Kachikwu Explains Delays in Take-off of Refineries’ Co-location

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Chineme Okafor in Abuja

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has explained the delays in the take-off of his initiative to have new refineries set up and share infrastructure with Nigeria’s existing refineries in Kaduna, Port Harcourt and Warri, to boost domestic petroleum products refining capacity.

According to the petroleum minister, the concept has taken the Nigerian National Petroleum Corporation (NNPC), which owns and operates the three refineries that would host the new ones, time to understand and subsequently come to terms with it.

The minister explained to journalists at the just concluded 2017 edition of the annual Offshore Technology Conference (OTC) in Houston, Texas, United States, that the corporation was initially uncomfortable with the idea of having additional refining units at its existing complexes, which it still had challenges fixing.

He, however, noted that the NNPC had since come to terms with the idea, which he said would be different from its existing refining activities, hence, the progress made with discussions on the Kaduna and Warri refineries hosting the new refineries.

“On the co-location, there was an alignment problem. I set up the co-location concept but it took NNPC a while to come on board because they were focused on the four refineries, but they have realised it is not an NNPC activity but simply a new person who wants to have 100 per cent control of his refinery but leasing infrastructure from the NNPC refineries,” said Kachikwu.

He further explained: “For the co-location, there have been challenges but we have been able to show through utilisation of opportunities from the Direct Sales Direct Purchase (DSDP) that they (investors) can recover their money and the government is prepared to give guarantees in the event they don’t.

“We had actually identified two companies out of 10 that had shown interests and competence. Right now the co-location for Kaduna and Warri are almost wrapped up, but Port Harcourt is still a bit of challenged.”

When asked if the government’s reluctance to deregulate the country’s downstream oil and gas sector would not affect the business plans of investors in the co-location programme as well as dent his push for International Oil Companies (IOCs) to invest in petroleum products refining in Nigeria, the minister said he understood the importance of deregulating the market to allow investments and private-sector led growth, but that he was sure the issue would be addressed.

“I totally agree with you. Until you deal with that issue (deregulation), you are going to be struggling with some of these concepts but I am just proceeding with them with the expectation that as we get closer to it and get out of the emergency two-year period when importation will be taken out, that the need to look at that sector will become critical,” he added.

Kachikwu in 2016 initiated the co-location programme with the hope that investors would take up the opportunity of sharing facilities with NNPC’s existing refineries to refine products for Nigeria’s domestic consumption.