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Tag: refineries

  • December deadline: Axe dangles on unprofitable refineries

    December deadline: Axe dangles on unprofitable refineries

     The presidential mandate is for the refineries to work optimally by the end of this year. Dr. Emmanuel Ibe Kachikwu, Group Managing Director (GMD), Nigerian National Petroleum Corporation (NNPC), who has been tasked to revitalise the refineries, says any unprofitable refinery would be up for grabs next month. JOHN OFIKHENUA examines the issues at stake.

    In another 60 days, the fate of local refineries would be decided. The downstream sub-sector of the petroleum industry is counting down to the December deadline for the refineries to justify why the Federal Government should continue to invest in their Turn Around Maintenance (TAM).

    The government, through the Nigerian National Petroleum Corporation (NNPC), is sinking fortune into the reactivation of the refineries to boost domestic production of refineries before deciding what to do with fuel subsidy.  The petroleum industry is mainstay of the nation’s economy. But as part of ways to develop other sources of income, the government is considering the development mining, agriculture and other sectors to diversify the economy.

    Minister designate and the Group Managing Director (GMD) of the NNPC, Dr Emmanuel Ibe Kachikwu, told the Senate during his screening that any non-performing refinery would be shut down by December. Issues bothering on subsidy and the state of the refineries formed the planks of interaction between Kachikwu and the senate.

    Should the NNPC exhaust all maintenance options on any of the refineries without attaining optimum refining capacity, the corporation will shut it down and offer such sale, he told the senators.

    In his clarification on the durability of the refineries, he said that they have a life- span of 50 to 60 years with regular maintenance. But he told the Senate that the refineries have been denied necessary routine maintenance for 10 year, a negligence he blamed for their collapse.

    Ironically, managers of the refineries hid under the Turn Around Maintenance (TAM) programme to secure approval and release of funds from successive administrations without having anything to show for the billions of naira they got for the maintenance of the facilities.

    In the twilight of its tenure, the last administration kicked off the maintenance of the refineries. Not a few Nigerians dismissed the effort, saying the move was to score a political goal. Although the previous management gave the impression that the facilities attained 65 per cent operating capacities, Kachikwu  told President Muhammadu Buhari that the refineries cannot perform above 27 per cent production capacity. The NNPC helmsman said the “refineries are operating today at about 25, 27 per cent capacity”, stressing that “I know that there had been this whole number bandied around to the fact that we are at 65 per cent performance level; that is not true and I have advised His Excellency as such.”

    According to him, the global practice indicates that refineries have 90 per cent performing capacity. At that stage, Kachikwu told senators, the refineries are depicted as profitable. He said the four refineries – at Port Harcourt, Rivers State, Warri, Delta State and Kaduna, Kaduna State – operate below 60 per cent of their nameplate capacities.

    His words:  “If any refinery produces below 60 per cent, then it is not production. Because the performing capacities of refineries worldwide are in the 90 per cent and above categories and that is when you begin to make yields.  That is when it can be said to be a profitable refinery.”

    Having adopted a 90-day rehabilitation programme, which elapses in December, the corporation is sweating to turn around the refineries for optimum utilisation. Should the efforts failed by December, the government would be left with the privatisation option.

    Kachikwu said: “Their (refineries) performance levels were between 25 and 28 per cent. When I joined, the first thing I did was to put a clarion call to all the managers of our refineries. I said the success of your job depended on these refineries and how they work. If we can’t run them then we need to make adequate arrangement and sell them out.”

    He said the NNPC has a plan to raise production capacity of the Port Harcourt Refinery from 67 per cent to about 75 per cent by December, adding that the refinery has recorded significant level of progress in terms of performance.

    The NNPC chief has also expressed the hope that the Warri Refinery would come on stream.

    “I’ve given a 90-day programme which is working and I’m glad that over the last few weeks, Port Harcourt, for example, has come out of the albatross and is producing right now about 67 per cent capacity. Our target is to grow Port Harcourt to between 70 and 75 per cent capacity by the end of the year. Warri is beginning to signal that there is a likelihood that they will come on stream.”

    In terms of capacity, the four refineries have a combined capacity of 445,000 barrel per stream day (bpsd). The Federal Government acquired the 60,000 (bpsd) name template in 1983 from Shell Petroleum Development Company (SPDC) which established it in 1965. In 1989, it commissioned 150,000 bpsd export refinery, bringing the total installed capacity of the Port Harcourt Refinery to 210,000 bpsd.

    The Warri Refinery, the first government-owned refinery, was commissioned in 1978. It was built to process 100,000 barrels of crude oil per day but was later de-bottlenecked to process 125,000 barrels per day in 1987. The Kaduna refinery which was commissioned in 1980 has 110, 000 barrel per day installed capacity.

    The lack of transparency in the administration of Petroleum Support Fund (PSF), known in the oil sector parlance as oil subsidy has heightened the debate on the fate of the fuel subsidy regime. This, in recent time, has triggered strict monitoring of the consumption of petroleum products in the country.

    Through observation and monitoring, according to Kachikwu, the NNPC has discovered a flaw in the consumption claim. According to him, Nigeria’s daily consumption of petrol is between 25 to 30 million litres as against the 40 million-litre claims by the immediate past administration.

    However, it is obvious that if all the refineries attain optimum performance, their output would still be a far-cry from the daily requirement of the country.  So, Nigeria would still have to rely on importation to make up for the deficit. The total output of the four national refineries is about 19 million litres when they operate at installed capacity.

    In a bid to curtail sharp practices in the management of the subsidy regime and reduce the foreign exchange differential, the corporation assumed the sole importer of refined products. It has adopted the Offshore Petroleum Agreement (OPA) in the interim. Under the new arrangement, the NNPC exchanges crude oil for refined products.  Besides, it recently opened the bids from 101 oil firms that are competing to engage in the offshore processing of crude for Nigeria.

    The government has scheduled the conclusion of the bidding process for next January, if the words of the Managing Director, Pipelines & Products Marketing Company (PPPMC) Limited, Mrs. Esther Nnamdi-Ogbue, are anything to go by.

    According to her, it would be a temporary measure for fuel importation for twelve months during which the country would have boosted the domestic refining capacity through rehabilitation of existing facilities and adoption of other measures.

    “When we look at what the refineries are doing currently, we have 210 going to OPAs. The intention is that our refineries would work better and are hoping that the 210 will currently be used in the OPA arrangements. We are hoping that this arrangement comes in place in January,” Mrs. Nnamdi-Ogbue said.

     

    Why Buhari is opposed

    to subsidy removal

     

    To the President, removing fuel subsidy without first putting the palliative in place would amount to putting the cart before the horse.

    “He is opposed to the removal of oil subsidy because of the pains it would inflict on the masses. He has therefore insisted on putting necessary palliatives in place before considering oil subsidy removal,” Kachikwu said of the President, adding that without the palliative measures, “you cannot just remove subsidy.”

    “The NNPC is working to establish the actual volume of PMS the country consumes monthly and the actual amount the country spends on subsidy to determine the direction to go. If you don’t handle it with palliatives, you create problems,” he said.

    The consensus is that the debate on the propriety of retaining or removing fuel subsidy may be needless when domestic refineries meet the nation’s demand. Already, the Nigerian Labour Congress (NLC) is applauding the plans for adequate provision of petroleum products locally.

