Kachikwu’s waffling on refineries
The Minister of State for Petroleum Resources, Ibe Kachikwu, recently demonstrated anew how rudderless and insincere national leadership is driving the country to the edge of failure. His “revelation” that the government’s oft-repeated promise to bring the four state-owned refineries to almost full capacity utilisation by 2019 is no longer feasible surprised no one: Nigerians have become painfully accustomed to official calumny on energy matters. With the next elections just months away, however, President Muhammadu Buhari can still walk the change talk and move to save the country the crippling burden of refined fuel import by selling the refineries post-haste.
For the hapless 193 million Nigerians, there is no end in sight to the official waffling over refined petroleum products. The minister went (as usual) on an optimistic note to say rehabilitating the refineries was still on track, while three out of 40 modular refining licensees would commence production “towards the end of next year.”
Like its predecessors, this government has mortgaged its credibility by failing to do the right thing on the downstream oil and gas sector and thereby entrenched the country deeper into the abyss of perpetual dependence on imported petroleum products despite being the world’s eighth largest exporter of crude and 13th largest producer. Early in the year, CBN said Nigeria spent $36.3 billion in five years on fuel importation. And according to the National Bureau of Statistics, in the first six months of the year alone, N996 billion expended on fuel import. Like Kachikwu, Maikanti Baru, had in line with the dubious tradition of newlyappointed group managing directors of the Nigerian National Petroleum Corporation, in 2017, also pledged December 2019 as resurrection date for the refineries. Baru reiterated this hollow promise in May in Houston, Texas, at the global Offshore Technology Conference, where he regurgitated the decade-old slippery proposal to contract the original builders to return and restore them “to at least 90 per cent capacity utilisation before the 2019 deadline...”
For some reason that has never been officially explained, but identified nationally and internationally as institutionalised rent-taking and a corrosive patronage system, every successive Nigerian government insists on holding on to the loss-making refineries instead of the sensible route of privatisation and liberalising the downstream sector of the oil and gas sector. They, however, always simulate futile activity to “revamp” them.
On assumption of office as minister while doubling as GMD, Kachikwu had been more forthright and true to his background as a private sector technocrat. His initial assessment of the refineries was that they were so far behind in maintenance and should be sold outright. His verdict on the Warri and Kaduna refineries was damning as he considered them to be in a terrible shape. He knows privatisation is the only sure route to save Nigeria from the billions it spends annually importing refined products and subsidising imported petrol prices that he put at N1.4 trillion recently. “Personally, I will have chosen to sell the refineries, but President Buhari has instructed that they remain. After they are fixed, if they still operate below 60 per cent, then we will know what to do,” he said in 2015.
Suddenly, the Buhari government said in 2017 that it was seeking another $1.12 billion to fund the turnaround maintenance of the refineries. In 2007, the then GMD, Funso Kupolokun, had told a House of Representatives committee that $1 billion was spent on TAM between 1999 and 2007. Ian Udoh, then head of the NNPC’S refining and petrochemicals division, said in 2015 that $550 million would be spent on refurbishing the plants using “local engineers,” while the immediate past minister of petroleum resources, Diezani Alison-madueke, had insisted on $1.6 billion for TAM, but could not get parliamentary approval to raise a foreign loan.
Elsewhere, countries are taking hard but necessary decisions: Saudi Arabia in 2017 unfolded an ambitious privatisation plan that will see ports, airports, refineries and water supply plants unloaded to raise up to $11 billion and create 12,000 new jobs by 2020. In 2017, Saudi Aramco took control of 100 per cent of the 600,000 barrels per day Port Arthur Refinery, Texas, North America’s largest, as well as 24 distribution channels in the United States.
Nigeria has to get serious and its leaders should be sincere. It is the only member of the Organisation of Petroleum Exporting Countries still dependent on massive imports of refined products. According to
OPEC Annual Statistics Bulletin 2016, almost eight million barrels per day of potential refining projects are on stream for the period 2016-2021. These include “mega refining projects” in Kuwait, Saudi Arabia and Venezuela; and sizable projects in Angola, Ecuador, Iran and the United Arab Emirates. Algeria opted for medium-sized refineries.
Unlike Saudi Arabia that raised refining capacity from 2.1 million bpd to 2.9 million bpd; the UAE from 675,000 bpd to 707,000 bpd between 2012 and 2015; Indonesia, Iran and Iraq that maintained their respective 1.12 million bpd, 1.78 million bpd and 900,000 million bpd capacity by 2015, Nigeria’s four refineries, with combined capacity of 445,000 bpd, operated at combined 3.02 per cent capacity utilisation in August, 2018 according to NNPC’S financial report. Except for the expected 650,000 bpd Dangote Refinery, a private initiative, the government has not provided the enabling environment for others to follow the brave steps of Dangote.
Kachikwu and the NNPC should stop the rigmarole: the four refineries have no future as state-run enterprises. They should be privatised immediately to stop the perennial waste and help unleash the immense potential for investments and job creation that sell-offs and liberalisation offer. All that are needed are the political will and sincerity of those in authority to do the right thing.