Petroleum Corporation (NNPC) will sign funding and contractual agreements with third-party financiers and contractors for the revamp of its 445,000 barrel per day (bpd) combined capacity refineries in Kaduna, Warri and Port Harcourt, by October.

Kachikwu also stated that Nigeria could become a continental hub for refined petroleum products in Africa if the federal government succeeds with its reforms of the country’s local refining industry.

He stated these in a podcast message he delivered on the state of the government’s efforts at reorganising Nigeria’s domestic petroleum refining industry.

He stated that processes to ensure the NNPC moves on to revamp the refineries so they can work at 90 per cent combined production capacities were largely concluded. He added that the signing of the agreements would follow next.

He also explained that the government had to engage an external consultant to review the status of the refineries to enable it negotiate good deals for the agreements.

According to him, the corporation has identified the relevant people it would work with on this, including the Original Refineries Builders (ORBs).

“This edition, we are going to focus on something that interests virtually every Nigerian – the refineries. It was one of the areas we were very concerned with when we started and continued to remain a key focus area,”.

“Our refining capacity was less than 10 per cent, we managed to elevate it to about 15 per cent and that is where substantially it has remained. We’ve continued to import most of our refined petroleum products into this country, the effect of that is all the challenges in terms of pricing of petroleum products and the under-recovery or subsidy as the case maybe that has been subject of very may interests”, Kachikwu said.

Kachikwu noted that he inherited “unsustainable refineries that were not performing, fairly ballooned contractual models that were costing the government so much money”, adding that: “We had our work cut out for us.”

“We decided that we will intervene in this sector in four main particulars – the first is to see how we can revamp our refineries; we wanted to look at modular refineries, not just for the benefits it brings in terms of refining but the benefits it brings in terms of Niger Delta concerns.

“We also looked at Greenfield refineries which are brand new refineries, how do we encourage private sector to go in on their own.”

He said that President Muhammadu Buhari had approved that a third-party funding through a debt structure model be found for the repairs of the refineries.

“So, we decided to get a third-party who would put in money, work with the NNPC in a joint operational model and get these refineries from a 10 per cent capacity to about 90 per cent capacity performance.

“Today, the concept has been agreed and approved. Financing structure is largely being agreed. The financiers have largely been identified. Contractual processes are ongoing to reach the terms of those financing, we have also identified the initial builders of the refineries to be the contractors using the financing that will be raised from the third-party financiers,” he stated.

“That process is largely almost done and we are hoping that really, by the end of October, we should be in a position to have signed all the requisite agreements and be able to charter people to be able to move in and begin work.”

“If we can by the end of the year get to a point where we can at least begin the process of actual work – shutdown the refineries and begin, then I think we have achieved the objectives of this refineries maintenance and revamp,” the minister added.

He said the government had issued licences for 40 new modular refineries, and that two with 17,000bpd capacity each had gone as far as attempting to commission their plants between the last quarter of 2018 and first quarter of 2019.

He also said that apart from the 650,000bpd Dangote refinery in Lagos expected to come on stream in 2020, the Nigeria Agip Oil Company (NAOC) has planned to build a 150,000bpd refinery in Bayelsa State.

Kachikwu stated that he expected all these to result in Nigeria becoming a destination for crude oil refining in Africa, adding that this would ensure she takes over and dictates the continent’s oil refining market.

He equally added that at that time, the country would enact a policy to de-emphasise on export of crude oil, and focus on providing for domestic refining.

“Dangote refineries is also there and we have continued to work with them, and projected to come in 2020. If we succeed in getting that, the 650,000bd will capture close to 70 per cent of our consumption today, and then we succeed in getting the 450,000bpd combined refining capacity that we have, we would have met the national expectation in terms of 100 per cent refining capacity and then begin to look at the export model.

“All these will change the dynamics of the refining industry in Nigeria. I can tell you, as we go through the crude oil sales policy of this country, we must get to a point where even those who produce crude oil as joint venture partners must take a responsibility in providing crude first for the local refineries.

“We are going to have to come there through policy because it does not make sense for us to ship out all the crude that we produce and leave our citizens scurrying for imported refined petroleum products,” he explained.

He also stated that between 30 and 40 per cent of Nigeria’s foreign exchange expenditure for importation of refined petroleum products would be saved if she succeeded with the plans to quit importation through local refining.

“There is absolutely no reason why Nigeria should not be the bastion of export petroleum products all over Africa. That market is waiting, we need to hurry up. If that market is taken up by others, we will have refineries that do not have substantial markets, but right now the market is open, people are willing and the distance in terms of freight is very favourable to this model and we are going to continue to work hard to achieve it,” added the minister.