    Sharing the same view with the NLC are IPMAN and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). They all lauded the Buhari-led administration on its management of the oil and gas sector, especially its arrangement on fuel supply.

    PENGASSAN is insisting that the government should exit from fuel importation before removing subsidy. It said oil workers are not opposed to the deregulation of the downstream sector of the industry but that fuel supply must not be import-based.

    Its spokesman Emmanuel Ojugbana said: “The NNPC is trying to ensure that it rehabilitates the four refineries in the country for optimal utilisation that would reduce importation of petroleum products. This was one of the conditions that the labour leaders asked the Federal Government to meet before the sale of refineries or removal of subsidy.”

    Speaking in the same vein, NLC’s General Secretary, Dr. Peter Ozon-Esson, also described the plan and implementation of the fuel supply measures as positives steps that could boost income generation and create employment opportunities.

    Commenting on the measures that NNPC has adopted on the supply of petroleum products, he described the measures as laudable as they would attract local operators to invest in domestic refineries. He said the country would become self-sufficient in fuel supply on the long run.

    The general secretary described the current importation regime as a burden on the nation’s economy, noting that it has pushed up the demand for foreign currency, thus putting pressure on the naira.

    According to him, the success of the NNPC on its plans for the refineries, will not only translate to job creation but accelerate economic growth.

    Ozon-Esson said: “These are correct measures. If we get the domestic refineries to work, and we expand the capacity of domestic refining, by building new refineries and using incentives to make private investors to also build refineries.

    “With time, we will become self-sufficient in petroleum products so that we do not need to continue to import. The current importation of petroleum products heavily weighs down the economy. On one hand, it’ll lead to a huge demand for foreign currency, which then acts as pressure on the value of the naira.

    “But apart from that, if we refine domestically, we’ll create jobs. Because when we continue to import, we are exporting jobs-other people are doing the jobs. One, we have the raw materials that we can send abroad for other people to benefit from the process of refining.

    “We can reap those benefits and they will assist our economy to do better- to become more stable and to become more resilient.  So, these are laudable decisions of government on policy. Nigerians should rally round the government for support.”

    Dankingari said IPMAN has no grouse with the removal of subsidy in as much as the local refineries function.

    His words: “The removal of subsidy is a welcome idea but it has to be in phases. In phases in the sense that if you look now all our refineries are not functional.  Even if they are functioning, the capacity at which they are functioning is too low. And we really rely on importation.

    “So, if the Federal Government can try as much as possible within the shortest possible time and see that they put these four refineries in order, I think if it removes subsidy, it will not affect the entire citizens.”

    Going by NNPC’s disposition to work, especially its determination to ensure self-sufficiency in domestic production of petroleum products, the hopes are high Kachikwu, expected to double Minister of State for Petroleum Resources, could attain optimum utilisation of the four nation’s refineries.

    Time will also tell how far the private investors would go with plans to build modular refineries as ways to boosting domestic fuel supply.

    But promoters of fuel subsidy withdrawal should at least for now, perish the idea as President Buhari appears not to be in haste to approve such measure without accomplishing surplus in local production of products.

  • Co-location of refineries on the card

    Co-location of refineries on the card

    Besides raising the production capacities of refineries, the Nigerian National Petroleum Corporation has a plan to provide other palliatives to cushion the pains of fuel importation. The major alternative is the encouragement of investors to to build refineries within the premises of existing ones.

    Speaking with reporters in Kaduna, the corporation’s Group Managing Director (GMD), Dr. Emmanuel Ibe Kachikwu noted: “What is obtainable is that most of our refineries are close to 30 to 40 years old, we need to look at building new refineries in the same land space where they can share facilities so that you will have something to lean on when these old ones are beginning to kick out.”

    But, beyond the readiness of government’s readiness to allow investors to share facilities within existing refineries, some private firms have already bought into domestic refining business. One of such companies the Dangote Oil Refining Company, which has started the construction of a 650,000 barrel per day capacity refinery in Lagos. The company has a plan to begin by 2018.

    Also, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has secured a large expance of land to build a refinery in Koigi State.  The association, it was learnt, got an offer from a Californian firm (Kanen Refinery) to build a $70 million refinery within a year.

    According IPMAN’s Vice Chairman, Alhaji Abubakar Dankingari, the modular refinery, which was built  some 41 years ago (1974) in California where it will be dismantled, transported to Nigeria and reassembled.

    A local firm, Green Energy International Ltd, recently secured a license from the Department of Petroleum Resources (DPR) for Modular Refinery to produce diesel and other refined products.

    There were also reports that President Buhari granted approval to 65 indigenous firms in August to build modular refineries.

  • Buhari’s refineries measures in tandem with OPEC’s, says PENGASSAN

    Buhari’s refineries measures in tandem with OPEC’s, says PENGASSAN

    The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) yesterday extolled President Muhammadu Buhari’s measures on petroleum refineries, saying that they are in line with the stipulations of the Organisation of Petroleum Exporting Countries (OPEC).

    Reacting to The Nation’s request from the association to comment on the measures that the Nigerian National Petroleum Corporation (NNPC) was adopting to address fuel supply in the country, the association said it was impressed with government’s decision to revive the refineries.

    PENGASSAN said: “This is one of the conditions we gave before the downstream of the oil and gas industry can be deregulated, and we really appreciate President Buhari’s resolve to ensure that the refineries are back on stream.

    Retaining the refineries under government ownership is in tandem with OPEC’s mandate that every member country should be at the commanding height of its economy.”

    According to the Public Relations Officer, Comrade Emmanuel Ojugbana, who responded to The Nation’s questions, former President Olusegun Obasanjo’s government issued licences to private investors for green field refineries, but they refused to construct the plants for fear of government’s commitment.

    He noted that there is now a cause to believe that the President’s commitment will guarantee private investment in new refineries.

    Describing the President as an experienced regulator of the oil and gas sector, the association recalled that the President built the Port Harcourt refinery while he was the Federal Commissioner of Petroleum and Natural Resources and the first Chairman of the Board of the NNPC.

    “So, he knows the onus and we believe his decisions are right,” said the oil workers.

    PENGASSAN added: “This is a welcome development to us as a union. In fact, we had been clamouring for the establishment of more refineries before now.

    “During the former President Olusegun Obasanjo’s administration, licences were given to some investors, but unfortunately, they did not go ahead.

    “Now with the commitment of President Buhari, there is tendency that the government will guarantee enabling environment to make the investment a reality.”

    The association said that it is not opposed to deregulation of but it has always insisted that there should be a reasonable level of domestic refining capacity.

    It said: “We are not averse to deregulation, but our argument is that it must be import-driven. There should be some level of local refining of petroleum products in the country.

    “This is why we have been clamouring for encouraging investments in the establishment of refineries, especially modular refineries. This will not only increase local refining of petroleum products and stem down scarcity but also enhance job creation in the sector.

    “We also argued that it is not safe for Nigeria to sell its national assets. That is why we are against the outright sale of the refineries.

    “We therefore propose a model just like the Nigeria LNG model whereby the government will own 51% and the private investors will own 49 per cent.

    “With this model, the managements of the refineries will have some levels of administrative and financial autonomy to ensure adequate running of the refineries.”

