What will
Nigeria do with its money-guzzling and decrepit refineries that have not been
meeting the objectives for which they were set up barely 50 years ago? That has
been the lingering question, which needs an answer that may determine the value
th
e country can get from the derelict facilities.
The old
question resurrected the other day when it was reported that the Nigerian
National Petroleum Corporation (NNPC) had inaugurated a committee with a
mandate to bring them (the refineries) to 90 per cent capacity with a whopping
USD1.12 billion. According to the report, combined capacity utilisation of the
refineries had been on the downward trend such that as recent as June 2017 the
rate dropped to 12.73 per cent from 23.09 per cent in May. The refineries’
combined production, even at full capacity, has never been enough to satisfy
domestic demand of petroleum products.
Consequently,
the country has been depending on imported refined petroleum products involving
huge foreign exchange outflows. This is in spite of huge amounts of money, in
hard currencies, that had been spent in their repair or rehabilitation or
turnaround maintenance or refurbishment (expressions that had been variously
adopted to pull funds out of public treasury for use in the refineries).
As
discussions persist on whether the refineries ought to be repaired or
outsourced or privatised or concessioned, sides have been taken with varying supportive
reasons. Some experts, the other day, were reported to be against government
putting N342.72 billion (USD1.12 billion) needed now to repair the money
guzzling refineries. The experts, who instead, recommended sale of the
facilities, were reported to have justified their position on the fact that,
the facilities are obsolete and since 1999 till date about ‘‘N963 billion’’ had
been spent for the same purpose without results.
The point is
clear: The recommendations by some other stakeholders for the refineries to be
privatised or concessioned, will fail when past experiences in this connection,
are subjected to objective and transparent evaluation. For instance, how many
of the privatised and concessioned government businesses are today successful and
delivering benefits to the citizens?
In view of
the fact that there will always be different optional recommendations and of
course interests, what should be of concern to the government in this situation
is the course of action it should take that will be most beneficial to the
economy and the citizens.
Meanwhile,
experts on crude oil refining have long foreclosed discussions on continued
maintenance of the countries obsolete refineries. The world has moved on with
modern oil refining systems. So, what does the Nigerian government want to
achieve with obsolete systems? Can water be squeezed out of a rock, which is
about what is being propagated by officials of government in recommending
repairs? Again, what is the guarantee that government will manage the
refineries efficiently even if they are repaired?
From past
experiences, it makes some sense to claim that as long as the refineries are
under government’s management and control, they will remain moribund and
unprofitable, no matter the amount of money spent. In this regard, government
should consider what it can salvage from the already bad situation to cut its
losses. What is realistic is that the refineries should be sold as most experts
have proposed. But before putting them on the shelf for sale, comprehensive
evaluations must be undertaken to determine both their attractiveness to buyers
and market value. Only qualified valuers of proven integrity should be used to
conduct the evaluation.
Besides, the
sale arrangements including due diligence should be made transparent and only
persons that are proven to be capable of putting the facilities back to use
should be given opportunity to bid and buy.
As the
country is still in need of refining crude oil domestically, it is further
recommended that government should create the enabling environment for the
establishment and operation of Modular refineries across the country. This
should be given to licensed private operators under strict and measurable
guidelines. Modular refineries are easier and cheaper to establish, operate and
maintain. They can also be managed more efficiently given the level of our
present development and environment. Besides, meeting the needs of the nation
will be best assured with modular refineries scattered across the country. If
any of them has major challenges, the entire country will not be shut down as
the unaffected ones will continue to produce. Thus, foreign exchange for PMS
import will be saved; significant number of employment will be created,
individuals, households and other economic units will be empowered. Lest we
forget, the much-advertised modern refinery being built in Lagos by Africa’s
richest man, Aliko Dangote will also be completed to complement these
aforementioned deregulated environments for oil refineries.
NPRC
completed the first refinery in Nigeria in 1965 at 38,000 barrels of crude oil
per day at a cost of 12 million pounds. The Warri Refinery, the first Nigerian
government-owned refinery built to process 100,000 barrels of crude oil per day
was commissioned in 1978.
In the main,
any committee already set up by government to turn around the moribund Nigerian
refineries should be disbanded today. Government no longer has business in the
business of managing refineries. It will even be in public interest to set up a
technical committee to determine how billions of naira worth of turn-around
maintenance (TAM) had been used without any visible results.
Guardian
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