Refining the refineries

This piece is a continuation of last week’s article in this column titled “Buhari and the burden of leadership”. It is also motivated by a report in one of my favourite newspapers published on 8 December, 2015 titled “FG faces daunting task over state of refineries”. The report was illuminating and carefully digested. An aspect of the report which I found interesting says that “Ibe Kachikwu, NNPC’s Group Managing Director and Minister of State for Petroleum, maintains that the refineries will not be sold to private investors, even as they continue to post losses and not profits to the government.”

I do not know if Ibe Kachikwu still maintains his stance on privatization of refineries or not. As I write this piece, available record shows that the minister of state for petroleum has promised that by the end of January 2016 all the refineries would be fully back on stream and that “the 10-million type capacities out of about 40 million projected national consumption would be realized”. This is good news, but can government sustain the operations and maintenance of the refineries? I do not think so. It is at the end of January 2016 that Ibe Kachikwu’s statement with respect to the production of 10 million litres per day of refined petroleum products will be appraised.

The problem associated with the operation of government-owned refineries in Nigeria dates back to the last two decades. That was when the demand for Premium Motor Spirit (PMS) by Nigerians outweighed the supply from the refineries. This necessitated both military and civilian governments to import PMS from abroad.

Along the line, the refineries were in a state of disrepair and needed Turn Around Maintenance (TAM). TAM was not forthcoming. The easiest way for government to solve problems associated with TAM was importation of fuel. Importation of fuel became a big-time business in Nigeria. Fuel subsidy almost crippled Nigeria’s economy but for the drop in crude oil price and the emergence of PMB.

Nigeria is at a crossroads in its chequered history where crucial decisions have to be taken on the privatization of government-owned refineries. Whether the refineries are to be privatized or run by government, policymakers must weigh the consequences of whatever decision they take. Their decision must be in the interest of all Nigerians.

It appears some stakeholders in the nation’s oil and gas industry are in favour of privatizing the refineries while others are opposed to it. Anyone interested in the debate will want to know what Nigeria stands to gain or lose if these refineries – one in Warri, two in Port Harcourt and one in Kaduna – are privatized.

Why is the Federal Government not in favour of privatizing these refineries? If theses refineries are not privatized, can the government sustain their operations and maintenance? What type of privatization will be the best for the nation bearing in mind our poor maintenance culture and technological backwardness?

I have visited the refineries at Eleme and Kaduna sometime in the early part of this century. I was on an official study tour. At the time these installations were visited, they were not operational. The question one was tempted to ask was: why has past governments not done anything to ensure that the TAM of these assets were implemented? Some say “the TAM was neglected because it was a conduit for siphoning funds from government coffers”, while others reason “it is due to lack of political will on the part of government to make the refineries work”.

Some even argued that “Nigeria is not blessed with many visionary leaders” and that this is responsible for the poor state of our refineries.
Just as in a conventional warfare, no society can win the war against poverty and boast of development without visionary leaders. For almost two decades or more no leader or group of leaders ever thought that a day will come when all refineries will be required to work in order to shore up financial inadequacies of government to import petroleum products. It is a pity!
What do we find in our society today? The tragedy is that Nigeria has emerged as a highly bureaucratic society without bureaucracy or bureaucrats. Even those who deserve to be called democrats are hitlerian in character. Anyway, the decision to privatize the refineries or not is Buhari’s. It is one of the burdens he has to shoulder as a leader. Thank goodness Buhari says he is a democrat. Whatever decision he takes on the refineries will reflect his understanding of the complex issues involved with continued government ownership and maintenance of these national assets.

The lack of maintenance of Nigeria’s refineries over a long time is partly responsible for the current state of disrepair. The oldest of Nigeria’s four refineries is 50 years old. If India is still using its oldest refinery at Assam built in 1901, then there is no reason those owned by Nigeria should not work. It is a pity that Nigeria has not built indigenous technological capability over time to enable local firms manufacture some basic spare parts of these refineries over time.

If Nigeria had developed indigenous technological capability, the cost of repairing these refineries would have been reduced drastically. To repair the refineries now will be at exorbitant cost. That is the price Nigeria has to pay for its technological backwardness.

If the FG insists on maintaining and operating the refineries, it will be a drainpipe for the nation in these austere times. My candid view is that the FG should privatize these refineries. Public private partnership is what I think is best for the nation. Why can’t Nigerians be part of the ownership of the refineries? PMB’s government should not make the mistake of just privatizing the refineries without due diligence. Transparency and accountability are vital elements of any privatization process. This is to avoid a repetition of what the nation is facing with epileptic power supply after privatization of PHCN.

Again, the FG should enact new regulations that will guide the conduct of business in oil and gas industry. With the Dangote 600,000 barrels/day refinery on stream, it will make Nigeria self-sufficient in petroleum products refining as reported. It may also confer on Nigeria the status of a “major exporter of oil” as widely stated. The story does not end there.
Is it only Dangote’s refinery that Nigeria wants to have in the year 2018? What is the consequence of this on the Nigerian economy? Is it wise for a private firm to have monopoly of supply of a strategic product such as fuel? Are other investors not interested in operating refineries in Nigeria? It was discussed in a conference that several investors are interested but they are not ready to invest in a sector that requires huge capital but not regulated by government.

I urge PMB to privatize the refineries and enact new laws to guide the conduct of business in the oil and gas sector of the nation’s economy. This is because for several years, successive governments in Nigeria have displayed incompetence in operating and maintaining refineries successfully.

 

MA Johnson