Investors to upgrade, operate and secure downstream assets
Chineme Okafor in Abuja
The Nigerian National Petroleum Corporation (NNPC) has concluded plans to hand over to private investors with good financial standing its 5,000 kilometres of pipeline network, 21 petrol storage depots and nine Liquefied Petroleum Gas (LPG) depots to upgrade, operate and secure under a Joint Venture (JV) model, THISDAY has learnt.
The paper gathered Tuesday in Abuja that the corporation has as part of this plan invited interested companies to bid for the assets which it has also segmented into seven for ease of operation.
Bidders, it was learnt have also begun to inspect the assets with a view to table their bids before the corporation.
Some of the assets up for the concession are the Single Mooring Point (SMP); New Atlas Cove Jetty (NACJ); Atlas Cove and pump station; Satellite (Ejigbo) depot; Apapa jetty; and Atlas-Mosimi pipeline which are in segment 1.
The Apapa LPG plant in segment 1A, the Import Berth Platform (IBP); IBP-Escravos pipeline; Escravos terminal, Escravos-Warri crude oil line; Warri-Kaduna crude oil line and pump station; Warri pump station; Warri-Suleja pipeline; Warri-Benin pipeline; Benin depot; Benin-Ore pipeline and Ore depot in segment 2, Mosimi depot and pump station; Mosimi-Ibadan; Mosimi-Ore and Ibadan-Ilorin pipelines; Ibadan and Ilorin depot and pump station in 3 and Ibadan LPG plant in 3A are also included.
Equally, the Ilorin LPG plant in 3A, Kaduna and Zaria pump stations; Kaduna-Kano; Zaria-Gusau; Kaduna-Jos; Kaduna Suleja and Suleja-Minna pipelines as well as, Kano; Gusau; Suleja and Minna depots in segment 4, as well as Enugu, Markurdi, Yola, Port Harcourt and Aba depots amongst others are included.
THISDAY saw a notice of this and the scope of work which the investors would be expected to cover.
They include security of the country’s pipelines against third party breaches, periodic upgrade and maintenance of pipelines as well as depots and storage facilities and safe transportation and reception of contracted throughput volumes of products of users.
Also, the proposed JV investors would be asked by the NNPC to deploy state-of-the-art pipeline protection technology to detect and stop leaks, as well as communicate real-time breaches on them for rapid response.
A source in the corporation who is familiar with the development also told THISDAY anonymously that emphasis was been played on companies with capacities to deploy technology in their running of the downstream assets.
It was also learnt that preferred JV operators will be requested to provide funds in line with expert valuation for rehabilitation of the downstream assets which will be ring-fenced and put towards asset repairs and replacements.
For storage facilities and pipelines, it was learnt that bidders would have to show to NNPC that they have annual turnover of $150 million and a net worth of at least $75 million, while $20 million annual turnover and $5 million net worth would be demanded of bidders for its LPG plants.
The investors, according to the NNPC will also be responsible for daily operations, maintenance, and technical integrity of its jetties, pipelines, storage and LPG butanisation plant.
They will ensure that the assets are always kept in good condition for users under the supervision of NNPC which shall verify and approve their costs for any upgrade of the downstream facilities.
Similarly, as part of their tasks, the investors shall use their funds to upgrade and run the facilities, thus ensuring seamless availability of the assets at all times, while they earn monies paid as throughput user-tariff on the facilities.
According to the terms of the partnership, revenues generated from the tariff shall be split between the NNPC and investors based on shares determined by expert valuation of the assets. The corporation will however be indemnified by the investors of storage or transportation losses.
The NNPC source in his clarification of the development said: “We are actually looking on a joint operating agreement model.
“We are trying to see if private investors will come in with their money to run these assets. We will however continue to own the assets but they will come in to invest to upgrade, manage and operate them in a JV model.”
He further said: “There is an independent valuation to help us determine the assets’ value so that when we go into the JV even if we are not putting in cash, we will understand what our contributions are, based on assets value.”
“There is no limit to how much they can invest but we try to set is some numbers around the financial capabilities of the companies and we are big on the technology side of this because that will help us run the assets effectively.
“We have to set the tariff based on throughput and as we get the assets on, we also get non-NNPC operators to use our pipelines and storage facilities and the JV will start to earn money,” he added.
Speaking on the timeline for the exercise to become operational, the source explained: “We are in the tender stages now and about to extend the dates to like two more weeks to give interested parties additional time to access the facilities because we had issue with our union in terms of accessing those assets.”
“But once they eyeball them and build their bids based on what they see, then we will quickly go ahead and shortlist based on their bids,” he added.