  • BUA Group chairman praises govt on resuscitation of refineries

    BUA Group chairman praises govt on resuscitation of refineries

    Chairman of BUA Group Abdulsamad Rabiu has commended the Federal Government on the resuscitation of local refineries and reduced price of Low Pour Fuel Oil (LPFO) from N77.94 per litre to N51.38 per litre.

    Rabiu, who is also the Chairman of the Cement Company of Northern Nigeria, said the improvement in the refineries operations has led to increased supply of LPFO to its Sokoto Cement plant.

    He said CCNN, the makers of Sokoto Cement, is the only operating cement plant in the whole of North-West Nigeria and the single largest employer of labour in Sokoto state. However, the company’s effort have been slowed down over the years due to infrastructural challenges including erratic supply of fuel oil to the plant.

    “With the recent appointment of the new Group Managing Director for Nigeria National Pertroleum Corporation by the President Muhammadu Buhari-led government, we are however beginning to see the impact of improved production at the refineries.

    “Last year, CCNN spent about N7billion on fuel oil alone. However, this welcome development will bring about improved, cost-effective production and efficient capacity utilisation at Sokoto Cement which should further engender a sustainable pricing regime that will make cement more affordable in the North Western region in the medium term.”

    Rabiu further added that the moves of the current administration to ensure optimal operations at the Nation’s refineries will rejuvenate moribund industries. “For instance, access to cheaper fuels associated with increased production at the refineries is already stimulating the rejuvenation of key industries including textiles and manufacturing in the North. I believe this effect will be replicated across the nation where certain industries are dependent on the refineries as their primary sources of fuel,” Rabiu said.

    On the new line being added by BUA Group in Sokoto, Rabiu commented that at $300million, the project is currently the single largest private investment in the North West region.

    He said BUA Cement was committed to ensuring the timely completion of the project in2016 which is expected to add an additional 1.5million tonnes per annum to CCNN’s current 500,000tpa capacity as part of the group’s Cement Strategy for Nigeria. Although, the additional line will come with Coal as the primary source of fuel, LPFO will still be used as a backup fuel at the plant.”To further consolidate our position as a major player, wewill continue to pursue our mid-term cement expansion strategy vigorously and are currently exploring opportunities for further expansion especially in Nigeria” added Rabiu.

    Abdulsamad also spoke on BUA Group’s social responsibility initiatives especially in CCNN’s primary area of operation in Sokoto State in which the company has invested immensely in various health, education, capacity development, employment generation and water supply project for its surrounding communities.

    “For us at BUA group, CSR is an integral part of our business, especially in areas where we operate. We are very conscious of responsible and sustainable business practices as it relates to environmental management, responsible sourcing, working conditions, education andhealth and, we do our best to ensure we work hand-in-hand with all stakeholders within the communities,” he said.

     

     

  • Fuel subsidy: Refineries’ rebound threatens fuel importers

    Fuel subsidy: Refineries’ rebound threatens fuel importers

    DESPITE minor glitches, there is a ray of hope of boosting local refining of petroleum products with the four refineries showing  recovery signs. In this report, AKINOLA AJIBADE takes a look at the conditions of the refineries before and after their reactivation, the factors that could have led to their sudden transformation and improved power supply.

    The refineries

    •Warri Refining & Petrochemical Company Limited (WRPC)
    Installed capacity 125,000bpd Expected output 100bpd (80%)

    •Port Harcourt Refining Company 1&2 (PHRC)
    Installed capacity 210,000bpd Expected output 126 (60%)

    •Kaduna Refining & Petrochemical Company Limited (KRPC)
    Installed capacity 110,000bpd Expected output 71,000bpd (70%)

    An impressive turnaround or an interesting bounce-back may be fitting  tags  to describe the revolution at the nation’s four refineries. The four, put together, have recorded phenomenal improvement in their production capacities in recent times.

    Though the Warri Refinery has been temporarily shut down on the orders of the Nigerian National Petroleum Corporation (NNPC) for not producing enough petrol, the refineries have been showing remarkable levels of improvement.

    From below 25 per cent production capacity in the last decade to the current 60 per cent production capacity, the refineries are showing signs of recovery.

    The facilities went moribund, no thanks to years of neglect and mismanagement occasioned by lack of policy direction on the part of successive administrations. But, the good news today is that they are now functional, notwithstanding the few  glitches.

    Going by the NNPC data on refineries,  the Port Harcourt Refining Company (PHRC 2) is producing five million litres of petrol; the Warri Refining Petrochemical Company (WRPC) Limited is awaiting the completion of the rehabilitation on its Fluid Cracking Catalytic Unit (FCCU) to raise local production by 3.5 million litres.

    The Kaduna Petrochemical Refining  Company (KPRC) has resumed the production of automotive gas oil (AGO)  otherwise known as diesel, and Dual Purpose Kerosene (DPK), which can be used as both aviation fuel/Jet- A1 and household Kerosene, known in the technical parlance as (HHK).

    The data has put the Crude Utilisation Unit (CDU) and capacity utilisation in the four refineries at 60.40 per cent.

    Underscoring the utilisation capacity, the PHRC is set to ramp up its operation to about 60 per cent of its 210,000 barrels per day (name plate or initial capacity) and the WRPC will be hitting 80 per cent of its installed 125,000 barrels per day capacity. The development, according to the NNPC, is despite the fact that the Fluid Cracking Catalyic Units (FCCUs) have not been re-streamed.

    The Corporation said: “The Port Harcourt and Warri refineries have been successfully re-streamed after a nine-month  rehabilitation was carried out by its in-house engineers and technicians.”

    Enough evidences abound that the four refineries, which were built with initial capacity of 445,000 barrels of crude oil per day, will soon return to name plate capacity after undergoing  completion repairs in a couple of months.

    The refineries cannot meet the daily consumption requirement of between 40 to 42 million litres of fuel per day yet but their production records had not only beaten the predictions of those who concluded that the plants would never run again in the light of the myriads of problems bedeviling them. Already, industry observers are singing a diffrent tune.

     

    The magic wand

     

    Like others in the past, the sudden recovery of the refineries has raised several questions in the industry. How did it happen? What was the formula used? How did the management revive the refineries within a short time? Were saboteurs actually frustrating the endless Turn Around Maintenance (TAM) that never revived the refineries? How did the Federal Government danced around the problem?

    Successive administrations have sunk billions of the tax payers’ money into the TAM in the last two decades, but the refineries refused to work, forcing the Federal Government to rely on the importation of refined products to meet domestic demand. The importation brought about the involvement of members of the Major Oil Marketers’ Association of Nigeria (MOMAN) in the controversial money-guzzling subsidy regime.

    In 2002, the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, approached the   Senate Committee on Petroleum (Downstream) with a Federal Government proposal to spend N251 billion (about one billion British pound sterling) to fix the four refineries. Scheduled for the TAM were the refineries in Kaduna, Port Harcourt and Warri in Kaduna, Rivers and Delta states.

    Besides, the huge vote for the TAM, more than $10 billion was said to have been spent money in the last decade on routine maintenance.

    Despite the TAM, the Federal Government continue to subsidise the importation of products to meet growing local needs.

    The subsidy payments, being made to fuel importers, has not only grown overtime, but has eaten deep into the coffers of the government, whose resources has dwindled due the tumbling prices of crude oil at the international market.

