FG mulls refinery sales
For the umpteenth time the federal government has hinted on possible sales of the four publicly-owned refineries.
The offer for sale, according to the government, is aimed at attracting investors, boosting competition, and improving efficiency in the downstream oil sector.
The Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, during an interview with Bloomberg TV anchor, Joumanna Bercetche, on the sidelines of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) on Tuesday.
Daily Trust reports that the proposed sale of refineries has been on the front burner following the underperformance of the refineries in Port Harcourt, Warri and Kaduna states.
The Group Managing Director of the NNPCL, Bayo Ojulari had on assumption of office said the company is currently reassessing the refineries’ strategies and could finalise the review by year-end.
The NNPC boss, who spoke with Bloomberg on the sidelines of the 9th OPEC international seminar in Vienna, Austria, had admitted that it was becoming a ‘bit more’ complicated to revamp state-owned refineries.
“So refineries, we made quite a lot of investment over the last several years and brought in a lot of technologies. We’ve been challenged,” Ojulari said.
“Some of those technologies have not worked as we expected so far. But also, as you know, when you’re refining a very old refinery that has been abandoned for some time, what we’re finding is that it’s becoming a little bit more complicated,” he added.
Daily Trust reports that Nigeria has four crude oil refineries, all managed by the NNPCL. They have long struggled with underperformance, inefficiency, and maintenance issues.
There have been increased calls over the years to hand these oil facilities located in Port Harcourt, Warri, and Kaduna to the private sector for efficient management and productivity.
In November 2024, the state oil refinery said the Port Harcourt refinery had officially commenced crude oil processing, but the refinery shut down in May for maintenance.
The Warri and Kaduna refineries are, however, still undergoing rehabilitation.
What the presidential aide said
Verheijen said that letting go of the refineries owned by the Nigerian National Petroleum Company Limited (NNPCL) is one of several reform options the government is exploring to reposition the energy sector for sustainable growth.
“It’s one of the options that you have to consider if you find the right technical partner with the right capital,” Verheijen said.
The plants have largely been sustained by subsidies, “but now that we’ve removed the subsidies, we’ve removed the distortions in that market,” she said.
Nigeria’s four state-owned refineries — located in Port Harcourt, Warri, and Kaduna — have a combined installed capacity of 445,000 barrels per day (bpd) but have remained largely dormant for decades, despite repeated turnaround maintenance projects that cost the government billions of dollars.
Verheijen stated that the government’s reform agenda under President Tinubu aims to restore market efficiency and transparency, ensuring that the petroleum sector operates on purely commercial terms.
NNPC looking for technical partners for refineries.
NNPCL’s u-turn
In late July, the NNPCL boss had ruled out sale of the Port Harcourt Refining Company and the other three national refineries it operates.
Speaking at a company-wide town hall meeting in Abuja, he reaffirmed the company’s commitment to completing high-graded rehabilitation and retention of the plant.
Ojulari stated that his new position isn’t a shift but informed by ongoing detailed technical and financial reviews of the Port Harcourt, Kaduna and Warri refineries.
He said the ongoing review indicates that the earlier decision to operate the Port Harcourt refinery prior to full completion of its rehabilitation was ill-informed and sub-commercial, Ojulari said.
While progress is being made on all three, he said the emerging outlook calls for more advanced technical partnerships to complete and high-grade the rehabilitation of the Port Harcourt refinery, thus selling is highly unlikely as it would lead to further value erosion.
The company stated last week that it is already seeking technical equity partners capable of managing and operating the Port Harcourt, Warri, and Kaduna refineries at international standards.
“We are looking ahead with optimism to ensure our refineries operate effectively,” NNPC Chief Executive Officer Bayo Ojulari said in a post on X.
The Dangote’s challenge
Daily Trust reports that while Nigeria struggles to fix the state-owned refineries, the Dangote Industries Limited launched a 650,000-barrel-a-day refinery which has been supplying various petroleum products with plans to expand the capacity to 1.4m.
Many Nigerians hailed Dangote for pulling through what Nigeria has failed to achieve in decades past as the country continued to rely on importation of refined petroleum products.
Dr. Mobolaji Aluko, an oil and gas expert speaking at a forum recently said Dangote had done what Nigeria has not been able to do for decades.
He disclosed that Nigeria in the last 65 years had only been able to refine 144,000 barrels of crude oil with the four state-owned refineries in Port Harcourt, Warri and Kaduna.
Aluko who stated that he worked in a refinery Port Harcourt in the 70s when the refineries were working stated that the Dangote Refinery is a strategic asset that must be protected.
“It’s a strategic asset and it must be protected for the nation to move forward, if you don’t have it you must buy it, and if you have it, it is ridiculous for you again to have to import.
“As far as Dangote Refinery is concerned, the fact of the matter is that for 60 years, 65 years that we have been a country, we only tried to refine 144,000 barrels of oil per day in four refineries and we’ve been struggling to have that, and here comes the person who invested $20 billion to do 650,000 barrels per day, that is four times what our four refineries are trying to do and the fact that they’ve recently announced plans to double that to 1.4 million barrels per day that is to be commended.”
‘What to do with state-owned refineries’
Recently, a former presidential aide, Reno Omokri stated that privatisation might be the best option to get those refineries working.
He recalled how some of the refineries were sold to a consortium of companies led by Dangote during the administration of former President Olusegun Obasanjo but the sale was canceled by the subsequent government of late Umar Yar’Adua.
According to him, drawing from the experience of how Dangote revived the Benue Cement Company sold to him by the same Obasanjo government, maybe privatisation is the way to go to bring the refineries back alive.
In 2007, a consortium of companies headed by Dangote tried to purchase some of the refineries and they actually succeeded but there was a change of government and the unions went on strike and the subsequent government of late Umar Yar’Adua rescinded that sale. That was 18 years ago.
“And in 18 years, nothing has happened in those refineries.”
“The only thing I can just say right now is that Nigeria, both the government, the unions and the private sector, look at what happened in the past and let us allow that to guide us for the future.”
The Chief Executive Officer, Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, had told our correspondent that the prospects of those refineries working efficiently and competitively is quite dim because of their age, technology and because of the prospect of the refineries being able to compete, especially in the light of what is happening, with the increase in domestic production that we are now seeing from Dangote.
“The prospect is even dimmer if the management continues to be in the hands of the NNPC. Look at how much we have spent trying to resuscitate the refineries. We are talking of billions of dollars, which ordinarily could have been used to even build new refineries. And yet, there have been no results. So fundamentally, if the business model remains as it is, there is no way it can work.”
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