The dismal operational state of Nigeria’s three petroleum refineries after years of fruitless turn around maintenance (TAM) emerged on Wednesday as the federal government revealed that their combined capacity uitilisation remains at just 15 percent.
This, according to Dr. Ibe Kachikwu, Minister of State for Petroleum Resources, is a slight improvement on the 10 percent utilisation the Muhammadu Buhari administration met in 2015.
This emerged as Nigeria and its northern neighbour, Niger republic, are on the home stretch of finalising agreement to build a 100,000 barrels per day refinery to be located at a border town between the two countries. Leaders of both countries will sign the Memorandum of Understanding (MoU) for the new refinery next month.
Private investors, it was gathered, that would be involved in the project, as they had indicated how much they would invest in the refinery and were ready to provide funds for the facility.
Kachikwu who disclosed this in his latest podcast on the refineries and local production capacity, described the new refinery to be constructed by Nigeria and Niger, in partnership with private investors, as a Greenfield project.
“One of these (Greenfield projects) is the Niger-Nigeria refining relationship. We are almost concluding the MoU to build the pipeline from Niger to Nigeria, utilising Niger’s crude. So, we have agreed to build the pipeline at the border town between Niger and Nigeria, which is in Katsina State.
“We have the private sector relationship to build 100,000bpd refinery there. Both governments have largely reached an MoU. Later next month, that is in July, the two Presidents will be in Nigeria to sign off on the negotiated basis of this relationship, and then, the private sector will then be asked to put in the funding that they’ve indicated that they have,” the junior oil minister said.
Kachikwu stated that Nigerian refineries were producing at about 10 per cent when the current administration came to power and that the combined capacity utilisation of the facilities had increased to about 15 per cent.
Curiously, the minister seemed impressed with the marginal increase in refining capacity, saying “now, what was the state of the refineries when we came in? First, our refining capacity was less than 10 per cent. We managed to elevate it to about 15 per cent; and that’s substantially its assumed end. We’ve continued to import most of our refined petroleum products into this country.
“The effect of that is all the challenges in terms of the pricing of petroleum products and the under-recovery or subsidy as the case may be, (which) has been a subject of very many interest.”
The minister stated that the government had commenced the revamp of the refineries, adding that funding from third-party investors would be used to raise the combined capacity utilisation of the facilities to about 90 per cent.
He said, “What we’ve done so far is that we’ve been able to get the President’s approval to find third-party funding through a debt structure to be able to get these refineries back to working form. They will work with the NNPC and get these refineries from 10 per cent capacity to about 90 per cent performance capacity.
“Today, the concept has been agreed and approved; the financing structure is largely been agreed; the financiers have largely been identified, and the contractual processes are ongoing to reach the terms of the financing. We have also identified the initial builders of the refineries to be the contractors, using the financing that is going to be raised from third-party financiers.”
“We are hoping that by the end of October, we should be in a position to have signed all the requisite agreements and be able to charter people to move in and begin to work. If we can by the end of the year get to a point where at least we begin the process of actual work, then I think we would have achieved the objective of beginning to revamp the refineries,” Kachikwu added.
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