    It (subsidy payment) has risen to N1.9 trillion from N300 billion per annum. The scaring figure has not only caused frictions between the Federal Government and MOMAN members but pitted the importers against government.

    The parties are sharply divided over the actual outstanding subsidy payments, a development that has attracted calls on the government to discontinue with the arrangement.

    Of lately, the public and private sector’ operators have been trading blames on the actual cost of subsidising fuel imports into the country. The parties could not agree on the way forward.

    Amid the lingering disagreement,  the unexpected has happened. The refineries are gradually coming back to life. And ever since the refineries began production, not a few Nigerians, especially, stakeholders in the petroleum industry, have been expressing mixed feelings on the issue.

    Some take the gradual return of the refineries to optimum capacity as a new dawn in the troubled industry. Others see it as a step in the right direction for the country that has over the years, relied on importation to meet domestic demands.

     

    No longer business as usual

     

    They all agreed that the refineries have been going through positive re-engineering processes, which will on the long-run, affect the downstream segment of the petroleum industry

    NNPC’s Group Managing Director (GMD), Dr. Emmanuel Ibe Kachikwu, pinned the sudden revival of the refineries to the re-engineering activities put in place by the government.

    He said the issue of re-engineering of the refineries was embedded in the reforms initiated by the President Muhammadu Buhari administration to foster growth in the industry.

    Kachikwu restated the Corporation’s commitment to carry out the reforms to the letter and boost domestic production.

    Speaking at a forum in Lagos, the GMD said the refineries have been re-streamed to increase fuel production and further meet growing demands.

    He, however, said that the refineries are yet to attain optimal capacity, despite efforts to re-stream them.

    According to him, some worn-out components have been changed and the critical units that require intervention, have been fixed in clear demonstration of government’s commitment to make the refineries work optimally.

    President of the local chapter of the International Association of Energy Economics (IAEA) in Nigeria, Prof Wunmi Iledare, agreed with Kachikwu’s views. He said the commitment of the government to local production accounted for  the reactivation of the refineries.

    Iledare believes a good leadership will stimulate the socio-economic development of the country, pointing out that things have started taking shape in the downstream segment of the oil and gas industry, especially the refineries immediately President Muhammad Buhari assumed office on May 29.

    Leadership and vision, he noted, are inseparable ingredients in any economy and that the two must co-habit to promote growth.

    He described as shocking that the refineries on which successive administrations spent fortunes without result, have all started working within three months under the new government.

    His words: “Is the improvement in the production capacity of the refineries a fall out of maintenance activities carried out years ago? No. The growth that is being witnessed in the operation of the refineries is the result of re-engineering activities, embarked upon by the NNPC months ago. The refineries are not just working; they are working because the government took the right steps to fix the problems plaguing their operations.’’

    Iledare, who is a Professor Emeritus at the Centre for Energy Studies, University of Louisiana, United States (U.S.), said the perception of the leader, especially in the oil and gas industry, cannot but play vital roles in achieving the desired results.

    “The public perception of President Buhari’ s government is strong, and everybody is sitting up in order not to incur the wrath of the government”, the professor said.

    Iledare noted that the government has embarked on total cleansing of the ‘Nigerian System’ and the result is evident in the operation of the refineries now.

    He said the refineries are working because the right processes and methodologies were adopted to fix their problems, adding the refineries will return to optimal capacity with the sustenance of the ongoing efforts.

    Also speaking, the Managing Director/Chairman, Mobil Nigeria Plc, Mr. Tunji Oyebanji, said the refineries are coming up amid assurances by the Federal Government to pay the subsidy arrears owed to oil marketers.

    He welcomed the resuscitation of the refineries as timely in view of the perennial fuel shortage and the pressure on the government to embark on full deregulation of the petroleum industry.

    The Mobil oil chief, however, cautioned Nigerians against expecting the refineries to resume full production capacity immediately.

    He said the process of making the refineries to deliver 100 per cent output could not be that simple, because a lot of rehabilitation must be done to achieve such feat.

    Also, the Chief Executive officer, Starways Energy Limited, Oliver Mordi, said there must be more to the sudden recovery of the refineries, noting that previous administrations had tried, without success, to revive them.

    He suggested that a probe should be instituted by the government to unravel the reasons for the poor production output of the refineries in the past.

    According to him, sources within the refineries, claimed local engineers and technicians were used to put the refineries in order.

    Mordi said: “In times past, the NNPC has been engaging Original Equipment Manufacturers (OEM) to carry out major repair of the refineries. The manufacturers, based in the developed economies such as Europe and the U.S. have strong pedigrees in the area of building and installing refineries.

    “Yet, they were unable to fix our refineries. Recently, the manufacturers refused to come to Nigerian, on account of security challenges. As a result of this, the management of the refineries decided to use their workers to re-stream the refineries. ‘’ He said that from all indications, some saboteurs operated within the system to frustrate government efforts.

    Recalling his relationship with the Kaduna refinery, from where he was lifting oil a couple of years back, Mordi said tanker owners contended with loading problems in the KRPC due to certain problems.

    He said the refinery had battled with problems relating to loading and capacity, following allegations that workers have tampered with its operations.

    Mordi, now an energy consultant, said the issue often culminated in long queue at the Kaduna refinery by marketers who patronised the facility for  petroleum products.

    He said marketers were forced to lobbying in such situations to get their quota, adding that the problem is not limited to KRPC.

    Mordi said it was an open-secret that workers were being tipped before they attend to marketers, stressing that such sharp practices may have been shielded from the management.

    He said: “In the course of transacting business with some of the refineries few years ago, I discovered that the corrupt tendencies of workers were high. Cases abound where money exchanged hands between some key employees of the refineries and companies that came to load fuel before they render certain services.

    “Sources within the refineries said something was wrong with the human aspect of the refineries; that aspect might have changed in view of the successes recorded in recent times.”

    Local oil production boosts power supply

    Apart from the milestone recorded in the industry with the gradual return of the refineries to installed capacity, the country is also savouring steady electricity supply.

    Regarded as an albatross that the government and Nigerians have been contending with, the power sector has recorded an improvement.

    With electricity generation increased from 4,515 to 4,545 megawatts (MW) as announced by the Transmission Company of Nigeria (TCN), the country may be set to enjoy uninterrupted supply.

    The Nation discovered that the relative stability being witnessed in power supply could be traced to lack of distruption in the electricity value chain, including regular gas supply, reduced vandalism and upgrade of generation facilities by the new investors.

    Residents of Agbara, Amukoko, Ojo, Sango-Ota, Ikotun, Igando, Olodi Apapa, Isolo, Ajegunle and Ikeja areas, all in Lagos and Ogun states, have being enjoying improved electricity supply.

    Other areas are: the Federal Capital Territory (FCT), Abuja, Akure, Benin, Niger, Port Harcourt and Markurdi.  Residents in the listed communities now enjoy electricity for between four and five hours daily.

    The situation, a marked departure from what obtained in the past, has brought succour to many Nigerians, especially business owners, who look forward to further steady electricity generation and supply.

    Dr Sam Amadi, the Chief Executive Officer (CEO), Nigerian Electricity Regulatory Commission (NERC), said improvement in gas supply and relative stability in power supply across the country, was due to the anti-corruption disposition of the President.

