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Investors shun Nigeria’s $700m refineries’ upgrade – Today

HomeNewsInvestors shun Nigeria’s $700m refineries’ upgrade – Today
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Investors shun Nigeria’s $700m refineries’ upgrade – Today
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The hunt instituted by the Federal Government for $700 million investments to upgrade the 445,000 barrels per day capacity refineries in Nigeria has hit the rocks, according to report.

Sources confirmed that global investors who had repeatedly turned down advances by government to get them involved in the finance of the refineries’ upgrade have now embargoed investments in the installations.

Minister of State for Petroleum Resources, Ibe Kachikwu, had earlier said that the Federal Government would seek investors to fund the $700 million upgrade of the refineries located in Port Harcourt,Warri and Kaduna, to produce at maximum capacities.

Kachikwu said: “We are not inviting foreign partners to take over the refin-eries; the total investment for that is up to $700 million and we don’t have that. Let us be honest about it.

“The investors are coming to provide funds to take our performance on these refineries to 90 per cent and to provide us with technical skills. So, the areas of intervention will be funding and technical support.”

Five months after Kachikwu announced the refineries upgrade plans, no investor has embraced it and no one is likely to be drawn to a negotiation table soon, a senior civil servant at the ministry of petroleum resources told this newspaper after his anonymity was guaranteed.

The minister, he said, had used many fora, local and international, to seek investors for the $700 million upgrade, but investors might have technically marked Nigeria’s refinery investments as a no-go area due to uncertainty in policy and business model for the installations.

The source said: “Renowned global audit firm, PwC, and Resource Governance Institute, have shown the Federal Government in their reports as a bad manager and wasteful partner to work with in terms of investments in its refineries. What is shocking is that most of these deep-pocketed investors keep asking us to clear the air on the damning revelations in those reports.

“Generally, we have not been able to get anyone and it will be very difficult to get anyone. Not at this period when investors are more choosy in where to put their fortunes.”

Recently, executive summary of Resource Governance Institute’s latest report had noted: “Despite NNPC’s debilitating consumption of public revenues and performance failures, successive governments have done little to reform the company. We find that management of NNPC’s oil sales has worsened in recent years – and particularly since 2010. The largest problems stem from the rising number of ad hoc, makeshift practices the corporation has introduced to work around its deeper structural problems.

“Similarly, it began unilaterally spending billions of dollars in crude oil revenues each year, rather than transferring them to the treasury, because NNPC’s actual budget process fails to cover operating expenses.

“Some of these makeshift practices began with credible goals. But over time, their operation became overly discretionary and complex, as political and patronage agendas surpassed the importance of maximising returns.”

Aside from this, for instance, checks by this newspaper showed that crude supply to the refineries through marine vessels cost NNPC revenue loss of about $8.03 billion in 2014.

A contract agreement seen at the weekend showed that MC Cosmic and MC Jewel, two of the marine vessels for the contract, “would collect between $12 million and $15 million per daily transfer of about one million metric tonnes crude to Warri refinery.

“These heavy vessels would later need to load crude and transfer to smaller vessels. The cost of the smaller vessels ranges from $6 to $7 million per day, while the smaller vessels are also expected to later move the crude to terminals where trucks would have to load to the refineries at another operational cost.”

These add up to over $12 million daily and $8.03 billion in one year.

The latest marine supply contracts, which have, according to checks, raised the losses in refineries to over N1.27 billion, was consummated first with NIDAS Marine Limited last September following the cancellation of crude oil delivery contract with Ocean Marine Transport (OMT).

The new deals were retendered and awarded on a stop-and-go basis – meaning that it ceases to exist when the pipelines begin to work. The NNPC said it resorted to the delivery of crude oil to the refineries by marine vessels following incessant attacks on the Bonny-Port Harcourt refinery pipeline and the Escravos crude pipelines by oil thieves.

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