Business Hilights
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FG summersaults, ready to sell refineries commercially unviable

Contrary to previous pronouncements by the federal government that it has no plan to either sell or concession any of the four nation’s refineries, indications have emerged that there are fresh plans to put both Warri and Kaduna refineries on sale.

Government anchored its defence on the status of each of the refineries, saying those ones found to be commercially unviable are to be sold to reduce recurring month-on-loses.

Business Hilights recalls that earlier last week, the Nigerian National Petroleum Corporation (NNPC) had said the consolidated capacity utilisation of the three government-owned refineries dropped to 23.09 per cent in May, from 24.59 per cent in April.

However, some provisions of the newly approved National Petroleum Policy (NPP) as approved by the Federal Executive Council, made it clear that the aim of the government is not to sell but to make the refineries successful and commercially viable enterprises.

But the Minister of State for Petroleum interpreted the policy to mean that government was ready to sell any of one that failed to meet respond promptly.

The policy noted that “They will be encouraged to become so and will be supported as much as it is within the government’s ability to do so. Each refinery will be given a transition period in which to set themselves up on their own feet”.

“Ultimately though, if a refinery fails to make the transition and become commercially viable, the petroleum policy is for the government to divest (sell off), grant a concession or if necessary, close down any non-performing government-owned refinery. In either instance, the site may be handed over to a suitably qualified private sector developer to build a new refinery facility on the same site.”

NPP further averred that “It has installed its own independent gas-fired power supply; it has undertaken its own turnaround maintenance; it is close to jetties and the pipeline length from crude oil suppliers is short (less of a pipeline security risk), and it is operationally ready to produce refined products to international standards, although the cost structure is still not right.

“Of the three, Kaduna is perhaps the least ready currently because of its distance from crude oil supplies and reliance on a poorly maintained crude oil pipeline.”

The key motivator for the planned sale cannot be unconnected with government’s feelings that both Warri and Kaduna refineries had been underperforming for many years and it seems to lack the political will for real Turn Around Repairs (TAR) or maintenance.