The recommendation by the Nigerian National Petroleum Corporation (NNPC) that Nigeria’s three refineries in Warri, Kaduna and Port Harcourt be sold has been resisted by President Muhammadu Buhari.
The NNPC had suggested the sale of the refineries due to some challenges the agency described as critical elements, which they claim may continually hinder the effective operation of the facilities in the hands of the federal government.
Buhari was said to have disagreed with the NNPC on the ground of what a source explained to The Punch was based on “social and political” factors.
The source said: “You know the connection between the President and how he facilitated the setting up of the refineries in Port Harcourt. He is highly concerned about what the people will say.
“He is also said to be considering what the cost of petroleum products will be after the sales; considering what the government pays silently at the moment to make sure petroleum products are readily available.”
The source who spoke on the condition of anonymity said the NNPC’s decision was informed by the position of the corporation’s Stock Reconciliation Committee, which met last week in Abuja to assess the performance of the refineries.
The source, who is close to the committee, explained that the committee concluded that the operation of the refineries is not profitable at the moment.
NNPC has equally finalised its position on the protracted pipeline surveillance, with a verdict that the protection of the pipelines be entrusted to the military, which it believes can effectively protect the critical facilities.
The source further added that the ship-to-ship transfer, which the NNPC has employed to get crude oil to the refineries, cost between $6m and $7m per vessel and load one million metric tonnes of crude oil.
The source said: “MC COSMIC and MC JEWEL, which are engaged to transfer crude to Warri refinery because of their carrying capacities of about one million metric tonnes, collect between $12 and $14m per operation(trip). These are heavy vessels that load crude and transfer to smaller vessels. They then transport the crude to where the product can be transferred to the refineries.
“The same scenario is replayed to get the crude to the Port Harcourt refineries. If you add the amount to the already huge cost, you will realise that the nation cannot sustain the refineries on the prevailing conditions.
“Crude business is done three months ahead. It was already concluded during the immediate past administration that the three refineries would be sold, even though the government had stocked all the materials for the turnaround maintenance of the refineries.
“So, there wouldn’t have been any crude for the local refineries if the SWAP deal and the OPA had not been cancelled; so, the quota that would have been exported was rescheduled to the three refineries.”
Speaking on the Kaduna refinery, the source said:“Kaduna refinery has the capacity to crack any type of crude from any part of the world, be it light or heavy. The FCCU, which produces all components of petroleum products from the crude supplied, started production at about 11.50 this morning. During the week, it was undergoing processing,” the source added.
“The fear of the committee, however, is that the number of leakages along the Warri-Kaduna pipeline will not allow the transfer of petroleum products to continue. In July, when the Kaduna refinery was about to start production, the pipeline had been breached in 78 points between Warri and Lokoja. The vandals have been able to identify the difference between the pipelines carrying crude, gas and refined petroleum product. And once there is a breach in one of the pipelines, other pipeline will be shut down.”
The source further said the panel believe the best operation for the government was to sell the refineries while holding on to a “minimal stake” in the facilities.
“The recommendation is that the government should sell the refineries as they are. The same principle applies to our cars; it gets to a point that we believe that they are no longer serving the purpose for acquiring them. The refineries have become a burden. It has been recommended that if the government will not embark on outright sale of the refineries, it should go into partnership but hold a minimal stake in the venture, especially with those who built the refineries initially,” the source added.
Meanwhile, the NNPC has denied any plans to sell the country’s refineries. The group general manager, group public affairs Division, Ohi Alegbe, said: “There is nothing like that.”
On Thursday, August 27, the NNPC announced that it had reduced the number of crude oil off-takers for the proposed 2015/2016 term contract from 43 to 16.