Concerns Mount over NNPC’s Fresh MoUs with Chinese Firms to Revamp Refineries

• How FG failed to explore local capacities of Conoil, Seplat, First E&P, Renaissance, others 

•Dele Oye says selected Chinese firms lack technical, financial capacity 

•Urges national oil firm to resolve existing refinery contracts

Emmanuel Addeh in Abuja

Fresh concerns have continued to trail the recent Memoranda of Understanding (MoUs) signed by the Nigerian National Petroleum Company Limited (NNPC) with two Chinese firms for the rehabilitation and operation of the Warri and Port Harcourt refineries, amid growing calls for the federal government to explore the competence of indigenous energy companies with proven operational track records.

NNPC had announced that it signed the MoUs with Sanjiang Chemical Company Limited and Xinganchen (Fuzhou) Industrial Park Operation and Management Company Limited as part of plans for a technical equity partnership aimed at completing outstanding rehabilitation works and operating the two refineries.

According to the national oil company, the proposed arrangement would also involve refinery expansion, petrochemical integration and development of gas-based industrial hubs around the facilities.

But the development has generated criticism within sections of the oil and gas industry, especially after former President of the Organised Private Sector of Nigeria (OPSN), Dele Oye, questioned the technical and financial competence of the Chinese firms during an interview on Arise Television yesterday.

Oye argued that neither Sanjiang Chemical nor Xinganchen had verifiable global refinery rehabilitation or operational experience comparable to established Engineering, Procurement and Construction (EPC) firms like Saipem and Tecnimont, which previously handled rehabilitation contracts for the Nigerian refineries.

Besides, industry analysts argued that Nigeria now has a stronger base of local upstream and midstream operators with growing technical and financial capabilities than it did a decade ago.

Many of local companies that took over assets  divested by IOCs have not been found wanting, they have filled the gap with demonstrable competence.

Companies such as Conoil Producing, Seplat Energy, First E&P and Renaissance Africa Energy Holdings have emerged as major players in Nigeria’s oil and gas industry, controlling strategic upstream assets and executing complex production and infrastructure projects.

Although most of the indigenous firms are primarily upstream operators rather than refinery engineering companies, experts argue that the government could have structured a consortium model involving competent technical EPC contractors alongside Nigerian operating and financing partners.

They noted that the success of the Dangote Refinery demonstrated that large-scale refining projects could be executed in Nigeria through a combination of private capital, technical partnerships and commercial discipline.

Seplat, for instance, recently completed its acquisition of Mobil Producing Nigeria Unlimited assets from ExxonMobil, significantly expanding its offshore production portfolio and operational footprint in the country. The company currently produces over 100,000 barrels of oil equivalent per day from its combined onshore and offshore operations.

First E&P has also built a reputation for efficient operations in the Niger Delta through partnerships with the NNPC and other stakeholders, while Renaissance recently led the consortium that acquired Shell Petroleum Development Company’s onshore assets in Nigeria. Indeed, it is believed that after over 60 years, Nigeria has finally come of age!

The concerns surrounding the new MoUs are also coming against the backdrop of lingering controversy over previous refinery rehabilitation projects approved under former President Muhammadu Buhari which continued under the Bola Tinubu administration.

No Information About Nearly $3bn Rehabilitation Contracts

In 2021, the federal government approved a $1.5 billion EPC contract for the rehabilitation of the 210,000 bpd Port Harcourt Refinery. The contract was awarded to Italy’s Maire Tecnimont through its subsidiary, Tecnimont SpA, with the project structured in phases lasting between 18 and 44 months.

A few months later, in August 2021, the government approved another $1.48 billion for the rehabilitation of the Warri and Kaduna refineries. Of the amount, about $897.7 million was earmarked for the 125,000 barrels-per-day Warri Refinery, while $586.9 million was approved for the 110,000 barrels-per-day Kaduna Refinery. The contracts were awarded to Italy’s Saipem and Saipem Contracting Nigeria Limited, with the rehabilitation expected to be completed in three phases spanning 21, 23 and 33 months.

However, despite repeated announcements of mechanical completion and partial resumption of operations, the refineries have continued to face operational setbacks, shutdowns and production challenges. In fact, today, not a single barrel of oil is being refined from the facilities.

The Economic and Financial Crimes Commission (EFCC) is also reportedly investigating aspects of the refinery rehabilitation expenditures and contract implementation, further fuelling public scrutiny over the sector.

NNPC, however, maintains that the latest Chinese partnership discussions are part of efforts to secure sustainable technical and commercial frameworks for the country’s refining assets. The company said the MoUs followed more than six months of engagements between its management and the Chinese firms and stressed that any final agreement would still be subject to approvals and detailed negotiations.

