By Adewale Sanyaolu
The inability of the Federal Government to secure about $1 billion in offshore financing for the rehabilitation of the three refineries in Port Harcourt, Warri and Kaduna may have compelled it to opt for a new financing model.
Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, who disclosed the latest strategy at the Association of Energy Correspondents of Nigeria (NAEC) 2017 conference with the theme PIGB: Prospects and Challenges to Nigerian Oil and Gas Industry held in Lagos yesterday, said the actual rehabilitation work would be carried out by the original refinery builders (ORBs), with financiers funding the repair work, and that a joint management team comprising ORBs, financiers and NNPC, would steer the operation of the refineries over a period of 5-6years to bleed incremental liquids for recouping of investments.
‘‘In optimising local refining capacity, the first thing we did was to initiate steps towards revamping our own refineries in Port Harcourt, Warri and Kaduna. The refineries are not to be concessioned nor sold in whole or part because in the current state, optimal value would not be obtained,’’ he said.
The rehabilitation of the refineries under different models have come under heavy criticism form Nigerians, with the latest being the proposed move by Oando to take concession of the Port Harcourt refinery under a build operate and transfer agreement. But, the move was eventually suspended by the National Assembly
‘‘We sought externally for resources to finance the rehabilitation of the existing refineries, which was a very tall order, telling someone to invest about $1 billion in the refineries rehabilitation with no equity, and wait for incremental volumes of refined products to recoup their investment,’’ the Minister said.
On the other hand, he said the second dimension was to ascertain what holders of existing licenses to establish refineries have done since they were issued their licenses.
Giving a shocking revelation, the Minister said of about 40-50 licenses issued by the Department of Petroleum Resources (DPR) for the establishment of modular refineries, only two (2) have shown substantial progress.
, adding that the high percentage of non-performance led to engagements with licensees to ascertain the issues with a view to removing all bottlenecks.
On the concept for co-location of refineries, he said the country has moved from its initial model, which involved co-locating brownfield refineries with the existing refineries to the co-location of brand new (greenfield) refineries, explaining that the overall concept remains the same – pipelines, jetties, and where possible, storage tanks would be jointly invested in and shared.
To become net exporters of petroleum products, our existing refineries need to operate at nameplate capacity and all private and modular refineries need to contribute their quota. And to promote local content, we need to ensure Nigerian companies to participate in the process and the host communities must be taken into cognizance as they also have a role to play in achieving this goal,’’ he disclosed.
Giving an update on the Petroleum Industry Governance Bill (PIGB), he said the Ministry of Petroleum Resources is currently working arduously with the lower house to provide adequate pathway for passage of the PIGB and the Fiscals Bill at the lower House.
He noted that the PIGB, which has been on the news headlines since its passage at the Upper house, is indeed in line with the Transparency and Efficiency key focus area of the 7BIGWINs initiatives- a roadmap of short and medium term priorities aimed at developing a stable and enabling oil and gas investment landscape, which was launched by His Excellency, President Muhammadu Buhari in October 2016.