By Kelvin Adegbenga
Since the announcement by the Federal Executive Council on Wednesday, 17th March, 2021 of the Rehabilitation of the Port Harcourt Refinery Company Ltd and the approval of the sum of $1.5 billion many has supported and few kicked against it.
What brought my pen to paper is the Monday, 22nd March 2021 Leadership Newspaper publication titled “What $1.5Bn Refinery Repair Says About Nigerian Story: The More You Look, The Less You See”
Several questions came up from the write up such as: Where is the larger public interest in the deal?
Detractors usually think a mere mention of rehabilitation means another round of “business as usual”, where resources are drained with nothing to show for it at the end of the day.
While some of these arguments are justifiable, it is instructive to note that this rehabilitation is different because interested parties who benefit from the age-long importation largesse (and who fleece the nation dry) will potentially be out of business by the time the rehabilitation is completed.
This is the same for detractors who see nothing good in Pres. Muhammadu Buhari’s administration. These detractors probably forgot that this was an administration which, from its inception, made clear its intention to bring back the refineries to their optimal capacities.
The Buhari Presidency also threw its full weight and support behind the NNPC and gave the Corporation a free hand to execute the project without any interference in the contracting processes.
On why is a government that is divesting and encouraging the setting up of modular refineries now competing with private refiners? What is the point in deregulation when government insists on feeding the beast of public enterprise?
My point is you do not sell a refinery that is not functioning. It is not every sale that led to success. Ajaokuta Steel plant was sold but it did not make any difference. The people who bought it only tried to cannibalize it and then try to sell it off.
So therefore, if you sell a refinery that is not working, the buyer might just decide to break it apart and then sell it off.
On why should a government already in debt borrow at least $1billion to repair a company already listed for sale and at a cost many times over what was quoted eight years ago?
The rehabilitation is to be funded through part-loan and part-government, with the financiers actively monitoring the execution of the project.
Moreover, African Export-Import Bank (Afreximbank) is the reliable lender that has agreed to raise up to $1billion towards the rehabilitation project. In the same vein, Government will raise the sum of US$550m. A credible and capable lender like Afreximbank would never agree to put such huge amount of money where there will be no value.
And if the lives of Nigerians depended soley on repairing the Port Harcourt Refinery, why couldn’t government approach the original manufacturers, JGC, directly, to cut out the middleman and reduce costs?
For clarity sake, Tecnimont SpA is a representative of the Original Refinery Builder (ORB) which is one of the top ten global Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) Contractor in refineries, is globally reputable and capable, with requisite experience of similar jobs across the globe.
Nigerians should understand that when the refinery is working at full capacity, the government will then take a decision what to do with it; either to sell it off to private sector or to privatize it.
Whatever government wants to do with it will be done after the rehabilitation as the Buhari’s administration want to give Nigerians a functional refinery first.
Previous diagnostic review of the Refineries usually end up in corruption but since the emergence of the 19th Group Managing Director of Nigerian National Petroleum Corporation, Mal Mele Kyari, he has vowed to put an end to the corruption epidemic that has eaten deep into the NNPC.
Unlike what is obtained in the past, the current refineries rehabilitation project is different for the following reasons: It consists of a governance structure that includes key independent external stakeholders: Ministry of Finance, NEITI, ICRC, PENGASSAN and NUPENG; Unlike the regular TAM, this rehabilitation will involve comprehensive repairs of the plant with significant replacement of critical equipment to ensure that the plant’s integrity is maintained for a minimum of ten years; It is funded through part-loan and part-government, with the financiers actively monitoring the execution of the project and KBR and NETCO are acting as NNPC Engineers who will be supervising the EPC contract to ensure that the project is delivered on schedule, within budget and at the right quality.
There are quite a number of benefits in bringing the nation’s refineries back on stream. From satisfying local energy demand, growing the nation’s GDP, to strengthening the Naira by reducing the demand for Forex to creating thousands of jobs across the value chain (crude supply, operating and maintaining the refinery, product supply etc) including several third-party contractors that will supply outsourced services or goods, the advantages are huge.
The refined products also serve as feedstock for small scale local manufacturing. The most significant and visible benefit is energy security for the country. Imagine if COVID-19 lockdown became global and Nigeria couldn’t import, it would have been a disaster as there was no capacity to refine crude in-country and as such, there would have been no products at all. That will be a true definition of disaster!
Kelvin Adegbenga writes from Port Harcourt and can be reached via kelvinadegbenga@yahoo.com, @kelvinadegbenga