Oye: Selected Chinese Firms Lack Technical, Financial Capacity

Former President of the Organised Private Sector of Nigeria (OPSN), Dele Oye, yesterday criticised the recent MoUs signed by the  NNPC for the rehabilitation of the Warri and Port Harcourt refineries, alleging that the selected Chinese firms lack the financial and technical competence to execute such complex projects.

Speaking during an interview on Arise Television, Oye said investigations conducted by the Alliance for Economic Research and Ethics showed that the two companies linked to the refinery deals had no proven record in refinery rehabilitation or operation anywhere in the world.

According to Oye, one of the firms involved in the MoU, Sanjiang Chemical Company, is not an EPC company, but operates mainly in the downstream chemicals business.

Oye stated that although the company is publicly listed on the Hong Kong Stock Exchange, its recent financial fundamentals indicated declining cash reserves and increasing short-term borrowings.

“The first company, Sanjiang Chemicals, is not an EPC company. It’s not an engineering company. They are into the downstream sector. They are more into chemicals. They’ve never run any refinery. They’ve never rehabilitated one.

“The company has been registered as a public company, on the Hong Kong Stock Exchange, since 2003 or so. And if you look at the company’s fundamentals recently, it’s running low on cash. It’s going through several short borrowings.

“So, it doesn’t even have the financial or technical competence. It has never done any similar business…there’s no evidence of them working with any refinery anywhere in the world,” he emphasised.

He also dismissed the credentials of the second company, Xingcheng, describing it as a real estate and industrial park management firm with no known refinery expertise.

The former OPSN president explained that his organisation benchmarked the two Chinese firms against the original contractors handling the refinery rehabilitation projects, namely Technimont and Saipem, both of which he described as globally recognised EPC companies with extensive refinery turnaround experience.

Oye further questioned why NNPC was entering into fresh agreements without first clarifying the status of existing refinery rehabilitation contracts and ongoing investigations by the Economic and Financial Crimes Commission (EFCC).

He recalled that monies had earlier been approved for refinery rehabilitation and argued that Nigerians deserved explanations regarding disbursements, project execution and value received.

“We have not resolved the past. Have we found out, out of the $1.5 billion that was approved for the Port Harcourt refinery, how much was disbursed, what was available, and if indeed we hold them to account? NNPC is silent on that,” he said.

Referencing the Port Harcourt refinery, Oye maintained that despite official claims that operations had resumed, the facility only functioned briefly before shutting down again. “The refinery only worked for 30 days. It was shut down for them to look at what the issues are. It has never been opened,” he recalled.

He warned that failure to properly terminate or resolve previous refinery contracts before entering into new agreements could expose Nigeria to fresh arbitration and litigation risks similar to the Process and Industrial Developments (P&ID) dispute.

Oye insisted that the firms lacked the core engineering competence required for the assignment and advised NNPC against proceeding with the agreements.

“Our recommendation is that NNPC should not go ahead. These two companies have nothing to offer Nigeria. They don’t have the capacity technically. They don’t have the experience,” he maintained.

Although he acknowledged improvements in transparency and operational reporting under the current NNPC management, Oye described the refinery MoUs as a wrong move. “To be fair to Ojulari, since he entered, there has been less talk about NNPC. There is a level of confidence because he came from the industry. But this, I think, is a mistake,” he said.

Opposition to New Contracts Swells

Earlier, Energy expert, Dan Kunle, had flayed the NNPC over the fresh MoU with the two Chinese companies to revive the Warri and Port Harcourt refineries, describing the process as a “futile exercise” and a “waste of national resources.”

“This exercise is futile. This is my personal opinion and a very professional opinion,” Kunle said. He urged NNPC management to hand over the refineries to the National Council on Privatisation (NCP) for an open and transparent sale “as is,” rather than pursuing backdoor deals with firms which he alleged lack refinery ownership or operational experience.

He said: “This MoU means Memorandum of Understanding with a company that does not own and operate a refinery. Sanjiang Chemical Company Limited owns a petrochemical company in China… they have never built a refinery, nor do they own a refinery.

“They are not an original equipment manufacturer. The two companies are not state-owned. They are privately owned companies in China.”

Also, a group, the Centre for Energy Sector Transparency, faulted the agreement, adding that the move raises concerns about fiscal discipline and the absence of accountability for previous investments running into billions of dollars.

“What Nigerians are witnessing is a troubling pattern of policy repetition without reflection. The same refineries that have gulped enormous public funds over the years are once again at the centre of a fresh round of agreements.

“Yet there has been no transparent accounting of what has already been spent or why those investments failed to deliver results,” its Executive Director, Dr Oghenetega Edafe, said in a statement.