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EDITORIAL

Making Nigeria’s Refineries Work Again

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There is no doubt that Nigeria needs to urgently fix her moribund refineries and address the lingering issue of importation of refined petroleum products, which has continued to gulp several billions of foreign exchange.

With a huge potential as the 12th largest oil-producing nation in the world, with an estimated 37.2 billion barrels of crude oil deposits and seventh in the world in terms of gas reserves of about 187 trillion cubic feet, it is not a good narrative that the country is the only member country of the Organisation of Petroleum Exporting Countries (OPEC) that depends on imported refined petroleum products. A nation that has four refineries, two in Port Harcourt with a combined installed capacity of 210,000 barrels per stream day (bpsd), and one each in Kaduna (KRPC), with an installed capacity of 110,000 bpsd and Warri (WRPC), with an installed capacity of 125,000 bpsd, making a total of 445,000 barrels per day (bpd) should not have any business relying solely on importation for her domestic consumption.

Expert sources indicate that corruption has made it difficult to get these refineries working to full capacity. Nigerians have been fed with lies and deceit on the issue of the refineries. For instance, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr Maikanti Baru, recently revealed that no Turn Around Maintenance (TAM) has been undertaken on the four state-owned refineries in 42 years despite the billions of naira voted for this purpose by successive governments. It has also been reported that despite the huge resources budgeted for Turn Around Maintenance, none of Nigeria’s four refineries worked up to 50 per cent of their capacity. This has revealed the extent of corruption in the nation’s oil sector.

As the federal government makes efforts to complete the overhaul of these refineries so as to make them work to utmost capacity by 2020 as revealed by the Minister of state for Petroleum Resources, Dr Ibe Kachikwu, we urge the government to adopt the best business model in making the refineries more profitable. It is a cheering news that the NNPC has said plans are near completion on rehabilitation of the four refineries, using a Project Financing Model with private sector investing in the restoration of the refineries through their Original Refinery Builders (ORBs) to ensure that they operate at optimal capacity. According to recent reports, negotiations for the funding of detail scoping and early works by the ORBs are progressing significantly and expected to be concluded before the year runs out. To ensure efficient management of these refineries when rehabilitated, NNPC has said a blueprint for a new operational and marketing model is envisaged that will ensure that the refineries operate as standalone self-funded profit oriented business entities.

It is expected that if the nation is able to produce refined petroleum products locally, its price at the consumer level would come down and there will be no need to pay any subsidy on fuel at all. Besides, foreign reserves will not be expended on importation of fuel.

There have been argument that the refineries are old and cannot compete with modern plants. While we agree that new refineries have modern features that also enhance their efficiency, we are also of the opinion that proper maintenance and elimination of corruption in the system can make the best of what we have.

In the meantime, this newspaper commends federal government’s efforts in licensing private investment in modular refineries. Recently, the government gave approval for incentives to reduce the import duty rates on modular refinery equipment and components. It was gathered that the reduction was given in order to encourage investment in modular refineries in Nigeria.

The Federal Ministry of Petroleum Resources disclosed that it has secured approval for incentives on reduced import duty rates (customs duty waiver for the importation of modular refinery machinery, equipment and components) to encourage investment in modular refineries. Dr. Kachikwu, stated that the government was working hard to ensure that modular refineries started operating effectively in Nigeria. He noted that three out of the about 40 planned modular refineries would come on stream by the end of 2019, adding that 10 investors in modular refineries had submitted their various programmes and were making tangible efforts.

The nation’s Oil and Gas Industry, in our view, needs comprehensive reforms to engender transparency, accountability and appreciable returns on investment. We urge that the much-anticipated reforms from the Petroleum Industry Bill, PIB, should be given all the necessary consideration and impetus that it deserves.

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