The Nigerian National Petroleum Company Limited (NNPC) has announced that it will not rehabilitate its state-owned refineries without a clear path to profitability. According to NNPC Group Chief Executive Officer, Bayo Ojulari, the company will only work with technical equity partners prepared to have a stake in the performance of the facilities. This approach aims to ensure that the refineries return to sustainable and profitable operations.
Nigeria's three state-owned refineries in Port Harcourt, Warri, and Kaduna have consumed hundreds of billions of naira in rehabilitation and maintenance spending over the years but have struggled to deliver sustained commercial production and profitability. Ojulari disclosed that NNPC had learnt from previous rehabilitation arrangements, under which contractors were paid for rehabilitation, operations, and maintenance without having a direct stake in the commercial performance of the facilities.
The NNPC has stopped using crude oil to fund rehabilitation arrangements that do not deliver positive commercial outcomes. According to Ojulari, the company has reduced waste by stopping payments for refinery repairs with crude oil. The new approach is designed to ensure that the refineries return to sustainable and profitable operations rather than simply being restored to operation.
Ojulari warned that efforts to reposition the refineries could face resistance from interests that would prefer to acquire the facilities as scrap. He stated that there are those who are prepared to buy these refineries as scrap and that NNPC needs to watch out for such interests. The GCEO emphasized that the company is seeking a refinery that is self-sustaining, profitable, and sustainable.
NNPC has subjected prospective Chinese partners to a lengthy selection process, narrowing the field to about 20 possibilities from over 50. The company has signed a memorandum of understanding with the prospective partners, allowing them to conduct due diligence. Ojulari stated that the due diligence has shown that simply implementing some of the earlier rehabilitation plans could leave the refineries technologically behind for another five to 10 years.
The prospective Chinese partners have deployed more than 33 senior engineers to work with NNPC's technical teams for more than three months without charging the national oil company. Ojulari also stated that an NNPC delegation that visited China observed petrochemical facilities operating above their original design capacities. The company wants the refineries to return with technology capable of competing with modern facilities.
Ojulari emphasized that no final agreement has been signed with the Chinese partners, and commercial and technical negotiations will follow after the report. The NNPC is cautiously optimistic that some of the best practices observed in China can be replicated in Nigeria. The company aims to have a refinery that is self-sustaining, profitable, and sustainable, and is working towards achieving this goal.
Key points
- NNPC rules out rehabilitating state-owned refineries without clear path to profitability
- Company seeks technical equity partners to ensure sustainable and profitable operations
- NNPC warns against selling refineries as scrap, citing resistance from interests.
