CITING complications in revamping the Port Harcourt, Warri and Kaduna refineries, the Nigerian National Petroleum Company Limited (NNPCL) has revealed that the facilities could be sold off.
The decision came after the moribund refineries had allegedly gulped about $18 billion in turnaround maintenance.
The Group Chief Executive Officer(CEO) of the NNPCL, Bayo Ojulari, disclosed the possible sale of the refineries on the sidelines of the Organisation of Petroleum Exporting Countries (OPEC) International Seminar in Vienna, Austria.
Ojulari, who spoke with Bloomberg on Thursday, June 10, said the NNPCL was reassessing its refinery strategies and aiming to finalise the review by year-end.
“So, refineries, we made quite a lot of investment over the last several years and brought in a lot of technologies. We’ve been challenged,” he said.
He explained that some of the technologies had not worked as expected, adding, “When you’re refining a very old refinery that has been abandoned for some time, what we’re finding is that it’s becoming a little bit more complicated.
“So, we’re reviewing all our refinery strategies now. We hope that before the end of the year, we will be able to conclude that review. That review may lead to us doing things slightly differently.”
Speaking on the possible sale of the assets, he said, “What we’re saying is that sale is not out of the question. All the options are on the table, to be frank. But that decision will be based on the outcome of the reviews we’re doing now.”
Commenting on oil production costs, Ojulari hinted further that the operating cost of oil production in Nigeria ranged between $20 and $30 per barrel.
“For the cost of crude production, there’s a capital cost and there are the operational costs. The operating cost right now in Nigeria is hovering over $20 per barrel, which is quite high.
“Part of that is because of the investment we’ve had to make in terms of security of pipelines, which, as you know today, we have 100 per cent availability of our pipelines. That came out of the significant investment.
“So we believe with time, with stability, that costs will start going down; but for now it’s somewhere between $25 and $30 a barrel.”
Ojulari added that by the end of the year, the country planned to increase output to 1.9 million barrels per day(bpd).
The ICIR reported that the chairman of the Dangote Group, Aliko Dangote, expressed doubts that the refineries under the management of the NNPCL would ever work.
The billionaire businessman expressed this concern while hosting members of the Global CEO Africa from the Lagos Business School, after a tour of his refinery in Lekki, Lagos, on Thursday, July 10.
He pointed out that the NNPCL facilities had failed to work despite claims of turnaround maintenance.
“(The turnaround maintenance) is like you trying to modernise a car built 40 years ago, when technology and everything have changed. Even if you change the engine, the body will not be able to take the shock of that new technology engine,” Dangote said.
In 2021, The ICIR reported that the three refineries wasted taxpayers’ money without commensurate productivity. Between 2017 and 2021, the Port Harcourt Refining Company Limited lost N343.66 billion, while maintaining a staff strength of 506.
The refinery engaged 487 new workers in 2020, paying them N3.93 billion annually. Despite the moribund state of the refineries, each worker takes home an average of N8.072 million annually, according to the report.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.