The Federal Government has been accused of frustrating the take-off of private refineries by introducing policies that are not favourable to the project.
Chairman of the Association of Private Refinery Owners of Nigeria (APRON), Justice Samuel Ilori, who made this known in an interview with our correspondent, said the government keeps putting obstacles in the ways of private refiners to ensure none of them takes off.
Ilori, a retired Chief Judge of Lagos State, said those in power are keen in ensuring that no new refinery springs up in the country because they are benefitting from fuel subsidy.
He said: “For the past five years, the association has been lobbying the Federal Government to guarantee the investment of our foreign partners as demanded by them but to no avail.
“Each licensee has gone abroad to look for creditors and are spent a lot of money in searching for foreign partners, which we eventually found. But they are not willing to release money to us because we failed to obtain government’s guarantee as a condition for investing.”
Eight years ago, the government granted licences to 18 private firms to build and operate refineries. They paid $18 million to the government being the mandatory $1 million deposit each as stipulated in the guidelines. Besides, each of them had spent between two to three million dollars on site development. Their licensees have been revoked by the Department of Petroleum Resources (DPR) for failing to meet the 18-month deadline to build the refineries.
Ilori described the fiscal incentives rolled out by the DPR as half measures. For instance, the DPR stated that international market price shall be maintained for Nigerian crude that may be procured by a refiner – meaning that crude oil price discount shall not apply to the local refiners. The APRON leader considers this policy as discriminatory because, according to him, those who buy crude oil in Nigeria get discount, therefore, why must local refiners buy at international price, he asked.
He also criticised the crude oil allocation formula, which stipulates that “government will guarantee crude oil requirement of refineries up to the maximum turn down ratio, that is, 60 per cent processing capacity of the plant to the extent that crude is available.” He argued that it should be 100 per cent to serve as incentive to private refiners. To ask them to source for 40 per cent of their crude needs may be problematic, he said.
The APRON Chairman said because of the state of insecurity in the country, the foreign investors are asking for sovereign guarantee from the government and a guarantee that their investments would not be nationalised.
Ilori, who is also the chairman of Atlantic Petroleum Limited, one of the licensed private refineries, disclosed that his company has spent $3.8 million on the project. In spite of the obstacles in the ways of private refineries, he assured Atlantic is still pursuing the project.
He said: “We have foreign investors who are prepared to give us $500-600 million. But the state of insecurity in Nigeria is drawing them back. The last time they (investors) came to Nigeria, they were worried about the problem of kidnapping. One of them told me his wife warned him against travelling to Nigeria for security reasons. Unfortunately, after two days of their arrival, there was a news break on television that two foreign oil workers were kidnapped in the East. On hearing this, they immediately packed their things and left the country. All pleas that kidnapping is alien in Lagos could not persuade them to stay on.
“Our refinery, which is to be located in Badagry will on completion have capacity to refine 100,000 barrels per day. We have attained the kick off stage. The report on preliminaries before the building starts is ready. What we are waiting for is offshore survey of the ocean to know the behaviour of the ocean. It is quite expensive but we have got a company to do it for us.
“Because guarantee from government is not forthcoming that is why the investors are not willing to release their money. We have arranged for a bridging loan of about $130 million to kick-start the project hoping that would encourage the foreign investors to come and participate.”
On frustration by the government, he said: “Government does its own thing without really considering our association or taking cognisance of the individuals involved. Recently, a government panel invited us to Abuja, which we honoured. We were in Abuja a day before the meeting. We were responsible for our transportation, accommodation and feeding. On the day of the meeting we waited for the panel at the venue for more than five hours only for one young man to come and tell us that the panel cannot attend to us again.
“The panel wrote us again for a meeting in Lagos. It seems to me that members of the panel did not understand the nature of their assignment. They asked if we have renewed our licences. I told them we will do so when we are ready to take off. The panel just dismissed us without asking what we have on ground. The panel displayed arrogance of power. Nevertheless, I dropped our files with them so as to let them know the progress we have made on the project. That is almost four months and we are yet to hear from them. People in government and civil servants in the country have created a culture of impunity, which is not good for the nation.
“In the past eight years, the government has announced to the whole world that it was going to build three Greenfield refineries in different locations and not a single one has taken off. Is it that the government lacks fund or technical facility?
“To build Greenfield refinery of 100,000 barrel per day, you need at least $3 billion. How many Nigerian entrepreneurs can stick out their necks and go into it without foreign partners. Once the government agrees to guarantee foreign investment, foreign investors will come.”