    He said Mr. President has since assuming office on May 29, instilled  discipline that has put every public official on his/her toes,leaving everybody with no option, but to key into the new order.

    Amadi noted that the President has not left anybody in doubt that he has zero tolerance for corruption.

    According to him, investors in the power sector have been told to sit up or shape out, a development he said, was responsible for the supply of gas to the various thermal plants across the land.

    “The bottom line is that there’s a gas supply improvement in the system and partly also because of the zero tolerance for corruption by the present government, people are now sitting up,’’ Amadi said.

    Managing Director, Ikeja Electric (IE), Mr Abiodun Ajifowobaje, said the involvement of private investors in the management of Power Holding Company of Nigeria (PHCN) Plc. assets has boosted electricity generation.

    According to him, the private managers have introduced measures to improve electricity generation and distribution.

    He said Ikeja has moved from a little over 300MW of electricity to 500MW megawatts within a short time.

    According to him, the Distribution Companies (DISCOs) have been coming up with an initiative known as ‘’ Embedded Generation’’ through which a particular area will be designated and given to willing investors, who they will negotiate with to build power plants and sell to people within the locality at a cometitive price, relatively higher than what consumers pay the distribution firm operating in their domain.

    He said the initiative, when properly implemented, will boost electricity supply.

    Spokesman for the Eko Electricity Distribution Company, Mr Godwin Ihemudia, attributed the improvement to the boost in power generation.

    The Group Managing Director, Aiteo Power, Dr. Ramson Owen, also corroborated the position, saying the Buhari administration has recorded some feats in the power and petroleum sector.

    He, however, said that the sustenance of the achievements should be of primary concern to Nigerians.

    But the question begging for answers are: Can Nigeria sustain the progress recorded in the areas of improvement in output of refineries and power supply, taking into consideration the perennial gas supply problems?

     

  • NNPC deploys drones to monitor movement of oil vessels

    NNPC deploys drones to monitor movement of oil vessels

    Fresh vista to the fight against the perennial problem of oil theft and pipeline vandalism appeared on the horizon Tuesday with the disclosure by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu that the Corporation is working towards the deployment of drones across the nation’s territorial waters to monitor the inwards and outwards movement of oil bearing vessels.

    In a presentation at the special conference on Security in the Gulf of Guinea organized by the Gusau Institute, Dr. Kachikwu stated that the Corporation is working on a range of far reaching options designed to end the ugly episodes of crude and petroleum products theft within the next eight months.

    The press statement of the corporation’s Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe quoted the helmsman as saying: “We are launching an armada of approaches which will include incorporation of drones to check movements of vessels within our territorial waters; We are looking at the current logistical nightmares of changing staffing at the loading bay of crude oil export terminals virtually every 90 days, We are trying to equip the navy sufficiently though they are very well equipped in terms of skill set but not in terms of arsenal for patrols within the maritime area.”

    On the issue of pipeline protection, the GMD explained that though the Corporation is working assiduously with the law enforcement agencies to increase the presence of military personnel in the area, the ultimate security for the critical oil and gas assets lies squarely with the host communities.

    “The best security for these pipelines lies with the communities. We are trying to create enough incentives for them to see these pipelines as their own,’’ he said

    Lamenting the impact of oil theft on the smooth operations of the nation’s refineries, the NNPC GMD warned that if left unchecked, the menace could invariably make it impossible for the NNPC to operate the refineries.

    “Most of our product pipelines are ruptured and attacked frequently. For instance between June 2014 and June 2015, we recorded about 3, 500 to 4,000 attempts at the various products pipelines across the country. In addition to that, the pipelines that are supposed to convey crude to the refineries are perpetually hacked, ’’ he added.

    Dr. Kachikwu noted that the resort to the use of marine vessels to convey crude to the refineries is coming at heavy cost.

    “What this means is that no matter what we do with the refineries today, unless that is solved, we really are going nowhere, we cannot operate the refineries.”

  • NNPC, agency in talks on delivery of crude to refineries

    NNPC, agency in talks on delivery of crude to refineries

    The National Inland Waterways Authority ( NIWA) has initiated discussion with the Nigeria National Petroleum Corporation ( NNPC ) on how to deliver crude to the refineries through the waterways.

    The Acting Managing Director of NIWA, Mr Danaladi Ibrahim, told reporters in Lokoja yesterday that formal discussions with the management of the NNPC on the proposal would begin this week.

    Danaladi said NIWA was encouraged to initiate the proposal following the decision to stop the delivery of crude by trucks to the refineries in Port Harcourt, Kaduna and Warri.

    He said the NIWA could deliver crude through barges to the refineries, describing the option as cheaper, safe and environment-friendly.

    Ibrahim said NIWA also had the capacity to deliver refined products through inland waterways to all states, except Katsina and Kano.

    He said the organisation had procured enough tugboats to drive the barges, which were of varying capacities from 300 to 800 tonnes.

    The NIWA chief said the organisation had also procured 17 gunboats to guarantee the security of the facilities and personnel involved in the operation.

    Ibrahim hoped the proposal would be considered by the NNPC, saying the organisation had taken steps to protect the banks of River Niger.

    This is to prevent the dredged channel which was undertaken at a cost of N36 billion from being blocked.

    The NIWA chief said the country would reap the benefits of the dredging, saying more companies were ready to use barges to move their products.

    Ibrahim suggested the establishment of an inland waterways trust fund.

    He said the fund would make it compulsory for stakeholders in the maritime sector to pay a certain percentage of their earnings for the development of inland waterways infrastructure.

    Ibrahim said his vision was to unlock the potential of the sector in line with efforts of the government to diversify the economy.

    “Our prayer is that the Federal Government should muster the necessary political will to finance it while we provide adequate manpower,” he said.

    He also spoke of plans to maintain waterways and develop the waterfront in Lagos, Port Harcourt, Asaba and Warri through a public-private partnership arrangement.

  • NNPC vows to run refineries profitably

    NNPC vows to run refineries profitably

    The Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Kachikwu has noted that his administration would ensure that all the refineries of the Corporation are run efficiently and profitably to meet the energy needs of the country.

    He said the Corporate Service Unit and all the Strategic Business Units of the Corporation would henceforth be run as profit centers while noting that the days when the Corporation was perceived as a civil service organization instead of a Corporation were over.

    The GMD urged members of staff to act as change agents and assured that in the next sixty days some of the strategic targets would be translated into concrete milestones to the appreciation of all Nigerians.

    Kachikwu made this plea during the maiden interactive session with the top management of the Corporation at the NNPC Towers Abuja, according to the statement of the Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe yesterday.

    In furtherance of his commitment to transform the Nigerian National Petroleum Corporation (NNPC) into an efficient and profit-oriented Organization, the Group Managing Director of the Corporation, Dr. Ibe Kachikwu has implored the management to team up with him to close the skills gap and turn the fortunes of the Corporation around.

    The GMD said efforts are in top gear to create a conducive working environment for members of staff, adding that for the NNPC to transform into a profit center like its peers in other climes, the morale of the work force must be high.

    Dr. Ibe urged the management to provide leadership by example to the workforce while adding that sectionalism, tribalism and any form of non-transparent transactions must be completely stamped out of the NNPC.

