FG delays private sector investment in refineries — Investigation

The Federal Government is believed to be behind the delay in private sector’s involvement in the country’s refineries.

Our correspondent gathered on Friday that some players in the downstream and upstream sub-sector as well as other investors who had shown interest in the refinery business were already developing cold feet.

This, they said, followed what they described as ‘high level of uncertainties’ characterising the business environment.

An executive director of one of the major oil marketers in the country, who spoke to our correspondent in confidence, said the company had shown interest in building a refinery, but it had not heard anything from government.

He said, “We wanted to build a refinery in the country and we have indicated our interest to government. But as we speak, government had not said anything meaningful. I don’t know if they are hiding something.

“In fact, one condition we made clear to government was that we would like to have the crude produced in our refinery subsidised. Still nobody is saying anything. It’s just like all we are saying is falling on deaf ears. We are beginning to ask if government is serious about bringing in the private sector in this business.”

Last year, the Dr. Kalu Idika Kalu-led National Refineries Special Task Force had said that 28 out of the 35 investors given licences by the Federal Government to establish refineries in the country lacked the capacity to do so.

This was contained in the committee’s report presented to President Goodluck Jonathan by the committee’s alternate Chairman, Mallam Yusuf Ali.

A top official of one of the upstream players, who also spoke to our correspondent in confidence because he had not been authorised to say anything on the matter, said the only thing the company heard from the government was, “We should go ahead with our plan as the grey issues will be resolved later.”

The source said such ‘political’ statement was neither here nor there, and portrayed a high risk of uncertainty for any investor.

“If government is saying they are going to decide on some of the matters we raised later, then something is wrong. No rational businessperson will take such a serious risk,” he added.

The Nigerian National Petroleum Corporation has said it will spend N152bn on the repair of three of the nation’s refineries in 2013.

The amount is contained in the budget document submitted to the National Assembly Joint Committee on Petroleum (Downstream) recently.

The NNPC also plans to move 42.3 milion barrels of crude oil to the domestic refineries for processing in 2013.

As a result, a total of 18.64 billionlitres of products are expected to be derived from local refining during the period.

The document says the corporation is optimistic about ensuring 100 per cent products evacuation from the refineries, including reducing operational and demurrage costs by 10 per cent each on the 2012 levels.

NNPC also promised to achieve a 10 per cent growth in internally-generated revenue in 2013.

Details of the budget show that the total maintenance cost for the Port Harcourt Refinery by its original builders, basic engineering design for the Fluid Catalytic Cracking Unit and RFCC plant project is estimated at N76.779bn.

The corporation will spend N32.106bn on the Kaduna Refining and Petrochemical Company.