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NNPC GMD gives reasons for shutdown of refineries, to get private managers

The Federal Government has decided to continue with the shutdown of its 3 refineries, as part of the ongoing efforts to reposition them. 

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In what appears to be a never-ending situation, the Federal Government has decided to continue with the shutdown of its 3 refineries, as part of the ongoing efforts to reposition them.

This was disclosed by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, during a television interview earlier today.

These refineries, which are in Kaduna, Port Harcourt, and Warri, have rarely functioned properly for many years, despite the government’s infusion of huge investments in them.

The NNPC boss said that the corporation had decided to shut down all of its refineries in order to develop a model to upgrade them and secure enough funding for them.

(READ MORE: TCN, NNPC partner to boost gas availability, increase power supply)

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Although the GMD said they have secured funding for the maintenance, he did not provide details. Note that the corporation had previously entered into several unsuccessful agreements with oil traders.

NNPC GMD gives reasons for shutdown of refineries

He said that the NNPC was looking at a different model for refineries, such as that used by the Liquefied Natural Gas (LNG). Kyari said:

We made a very conscious decision to shut down our refineries. Today, after proper scoping, which was done in the past, we know exactly what to do to get them back on stream. We have also secured financing to make sure they work optimally.

“Aside from proper scoping, we are also going to have an Operation and Maintenance (O&M) contract, a different model of getting the refineries to work. We are looking at the NLNG structure where world-class processes will always be in play. We’ve seen it work with success.”

Getting Nigeria’s refineries to work efficiently and regularly has, for many decades, remained a mirage due to deep-rooted corruption in the oil industry.

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In a related development, the NNPC GMD said that the corporation will no longer be involved in the management of the nation’s refineries after their rehabilitation.
He disclosed that upon completion of the ongoing rehabilitation exercise, NNPC will engage the services of a company would manage the plants on an Operations and Maintenance (O&M) basis.

He explained that the ultimate plan is to get private partners to invest in the refineries and get them to run on the NLNG model where the shareholders would be free to decide the fate of the refineries going forward.

(READ MORE: NNPC seeks Russian firms’ partnership to revamp oil refineries)

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Mallam Kyari stated that this model, which is totally different from previous approach, would guarantee the desired outcome for the refineries.

It could be recalled that in January this year, the Nigerian senate, resolved to probe the corporation over the sum of $396 million which was spent on turn-around maintenance of the refineries, between 2013 and 2015, without any positive result, as the country has continuously imported almost all its petroleum product needs.

Members of the upper chamber expressed their displeasure at the moribund state of these refineries in the last 15-20 years, due to lack of proper maintenance.

These refineries have hardly operated at more than 15% capacity utilization per annum.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

1 Comment

1 Comment

  1. Adebiyi, Oluseye Akano

    April 9, 2020 at 4:15 am

    Let us consider learning from the ‘illegal’ refineries dotting the Niger Delta often closed at will by security agents. Investments in existing refineries seem to have lapsed into ‘sunk’ cost and must be so recognized to enable us adopt small-unit orientation in refinery business. god bless Nigeria.

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Energy

NNPC opens bid for repairs of pipelines and depots on a finance and operate basis

The project is expected to be operated on a public-private partnership basis.

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Pipeline Vandalism: Stakeholder collaboration, critical to tame menace - Kyari, Nigeria explains when it will fully comply with OPEC+ output cut

The Nigerian National Petroleum Corporation (NNPC) declared open on Tuesday, August 11, bids by interested private investors to repair the pipelines and depots that are serving the refineries.

These pipelines, built almost 4 decades ago, are very critical in the successful movement of crude oil to the country’s 3 refinery complexes located in Port Harcourt, Kaduna and Warri, and the subsequent movement of the finished petroleum products to the consumers.

The pipelines, which according to NNPC are in dire need of comprehensive repairs, have experienced years of incessant theft and vandalism as well as ageing.

This project is expected to be operated on a public-private partnership basis as the bidders are expected to finance and execute the project, then operate for an agreed number of years before transferring back to the NNPC. In other words, the bidders for the extensive repairs of these pipelines would have to finance them independently and operate for a defined period in order to recover their investment costs with throughput tariffs.

It must be noted that this model is similar to the one that had been in place by the state oil giant for the refineries. The NNPC had also announced plans to get private investors to invest in the repair of the 3 refineries on a repair and operate basis, as they do not want to be involved in the management of these refineries.

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The NNPC Group Managing Director, Mele Kyari, had said that the ultimate plan for these refineries was to allow it to run on the LNG model, where the shareholders would be free to decide on the fate of these refineries going forward.

The refineries, which have only run sporadically, were shut down by NNPC earlier this year while awaiting repairs and upgrade. These 2 projects are expected to be handled separately according to information made available on Tuesday.

In addition, the new pipelines would need intrusion detection systems, as well as deep burial, to stop theft or vandalism. The deadline for the submission of these bids is due by September 18.

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Economy & Politics

WTO Job: Okonjo-Iweala reveals how to resolve the rift between US and China

Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China.

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WTO, Okonjo-Iweala joins South Africa's presidential economic advisory council as nation struggles with recession

As the jostle for the top job at the World Trade Organization (WTO) becomes more intense, the Nigerian candidate, Ngozi Okonjo-Iweala, has disclosed some of her plans for the institution. The former Nigerian Finance Minister recently had an exclusive interview with CNBC Africa.

Speaking during the interview, Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China, the 2 biggest economies in the world, especially as regards trade issues. She also noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.

READ MORE: Gold price up as COVID-19 cases rise, U.S-China tensions heighten 

On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

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The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

READ MORE: Dangote fertilizer plant to begin production this year

Going further on how to settle their rift, Okonjo-Iweala said, “You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’’

“It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’’

READ ALSO: FG inks $3.9 billion deal with Chinese firm for construction projects 

She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

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She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.

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Coronavirus

US hands over 200 ventilators to Nigeria

The US Ambassador to Nigeria said USAID and  Nigeria will work very closely over the next couple of weeks.

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US hands over 200 ventilators to Nigeria

The United States of America, on Tuesday, August 11th, handed over some 200 ventilators to the Federal Government of Nigeria. This was disclosed by the Federal Ministry of Health via its Twitter handle, following the handover ceremony in Abuja.

The US Ambassador to Nigeria, Ambassador Mary Beth Leonard, at the handover event, explained that the ventilators are compact & portable & can be easily mobilized to reach those patients with the most severe symptoms of COVID-19.

Speaking during the handover ceremony, the Ambassador said, “Their arrival fulfills the commitment discussed between US and President Muhammadu Buhari earlier this year. Our support includes; training on the use & maintenance of this equipment, ensuring that the ventilators can address other respiratory illnesses in the years beyond.”

According to her, the United States Agency for International Development (USAID) and  Nigeria will work very closely and energetically over the next couple of weeks, with the Presidential Taskforce on COVID-19, to bring these ventilators across each of Nigeria’s states & the Federal Capital Territory.

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“The United States has been pivotal in supporting Nigeria’s membership in the ‘Every Breath Counts’ Coalition. Nigeria is now one of 2 countries in Africa to have an “oxygen roadmap” that seeks to fight against pneumonia, hypoxemia, & now COVID-19,” she stated. She then added that as the U.S. Ambassador to Nigeria, she remains proud of the strong friendship between the two countries.

The Backstory: Last April, Nairametrics had reported when the Minister of Information, Lai Mohammed, said that “President Donald Trump assured that the United States stands in solidarity with Nigeria in this difficult time and promised to send ventilators to support the country in its fight against the pandemic.”

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