  • NNPC targets 90% output from refineries

    NNPC targets 90% output from refineries

    With the ongoing rehabilitation of the refineries, the Nigerian National Petroleum Corporation (NNPC) said it expects to step up their refining output to 90 per cent of the installed capacities on the completion of the repairs.

    NNPC’s General Manager Services, Abubakar Muhammed stated this at the ongoing four days and 38th edition of the International conference and exhibitions of the Society of Petroleum Engineers (SPE)  in Lagos, themed “Natural Gas Development and Exploitation in an Emerging Economy: Strategies, Infrastructure and Policy Framework.” He said the nation’s four refineries would be operating at 90 per cent capacity after the completion of the ongoing turn around maintenance (TAM).

    Muhammed said out of the 90 per cent production capacity, about 40 per cent would be premium motor spirit (petrol) adding that additional refineries would be expected in the long and short term to increase the country’s refining capacity and domestic consumption. He said the Federal Government was committed to the refinery project, gas development and revival of gas infrastructure.

    According to him, the nation is expectant of the passage of the Petroleum Industry Bill (PIB) that would define the future of the country’s oil, gas production and power generation. “The PIB has been in the pipeline for 15 years. We are hopeful that the present legislature will address the bill,” he said.

    He stated that crude oil theft has been a major challenge in the country, adding that the criminal act has impacted on the average sale of government’s equity crude putting the cost to NNPC/joint venture at an average of about $600 million per month. This  comes at a time when the cash call budget has remained unattainable in the last few years, he added.

    “Management of funding is our most immediate challenge and innovative financing approach is currently being developed to address the issue. Another challenge is the development of shale oil in Nigeria’s largest market, United States; this has forced Nigeria to look for alternative market in Asia. Despite these challenges we are focusing on strategic realignment of our crude oil exports to sustainable markets,” he said.

    Muhammed said crude theft and pipeline vandalism has impacted on oil production in the last four years (2010 to 2014) from 2.4 million barrels per day in 2010 to about two million barrels per day in 2014. He noted that significant production interruption is now a regular feature in Nigeria’s production profile, adding that an average of 250,000 bpd was deferred.

    “At a price of $100 per barrel, this amounts to a loss of about $9.1 billion yearly. Crude theft from January to April 2015 stood at 39.3 million barrels or $3.9 billion at an average price of $97.9 per barrels. The solution lies with setting up of a critical infrastructure task force with accountability measures, and with a continuation of enlightenment, empowerment and enforcement of anti-sabotage laws. In a bid to address the current sub-optimal performance of domestic refineries, a new rehabilitation strategy has been adopted,” he added.

    The Managing Director, Total Exploration and Production Nigeria Limited, Elizabeth Proust said Nigeria has very tremendous gas reserve, adding that about 46 trillion standard cubic feet (tcf) of the reported 179 tcf of discovered gas, is currently developed or under-developed.

    Represented by the Deputy General Manager, Mr. Ahmadu Kida, Proust said that a joint effort by all stakeholders is needed to unlock the remaining 133 tcf of gas so that we can power the industry and boost the economy. According to her, more than 1,400 megawatts of Nigeria’s total power generation is fuelled by diesel, which costs three times the current domestic gas price.

    The Managing Director Seplat Petroleum Development Company Plc, Mr. Austin Avuru stressed the need for the nation to optimally harness its huge gas resources to meet the national aspirations. According to him, Nigeria needs to start looking for more gas, dwell on full gas utilisation and undertake reserve audits. He said for the country to generate 32 gigawatts of electricity, it would require 7.3 billion standard cubic feet (bscf) of gas. He said it was time for the country to start looking for more gas for domestic and commercial values. He said the country needs more reserves of gas and crude oil.

    The Chairman of SPE Nigeria Council Mr. Emeka Ene said that oil and gas plays important role in the economy of the country. He assured that all contributions of stakeholders at the conference would be submitted to the Federal Government for assessment.

  • Refineries: How price regulation, PIB clip investors’ wings

    Refineries: How price regulation, PIB clip investors’ wings

    The Federal Government’s regulation of the downstream sector of the oil & gas industry and non-passage of the Petroleum Industry Bill (PIB) are scaring investors from grabbing the mouth-watering incentives introduced to attract investment in modular refineries. Assistant Editor CHIKODI OKEREOCHA reports that the battle for deregulation, which is now gathering momentum, will encourage investors to build refineries and sell products at competitive market prices.

    If assurances from the Nigerian National Petroleum Corporation (NNPC) are anything to go by, the Port Harcourt refinery will resume operation next month. The Corporation, through its former Group Managing Director (GMD), Joseph Dawha, said the four refineries will operate up to 80 per cent of their installed capacities, translating to five million litres of petrol per day.

    Based on the revised Turn Around Maintenance (TAM) strategy for the refineries, Dahwa also said that Warri and Kaduna refineries will be revamped and become operational within the next 18 months.

    With all plants producing at nameplate capacities, a significant improvement is expected on domestic refining and a drastic reduction  on importation of refined products.

    But, if Dahwa felt his assurances would gladden the hearts of Nigerians and restore their confidence in NNPC’s  management of the nation’s oil and gas resources, particularly the refineries, he got it all wrong.

    President Muhammadu Buhari, who has not hidden his administration’s resolve to beam a searchlight on the operations of the NNPC, sacked  the corporation’s 10-member board last weekend.

    The NNPC has been under attacks  over perceived sharp practices in the running of refineries and the management of revenues from crude oil sales and swaps.

    Not a few Nigerians, including industry operators, experts and stakeholders, saw the NNPC’s sudden assurances as medicine after death. And they have every reason for such skepticism.

    For instance, none of the four state-owned refineries has witnessed significant improvement in capacity utilisation despite the several billions of the tax payers’ money spent on yearly Turn Around Maintenance (TAM).

    Even, the five million litres daily production expected from the Port Harcourt refinery from next month, will be a drop in the ocean. On the average, Nigerians consume about 40 million litres of petrol daily. So, if all the four refineries – Port Harcourt (two), Kaduna and Warri- produce 80 per cent of their nameplate capacities, it will translate to five million litres from each of the refineries. All four will produce 15 million litres, leaving a shortfall of 25 million litres and a far-cry for local consumption demands.

    Impliedly, the much-needed succour may not come for Nigerians, who have been battling with acute fuel shortage since the beginning of the year. Yet, the problem is not limited to petrol alone. In all, the two refineries in Port Harcourt have a combined refining capacity of 210,000 barrels per day (bpd). The other two in Kaduna and Warri have installed capacities of 110,000 bpd and 125,000 bpd respectively.

    All added, the four refineries have a refining capacity of 445,000 bpd. But the Organisation of Petroleum Exporting Countries (OPEC) says that Nigeria has capacity to produce 30,400 barrels per of gasoline, 15,800 bpd of kerosene, 18,400 bpd of distillates and 20,700 bpd of residuals.

    The oil cartel put the country’s output of petroleum products by country at 89,000 bpd, which is a far-cry from 445,000 bpd.

    Experts blame the embarrassing scenario on mismanagement of the refineries.

     

    Modular refineries to the rescue

    The stakeholders and the authorities in the oil and gas industry have proposed the establishment of modular refineries as the quickest way to halt declining efficiency and productivity of the existing refineries. They believe such facilities will   boost local refining capacity.

