Kachikwu’s waf­fling on re­finer­ies

The Punch - - EDITORIAL -

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.

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