The Nigerian National Petroleum Company Ltd (NNPCL) has signed a Memorandum of Understanding (MoU) with two Chinese companies for the completion and operation of the Port Harcourt and Warri Refineries.
This step is viewed as a major move that could have profound impact on the nation’s energy industry.
NNPCL yesterday stated that the MoU involved Sanjiang Chemical Company Limited and Xingcheng (Fuzhou) Industrial Park Operation and Management Co. Ltd.
The deal would be implemented under a potential Technical Equity Partnership (TEP), which would see the two companies providing necessary resources for the completion and operation of the Port Harcourt and Warri Refineries.
The MoU was signed by the Group Chief Executive Officer, NNPC Ltd, Bashir Ojulari; Chairman, Sanjiang Chemical Company, Guan Jianzhong and Chairman, Xinganchen (Fuzhou) Industrial Park Operation and Management Co. Ltd, Bill Bi, in Jiaxing City, China.
It was not cleared yesterday why and when NNPCL GCEO changed his mind on the state of the refineries, having previously said running the refineries was a waste of resources.
The agreement with the Chinese included completion of outstanding work at the two refineries, operating and maintaining both facilities to achieve best-in-class, sustainable performance and possible expansion of the refineries’ petrochemical capacities among others.
The planned expansion and upgrades are expected to elevate both facilities to cleaner and more profitable production standards.
Besides, the collaboration includes possible expansion of the refineries’ petrochemical capacities and harnessing gas and downstream opportunities through the development of co-located, gas-based industrial hubs.
Ojulari described the MoU as a significant milestone, following more than six months of concerted engagement between the technical and management teams of NNPC and the two Chinese partners.
“All parties recognise mutually beneficial opportunities for the development and long-term sustainable profitability of NNPC’s refining assets in Nigeria, and the collective weight required for success,” Ojulari stated in a statement released by the NNPCL’s Chief Corporate Communications Officer, Andy Odeh.
According to him, the MoU was an important step on the journey towards identifying potential technical equity partners to restart and expand NNPC’s refineries, and to explore opportunities in co-located petrochemicals and gas-based industries.
He added that the agreement reflected the parties’ shared intent to progress discussions in good faith, with any definitive arrangements to follow in due course and subject to customary approvals.
Ojulari had last year described the operations of the refineries as “monumental loss.”
According to him, the cost of producing the fuels from the plants was higher than the value of the products.
The NNPCL boss said the firm was wasting around N300 million and N500 million monthly on the refineries when he assumed office.
He explained that the country was pumping 50,000 barrels of crude oil daily, however, only realizing less than 40 per cent of products equivalent from there refineries.
This was an indication that the bulk of the crude oil disappeared or came out as lower valued products that were vended at a loss.
Former President Olusegun Obasanjo has also consistently said the refineries could no longer work.
According to him, any attempt to revive them would only lead to waste of resources.
However, some stakeholders gave kudos to the planned revival of the refineries.
Executive Secretary, Major Energies Marketers Association of Nigeria (MEMAN) Clement Isong, said the MoU was a positive development for the country’s downstream sector.
“It can only be a good thing for Nigeria. This is very positive thing. And they will help us towards the full beneficiation of our crude oil in Nigeria. And they will help with local employment. So it ticks all the boxes, and I am very hopeful that things work out as planned.
“The MoU hands over the refineries to people who can run it on a professional level, devoid of political decision making. So those refineries should be able to run efficiently and compete, which is extremely important. They will put us on our way to becoming the refining hub of West and Central Africa. It contributes significantly because it solves the three most important problems.
“Those refineries, we have been told, the problem is not that they are not working. The problem is that they are not working efficiently at scale. So, if these guys can run the refineries efficiently, and because they have a stake in the refinery, then you make it run well, isn’t it? So, this is the analysis that they have made.
“I think we should all be hopeful that it works. We want it to work. The refinery is in Nigeria. It is like a Nigerian LNG. The partners all have skill in the game. So, I think that this is the same thinking here. And I am very, very hopeful that it will, at the earliest possible date, be central, upgraded, and allowed to run efficiently,” Isong said.
President, Nigeria Labour Congress (NLC), Comrade Joe Ajaero described it as a healthy development and in line with advocacy by the labour union.