    Modular refineries are crude processing facilities with narrow product line, limited to kerosene, diesel and low pour fuel oil (LFPO) with a production capacity of between one to 30,000 barrels per day or bigger. They have a completion period of between 18 – 24 months.

    Promoters of modular refineries believe the option will address the recurrent and embarrassing fuel scarcity within a short time and at rock-bottom costs.

    Looking at it from the investment angle, experts agree that investing  in, and construction of refineries is capital intensive, and that mini/modular refineries are cheaper and easier to build.

    According to the Department of Petroleum Resources (DPR), Nigeria’s oil and gas industry regulator, an investor requires between $1 million to $15 million to build a modular refinery.

    Stakeholders identified flexibility as another attraction as investors can build refineries that are relatively inexpensive, in multiple locations as and where demand is required.

    Besides, modular units can be expanded, thereby providing a cost-efficient and highly flexible means of delivering ‘on the spot’ refining capacity, either to remote geographical locations, or to regions requiring the benefits of locally processed oil products to meet increasing operational and local demand.

    This was what the 20, 000bpd modular refinery in Rivers State, Southsouth set out to achieve. The project, with an initial cost of $480 million and a 12-month completion period, is to be handled by an international consortium comprising the National Standard Finance of the United States (U.S.) and Omega-Butler Refineries of the United Kingdom (UK).

    Apart from producing petrol, diesel and gas, it will also produce bitumen. The Rivers State government will provide 40 hectares of land for the project, that has a capacity to generate 1,500 jobs.

     

    Experts speak

    The job creation potential of modular refineries is not lost on the Joint Task Force (JTF) Commander, Maj-Gen Emmanuel Atewe, who believes that modular refinery will improve fuel supply, create jobs and grow the economy.

    Gen. Atewe told The Nation that if modular refineries were working, scarcity and distribution glitches would become a thing of the past.

    He said: “I think the country needs modular refineries to refine crude oil. By this, I mean refineries with smaller capacities. When we have modular refineries, they will help in refining thousands of barrels of crude oil and the economy will be better for it. Besides reducing the perennial fuel scarcity, it will also provide jobs for people.”

    According to the JTF Commander, with gainful employment for the restive Diger Delta youths,  they will no longer engage in pipeline vandalism and oil theft.

    “Even, if they are going to commit such crimes, the rate at which they do so would not be high. Job creation is one way of reducing restiveness in the Niger Delta. I’m advising stakeholders to come together and see how they can build modular refineries and further provide multiplier effects on the economy,” he said.

    The Registrar/Chief Executive Officer, Institute of Business Development (IBD), Mr. Paul Ikele, was on the same page with the JTF chief. He described modular refineries as a sustainable option that will boost products supply across the country and also resolve the subsidy controversy.

    He said the granting of franchise to investors to build and operate modular refineries with newer technologies, will end the raging controversy over whether or not to remove subsidy.

    “If petroleum products are available to Nigerians on sustainable basis, the issue of payment of subsidy would not arise,” the IBD manager said. He pointed out that the technologies used in building the existing refineries were obsolete and demanding so much in maintenance.

    He said the country cannot cope with such huge resources on TAM in the face of the prevailing global economic downturn, occasioned by  tumbling oil prices.

    “Let’s look at modular or mini-refineries with newer technologies that can assist existing refineries whose maintenance demand so much due to obsolete technology,” he recommended.

     

    Government’s take

    The government has not lost sight of the benefits of modular refineries. At a recent conference on Health, Safety and Environment (HSE), organised by the DPR, the former Petroleum Resources Minister, Mrs. Dizeani Alison-Madueke, gave a hint of a plan to scrutinise and franchise aspiring operators to install and operate modular refineries.

    She said the government believed the short project cycle, low cost and flexibility for the establishment  of modular refineries will stimulate investors’ interest in local oil production and minimise oil theft and operation of artisanal (illegal) refineries.

     

    The minister further stated that to ensure the success of the initiative, several financial institutions had been approached to assist operators in the funding of the initiative, adding that the regulatory agency will soon roll out the details of the programme.

    At a one-day sensitisation programme, organised in Lagos, for the sstablishment of modular refineries, the DPR Deputy Director in charge of Technology and Standards, Mr. Alfred Ohiani, echoed Mrs. Alison-Madueke that the government has decided to once again encourage the establishment of modular refineries.

    He said investment in modular refineries, whose timeline and cost is limited, holds a better chance of achievement more quickly than the conventional refineries.

    Pointing out that the DPR will fast-track the process for investors in modular refineries, Ohiani added that the regulatory agency has slashed the licensing fee from $1 million to $500, 000 to further sway investors’ interest.

    Apart from reducing the fee, the government is also dangling other incentives such as reliable, sustainable and cheap sources of crude oil feedstock for the refineries and freedom to locate plants at numerous tax free zones across the country.

    Investors are also to enjoy the liberty of exploring regional and international markets.

     

    Price regulation, PIB as clogs

    With such mouth-watering incentives, investors should be falling over themselves to establish modular refineries. But that has not been the case. Rather, most investors have adopted a ‘wait-and-see-attitude’.

    The Nation learnt that government’s regulation of petroleum products’ prices and the delay in the passage of the controversial Petroleum Industry Bill (PIB) are two critical issues clipping investors’ wings.

    An economist, Mr. Henry Boyo, captured investor’s frustrations when he said there is uniformity in the price of crude oil produced in Nigeria, Saudi Arabia, and America, or elsewhere and that most investors are afraid of being asked by the Nigerian government to sell below production cost.

    Boyo said: “The process of producing crude oil or refined products is the same everywhere in the world; it is the same equipment. So, if you put in the same feed stock, what you will get at the end will be the same price.

    “At that level of business, investors have to go and borrow money. If they borrow money to set up refineries here in Nigeria and they produce and the output from their refineries is priced all over the world at X dollars per litre, that price is uniform because crude oil is the same price all over the world.”

    Boyo, who identified labour as the only thing that might change, Boyo said those who have either gotten licenses for refineries, or ready to do so, are worried that repaying loans may become herculean when compelled to accommodate subsidy   after borrowing to set up refineries.

    According to him, the existence of local refineries is not the issue, the price at which the products will be sold is critical, as this will determine how fast the investor recoups his money.

    Noting that although, the government, through the NNPC has pumped in so much money, enough to build new refineries, on TAM, the issue at stake is at what price will the products sell?

    The economist insisted that the issue is not whether or not to sell the refineries, but pricing.

    “Investors cannot produce and sell to marketers below the production cost. In no time, they will pack their loads and go,” he said, adding that once the pricing is right, those who got licenses for refineries will begin operation.

    He, however, was quick to point out that the naira-dollar mechanism will influence pricing.

    In 2002, the Federal Government, through the DPR, franchised 18 investors (local and foreign) to establish refineries.

    But, 13 years down the line, only the Niger Delta Petroleum Resources is in the process of activating the license. The remaining firms have been watching the investment environment to make informed decisions.

    Although, investors continue to hold back because of stringent guidelines, corruption and a harsh business climate, inadequate project funding, among others, Boyo said  government’s regulation of the downstream sector remains the greatest reason behind the investors’ cold feet.

