Minister of Petroleum, Dizeani Allison Madueke
The National Refineries Special Task Force (NRSTF) set up by the Federal Government to take a diagnostic study of operations of Nigeria’s four traditional refineries with a view to proffer sustainable measures has disclosed that the country’s refineries are the worst managed of 42 existing African refineries.
Comparing Nigerian refineries with other refineries in Africa, the taskforce, which recently submitted its report to the government explained in its findings that the country’s four refineries with combined production capacity of 445,000 barrels per day (bpd) had an average capacity utilisation of 18 percent as against what obtains in utilisation capacities of other African countries.
“There are 42 refineries in Africa. Nigeria has three and the third largest combined capacity of 445,000 bpd. The countries with higher number and capacity are South Africa and Egypt, with two and refineries respectively, and corresponding capacities of 545,000bpd and 774,900bpd respectively.
Nigerian refineries have the worst performance record among the 42 refineries, with an average capacity utilisation of only 18 percent compared to 81 percent and 85 percent respectively for Egypt and South Africa in 2006-2009,” parts of report which was submitted by the taskforce led by one-time Minister of Finance, Dr. Kalu Idika Kalu read.
The committee, which recommended far-reaching measures that would be adopted in tackling the country’s challenges of under utilisation of its refineries, noted that a robustly managed refinery system with minimal government participation will suffice in putting the country’s refining industry back on track.
According to the report, “The NRSTF is of the opinion that only drastic and far-reaching measures will successfully turn around the refineries. To this end, it recommends that majority shareholding, a minimum of 51 percent in the three NNPC refineries should be divested to the private sector, in accordance with subsisting legislation, as in the Public (Privatisation and Commercialisation) Enterprises Act 1999.”
Giving conditions for a robust privatisation process of the refineries, the task force stated that the private investors must include a core investor with background and experience in managing and operating refineries, good technical and financial capability as well as acceptable vision and commitment.
“The core investor must assume full operatorship of the privatised refinery and other conditions that must be put in place include specific requirement for a program to promote technology transfer, local content utilization in services and skills acquisition by Nigerians, plans for all employee related matters such as retirees and staff pensions, severance and disengagement issues and contractual commitment to acceptable performance levels.
Appropriate fiscal incentives as may be applicable at the time, to attract the right calibre of investors, a proper valuation of the assets of the refineries will need to be carried out prior to privatisation, only limited repairs of the refineries which can be funded and completed on time should be instituted. This will enable production operations to be sustained in the refineries while they are prepared for privatisation.
It asked the government to consider the implementation of these measures as top priority and particularly prime the Bureau of Public Enterprises (BPE) to set up the structures for timely and transparent privatisation of the refineries within 18 months, with the assistance of reputable consultants.