Industry sector governance experts have expressed doubts as the Federal Government reveals plans to commence the rehabilitation of Port Harcourt Refinery in a bid to perform optimally and satisfy local consumption of premium motor spirit – petrol.
Adeyemi Adetunji, chief operation officer, upstream, at the Nigerian National Petroleum Corporation (NNPC), informed BusinessDay on the side-lines of the just concluded Nigeria International Petroleum Summit that the NNPC had prepared the ground for the commencement of Port Harcourt Refinery rehabilitation.
Recall, Mele Kyari, group managing director, NNPC, had given several assurances that the refineries rehabilitation had remained one of his key priorities to ensue local consumption, assuring that the refinery rehabilitation would commence the first quarter of 2020.
Industry governance experts had bared their minds on the development, noting that with the current capped price on petroleum price, no bank or would-be investor would be willing to invest money in Nigeria’s refineries.
Nigeria, with a population of about 200 million people and four refineries with installed refining capacity of 520,000bpd, is only able to refine 5 percent of installed capacity.
“No investor would put his money on a refinery when there is a subsidy regime. Banks specifically won’t finance refinery rehabilitation on a subsidy regime. Refinery businesses are a marginal business, and I wonder how the Group Managing Director of the NNPC would commence rehabilitation as promised.
“When you cap a product, investors are aware because it cannot guarantee them a profit on the product. The corporation must focus on the liberalisation of the downstream sector,” they said.
Tunji Oyebanji, chairman, Major Oil Marketers Association, told BusinessDay on the side-lines of the summit that the government needs to come clear on whether it wants to be addressing issues on oil resources as a social safety issue or purely an economic issue, which he said was impacting negatively on investment into the sector.
Emmanuel Iheanacho, a former federal cabinet minister, had also decried the Federal Government’s inability to prioritise investment in refineries despite the much talked about the expansion of the sector to global frontiers.
“We are not investing enough in refineries. Instead of waiting on OPEC to give us a quota of 2 million barrels per day, we can produce 4 million barrels per day and build refineries to refine and add value to our crude,” Iheanacho said.
He compared the Nigeria downstream market structure and that of the United States of America, a non-member of the Organisation of Petroleum Exporting Countries (OPEC).
“The United States has a population of 327 million with a total of 139 refineries with a refining capacity of 16.7mbpd. Texas, a state in the US, has a population of 28.7 million with 47 refineries and a refining capacity of 5.7 million barrels per day. Compare these numbers with Nigeria that has a population of 200 million people with four refineries with installed refining capacity of 520,000bpd but is only able to refine 5 percent of installed capacity,” he said.
Nigeria spends over a trillion on subsidy payment, which calls for concern with sector analysts calling on the government to speed up the process of liberalisation of the downstream sector.
Austin Onuoha, an oil sector governance expert, is worried that not having a fiscal governance framework of the petroleum sector is redirecting investments to other African countries ahead of Nigeria.
“Why can’t the NNPC be enlisted in Nigeria’s stock market. This should be the target of the corporation with a better fiscal framework, which could easily get investors to invest in the refineries.
The minister of state for petroleum resources, Timipre Sylva, has also expressed concern on how Nigeria is losing huge investments in the oil and gas sector on the back of non-fiscal governance framework for the oil and gas sector, assuring that the passage of Petroleum Industry Bill would happen by the middle of the year.