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NNPC Will Turn to Private Sector to Fix Refineries by 2023, says NNPC Chief

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Nigeria’s state-owned oil group NNPC will attempt to resuscitate its four obsolete refineries before 2023 through partnerships with private sector companies.

Mele Kyari, the chief executive of the Nigerian National Petroleum Corporation (NNPC) said that the corporation is tinkering with the idea of adopting a Build, Operate and Transfer (BOT) model for its four dilapidated refineries.

BOT agreements allow private entities to finance, design, construct, own, and operate state-owned facilities, usually large-scale infrastructure projects, in exchange for concessions from local, state and federal governments.

Mr Kyari said financing remains a major issue in the rehabilitation of the refineries, which has forced the government to explore the idea of private-sector partnerships.

“Today we are cash strapped, we do not have all the resources needed to fix the refineries so what we decided to do is a phased rehabilitation starting with the Port-Harcourt Refinery, but we have also seen the opportunity of getting all of them done at the same time,” Kyari said in an interview with Channels Television, a local news station.

“We don’t have all the cash to put in all the refineries, so we decided to put in a BOT arrangement , where the private sector will come in with their money, recover their cost from the tariffs, operate these refineries through an operating and maintenance strategy, so that the control goes out of NNPC, and they can recover their costs over a period of time.”

Mr Kyari had first mooted the idea of a private-sector partnership in April saying that the NNPC would not be involved in the management of the nation’s refineries after their upgrade.

“We are going to get an O and M contract, NNPC won’t run it. We are going to get a firm that will guarantee that these plants will run for some time. We want to try a different model of getting the refineries to run and we are going to apply this process to the other refineries before 2023,” he had said.

He has also added that during the period of the reform that will come after the Petroleum Industry Bill (PIB) is passed, the refineries will be managed by private sector firms in a manner similar to the Nigerian Liquefied Natural Gas (NLNG) company where the Nigerian government retains a minority interest while the company is managed by oil majors.

Kyari said the NNPC would strive to attain its oft-stated long term goal of becoming an integrated shareholder-focussed, commercially-viable energy group that is committed to process automation and cost-reduction.

The NNPC is widely believed to be one of Nigeria’s most inefficient and corrupt public corporations. Highly leveraged and seen as a conduit for large-scale theft by public officials and politicians, the corporation has struggled to effectively manage the nation’s upstream and downstream oil sectors

Industry sources say that like his predecessors, Mr Kyari recent statements on fixing the refineries before 2023, an election year, might be have political undertones as there is no framework to support this timeline.

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