    He said this was what informed the decision of President of Dangote Group, Alhaji AlikoDangote that after borrowing to provide a world-class refinery, he will not sell at a price below his production cost.

    Dangote, Africa’s richest man is currently investing $9 billion in aworld-class refinery in the Lekki area of Lagos, Nigeria’s commercial capital.

    According to the master plan, Dangote Group wanted to build a 450,000 bpd-capacity refinery, it has since increased the capacity to 650, 000 bpd.

    Analysts in the industry say despite Nigeria having the largest petroleum refinery in the world, Messrs Dangote will sell products at international prices.

     

    PIB also a spoiler

    Beyond pricing, the failure of the Sixth and Seventh National Assembly to pass the PIB into law has also not helped investors. The non-passage of the bill has made the commercial framework unclear to banks that will offer loans to investors.

    The PIB was designed to reform the entire hydrocarbon sector to increase the government’s share of revenue; increase natural gas production; streamline the decision making process by dividing up the different roles of the NNPC into a profit-driven company; privatise its downstream activities; and promote local content.

    The PIB will also provide for greater share of oil revenues to the producing communities and expand the use of natural gas for domestic electricity generation.

    For as long as the bill remained in the works, Nigerians cannot reap the fruits of the benefits.

    The bill has since become a subject of intense politicking at the National Assembly, which has different versions, especially around the more contentious contents such as the renegotiation of contracts with the International Oil Companies (IOCs), the changes in tax and royalty  structures and clauses to ensure that companies use or lose their assets.

    Experts argue that if the PIB, which they described as the roadmap for the opening up of the industry for increased investments had been passed, it would have comprehensively addressed the persistent fear of investors in building refineries, settled the issue of deregulation, as well as uncertainty concerning regular supply of crude oil at reasonable prices.

    Rivers State chapter Chairman of the Trade Union Congress of Nigeria (TUC), Comrade Chika Onuegbu, recently warned government and politicians to stop playing politics with the passage of the PIB.

    According to him, the non-passage of the document has blocked foreign investment in the sector that accounts for over 90 per cent of the nation’s foreign exchange earnings.

    Onuegbu, who made the declaration at a media chat with reporters in Lagos, noted that investors have continued to adopt a wait-and-see game, refraining from making any new investment pending the passage of the PIB.

    He said no Final Investment Decision (FID) has been taken on any oil and gas project in the country, not even on the government-promoted, Brass Liquefied National Gas (LNG) project since the introduction of the PIB as an Executive Bill in 2008  by the administration of  the late President Umaru Musa Yar’Adua.

    Onuegbu said: “It is worrisome that while we are dithering in Nigeria, there are new oil discoveries all over Africa, drawing in investors just as new technology is making hitherto unreachable and uneconomic hydrocarbon deposits accessible in Europe and North America, thus attracting investors to those environments.

    “We believe that the PIB represents a great opportunity for Nigeria to ensure a solid foundation on which the future of oil and gas operations in the country will rest. Also, that the petroleum resources which Nigeria have been endowed, work for and benefit the Nigerian people.”

    The delayed passage of the PIB is also believed to be responsible for the non-take-off of the three new green refineries with a total capacity of one million barrels in three states. The $23 billion (N3.7 trillion) project remained in the pipeline five years after it was conceived.

    On May 13, 2010, the Federal Government signed an agreement with the China State Construction Engineering Corporation (CSCEC) for the establishment of Greenfield Refineries in Lagos, Bayelsa and Kogi states at the cost of $23 billion (about N3.7 trillion) with a five-year completion period.

    Under the terms of the agreement, 80 per cent of the project cost was to be funded with a loan provided by CSCEC and a consortium of Chinese banks, led by the Industrial Commercial Bank of China (ICBC).  The NNPC was to provide 20 per cent of the funding as Nigeria’s equity stake.

    But five years after, the project is yet to see the light of the day, prompting legislative investigation last year by the House of Representatives Committee on Petroleum (Downstream).

     

    Calls for deregulation gather steam

    President, Lagos Chamber of Commerce and Industry (LCCI), Mr. Remi Bello, called for the deregulation of the downstream sector of the oil and gas sector as a way of out of the myriads of problems in the industry. He noted that a deregulated downstream will end scarcity of petroleum products, halt corruption in the subsidy regime, resuscitate the collapsed refineries, boost investments and create jobs.

    Insisting that the current regime of subsidy and government’s direct involvement in the operations of oil and gas sector should be discontinued, the LCCI chief said government’s management of the sector has done a colossal damage to the economy.

    “It is in the overall interest of the economy and the citizens that government should quickly deregulate the sector,” Bello said, urging labour unions and Nigerians to give the reform a chance.

    He was not alone. The Nigeria Employers’ Consultative Association (NECA) is also rooting for deregulation. It’s Director-General Segun Oshinowo argued that the the N10 reduction in the pump price of a litter of petrol by the government begged the more fundamental issue of appropriate policy framework that will promote investment in the sector and put a stop to the embarrassing and shameful practice of importation of products.

    Oshinowo said: “Our expectation therefore, is that government would seize the opportunity of the current decline in the price of crude oil to commence implementation of the policy on deregulation.

    “This is a unique timing the government cannot afford to miss as full implementation of deregulation, which in time past had led to price increase and reaction by the labour movement in form of industrial action, does not have any negative effect on the masses.”

    The NECA director further said that rather than the reduction from N97 to N87, there ought to be a far more holistic announcement of a new policy thrust of deregulation of the downstream sector and privatisation of the four refineries.

    According to him, the economy stands to gain a lot from the deregulation of the oil sector.

     

     

    Oil marketers’ position

    Oil marketers, under the aegis of Major Oil Marketers Association of Nigeria (MOMAN), argues that deregulation will bring in investments into the sector and encourage the establishment of private refineries.

    Its Executive Secretary Obafemi Olawore said the government should summon the courage to fully deregulate and remove subsidy, or embark on continuous subsidy regime payment as at when due.

    Olawore said: “If the government likes, they can introduce gradual removal of subsidy. But, it should not go beyond six to 18 months period.”

    He added that if fully deregulated with rules, the country will have serious investors coming in to invest adequately.

    He insisted that deregulation is the answer and that the government must educate the people to make them understand the advantages.

    Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, urged the government to muster the political will to push through the deregulation policy.

    “The government has no business in business. Deregulation is an idea whose time has come. Put the right policies in place so that private investors can come in,” he told The Nation.

    Okereke recalled that because of political exigency, the administration of former President Goodluck Jonathan could not take the bull by the horns and deregulate the sector.

    He recalled how the Federal Government administration buckled under the pressure of civil society groups in 2012 during the nationwide protest against the removal of fuel subsidy.

    Saying that subsidy has become unsustainable, Okereke said: “Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the wood as long as we continue to subsidise the price of petroleum products. We cannot continue to postpone the evil day.”

    Agreeing that Nigerians will pay more at the initial stage, he said the benefit will be more on long-run when price mechanism, determined by competition, ultimately forces down prices.

    One of the key issues driving the agitation for deregulation is the payment of an estimated N1 trillion annually as subsidy. This has pitted the government against oil marketers on one hand, and against Nigerians on the other.

    Will President Buhari retain or jettison oil subsidy? He has left nobody in doubt on his plans to reorganise the NNPC. He has begun that process with the disbandment of the corporations’ board.