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Another Government-owned Refinery In The Making?



The quest by government to go into partnership with Niger Republic to construct new refinery when the existing ones have failed to deliver is raising dust, FESTUS Okoromadu writes . 

On Thursday, February 1, 2018 the Minister of State for Petroleum Resources, Dr. Emmanuel Kachikwu, was reported to have met with the president of the Republic of Niger, Mahamadou Issoufou, alonside the energy minister of the Republic of Niger, Mr. Foumakoye Gado.

A statement issued by Kachikwu’s technical assistant , New Media, Roseblossom Nnodim, and posted on the minister’s facebook and twitter handles said both parties reached a mutually beneficial agreement for the construction of a refinery in the border town between the Republic of Niger and Katsina State, Nigeria.

It explained further that a crude oil pipeline from the Republic of Niger to the new refinery would be constructed adding that a definitive bilateral and technical agreements on the refinery, was to be signed in coming days.

The ministry’s announcement came on the heels of a similar disclosure by the group managing director, (GMD) of the Nigerian National Petroleum Cooperation, (NNPC), last year November that the federal government would build 1,000 kilometres of pipeline from Agadam Niger Republic, to supply crude oil to Kaduna refinery.

Baru, who stated this during a visit to the Kaduna Refinery Petrochemical Company Limited (KRPC) in Kaduna explained that a high level contact had been made with Niger Republic on the possibility of importing crude from the country.

“President Muhammadu Buhari has made several contacts with the President of Niger Republic; we are talking with Niger ministry of petroleum. We are also talking with the Chinese company operating in Agadam,” he was quoted to have said.

While it does not only sound absurd and shameful that Nigeria which parades itself as the giant of Africa and the highest producer of crude oil in the continent is unable to refine the product for local consumption, it is  very ridiculous that the government is thinking of embarking on another journey of engaging in refinery construction.

Previous Experience

To date, the federal government is the sole owner of the country’s three refineries located at Port Harcourt (commissioned in 1965), Warri (1978) and Kaduna (1980) with a combined capacity of 445,000 barrel per day (bpd) but nobody including those charged with the responsibility of managing them can say categorically when these refineries would produce at full capacity.

According to the NNPC’s financial and operations report for September, 2017 , the refineries  have reported operating losses for four of the previous 12 months. The Port Harcourt refinery was said to process 279,000 metric tonnes (mt) of crude and Warri 53,000 mt ,while Kaduna’s output was zero for the fifth month in succession. The total combined produce for the month came to 115,000 mt by implication in September 2017 the refineries achieved a combined capacity utilization rate of 6.1 per cent, compared with 9.5 per cent the previous month.

Such low rates can only result to losses and absence of products for the local market .

In an effort to resolve the crisis created by the poor performance of the existing refineries , government has resorted  to the importation of the  products as well as committing public monies to turn around maintenance (TAM) programmes and the latest is the commitment of $1.1billion. This is even as an earlier investment in TAM in 2013 made little, if any impact.  Again,  it has been argied in some quarters that  the latest programme of TAM would not be a success.

Consequently, stakeholders have advocated a reform of the way the industry was currently operated, this is where the recently passed Petroleum Industry Governance Bill (PIGB) becomes relevant and as well as local refineries owned and run by the  private sector.

In short some experts have argued that NNPC’s refineries should be allowed to wither away not to talk of suggesting government’s new initiative to further participate in this business where it has failed woefully.

The December 21, 2017 edition of the Good Morning Nigeria, a publication of the FBNQuest, was very blunt in this regard when in proffering solution to the nation’s fuel crisis it said, “Our message is ‘Local refining, the obvious solution’. By local, we mean private sector.

“The corporation’s refineries should be allowed to wither away in our view,” it added. Citing an example of what the private sector have to offer, the analysts at FBNQuest stated that, “The game-changer is the Dangote refinery under construction in Lagos State, which over time is scheduled to process 650,000 b/d crude.”