The NNPC Limited has said it may not be possible for the Port Harcourt, Warri, and Kaduna oil refineries to function at their full capacities when they come back on stream after rehabilitation.
The Group Chief Financial Officer (Group CFO) of NNPC, Umar Ajiya, who spoke on Arise News Channel, noted, however, that they would operate at about 80 to 85 percent nameplate capacity because they were constructed roughly 30 years ago.
Ajiya disclosed that work on the Warri refinery would likely start next week, noting that the newly adopted model would ensure that the right thing was done so that lenders on the project can be paid back as soon as possible.
According to Ajiya, the NNPC Limited decided to repair the assets because it would endanger its objective of ensuring energy security for the nation without some level of operation downstream.
“As envisaged in the Petroleum Industry Act (PIA), we have to ensure energy security for the country. To that extent, we cannot run away from the refineries. We have to rehabilitate them.
“But what is changing is that the refineries are going to be rehabilitated with a combination of our equity and lenders’ money and no lender will lend you money unless they know the money will come out after the rehabilitation.
“But on top of that, the lenders have also insisted that there have to be O&M contractors supervising the operation of the refineries day in and day out. So, rehabilitation is ongoing. Port Harcourt is ongoing, Warri is about to commence any moment, probably next week,” he disclosed.
The CFO argued that if the nation were to build new refineries, they would cost too much, maintaining that the rehabilitation undertaken by the NNPC Limited remains the best in the circumstance.
“So, we have that intention to make sure these refineries come back. New refineries are very expensive. You are talking about $3 billion to $5 billion, but the rehabilitation is costing $1 billion and Warri is less than $500 million.
“These refineries will be rehabilitated but they cannot operate at 100 percent nameplate capacity. They have constructed almost 30 years ago, so you will expect that when they are fully rehabilitated, they will deliver between 80 percent to 85 percent capacity.
“However, these same refineries that are being rehabilitated are going to deliver value to not only the shareholders but to lenders who have put money on the table. So, we don’t see any issue because irrespective of whether you rehabilitate or not, you have to do the regular maintenance needed for any plant, whether annual or biannual,” he stated.
He said some other commercialized government businesses failed in the last because, in those circumstances, the code of corporate governance was not institutionalized, adding that even after privatization, the government still controlled the majority holding.
For him, in the short to mid-term, the NNPC Limited will require private funding so that all control mechanisms will be fully activated.
“That’s why in the PIA, the law envisages that we should go public. When you bring private equity participants, they will ensure that the code of conduct works and that if the board is not performing, it’s easy to fire them and if management is not doing its work, it will be fired by the board,” he added.
