Petroleum industry and the politics of crude oil refineries in Nigeria

By Dan D. Kunle

Warm greetings,  Mr. Kachikwu. I woke up this morning to read on the internet of your declaration to resign if Nigeria continues to import petrol by 2019. I am sure you are entitled firstly as a citizen of Nigeria,  secondly as Minister of State for Petroleum Resource, of the Federal Republic of Nigeria and also as the current Chairman of the Board of Directors of NNPC. These three status eminently qualify you to express yourself at any time, in any place and on any matter in Nigeria, but I will be talking to you as an ordinary citizen of Nigeria in response to the above caption.

1.    Your resignation should be now and not 2019 because in August/September 2015 during your visit to Port Harcourt and Warri refinery sites you publicly declared that the  management of Port Harcourt refinery had used $10M to fix the refinery as against the realistic figure of about $295M offered by the original equipment manufacturers vendors/engineers for the TAM program. You also declared that by the close of 2015 it is expected that Port Harcourt refinery and probably Warri would be working at 90% capacity, thus reducing petroleum importation and possibly eliminating the subsidy controversies. Till this moment that I am writing, the crude oil refineries in Port Harcourt, Warri and Kaduna are yet to be fixed needless to mention if they have ever attained up to 50 or near 90% production capacity utilization since you came on board.

2.    Your resignation should be now because you still have not concluded the preliminary planning and necessary tender processes that will lead to the final award for the TAMs of the four refineries. Between 2015 and 2016, you made a public declaration that ‘would be’ investors should come to fix Port Harcourt refinery and invest in relocating any operational refinery of about 100,000 barrel capacity to be co-located within the facilities of Port Harcourt refinery and probably same for Warri refinery. Nigerian people have waited till this moment to see how such transaction would be consummated, but to no avail. Could this still be the new transaction you are trying to consummate with Oando and Agip. I am aware from records that Agip built Warri refinery and not Port Harcourt refinery so how easy will it be for them to take over the Japanese plant in Port Harcourt against their own in Warri. Meanwhile, petroleum product importation and storage management has remained an endemic problem in Nigeria.

3.    Your resignation should be now because as the GMD of NNPC in 2015 you declared that you would get all the refineries to work in order to stop the importation of petroleum products and this led to NNPC/ PPMC almost becoming the sole importer of petroleum product for a very long period because all the major private retail companies in Nigeria became apprehensive and hesitant in competing with NNPC/PPMC. Not until the crises of petroleum shortages were imminent before the downstream operators were again invited to join the import transactions. Petrol importation has continued till this moment plus the famous SWAP that was originally widely condemned for the opaque manner in which the transactions were structured. Today, you have just realigned the SWAP transactions to continue, maybe for the next two years you have set for yourself to resign. How will you manage these two contradicting objectives. For some companies to be taken crude outside for refining and at the same time get them to fix the four refineries for Nigeria. Who will be the umpire, BPE/NCP or the almighty PIB that is yet to be passed?? If by chance the four refineries become operational in the next two years with a total capacity of 445,000 barrels per day plus Dangote’s 650,000 barrels per day, Nigeria may then become a net exporter of refined petroleum products rather than crude export for white product imports; Big dreams!!! Let us pray the Tesla vehicles will not harm this dream.

4.    Your resignation should be now because by the year 2019 you would have completed your second half of this match if the imminent cabinet reshuffle does not exit you. It appears you are targeting 2019 when the Dangote group would have almost, if not completed the 650,000 barrel crude oil refinery in Lagos which you know will give Nigeria between 30 to 40 million liters of petroleum products per day. This is about the volume currently consumed in Nigeria without the functional Warri, Port Harcourt and Kaduna refineries. I hope you will by this fact know that you are playing on the senses of the ordinary citizens of Nigeria who are not as privileged as yourself within the exclusively privileged petroleum industry.

5.    Your resignation should be now because you know that to fix the four Federal Government owned refineries cannot happen in the next 1 to 1 1/2 years if you were to have the mandate and the funding today, taking into consideration all the due processes that are involved as enumerated by Mr. Simon Kolawole at the back page of Thisday newspaper of Sunday the 21st of May 2017. I am sure you are fully aware that most of the four refineries are technically insolvent and they have huge social liability issues because they were poorly maintained over the years and the communities have never totally offered their social licenses to the owners and operators of these refineries. There are also environmental issues to be attended to because of the corrosive nature of these refinery complexes.

6.    Your resignation should be now emphatically because you have for the last two years not allowed the four refineries to be opened up for privatization by Concessioning or by Liquidation or by Core Investor Sales. This your fresh ambitious move to either concession or farm out the refineries to any ‘would be’ investor must be advertised and all the criteria stipulated by the procument laws, BPE laws and ICRC laws must be complied with as raised by Simon Kolawole at the backpage of Thisday on the 21st of May 2017. This is the transparency issue.

7.    You should resign now because for the last two years we have not been made aware of what you have done with the Nigerian Gas Master Plan and the possible divestment of Federal Government interest in the Nigeria Gas Company to allow for more private participation in the gas production, processing and distribution across Nigeria. This singular lack of focused attention to the Nigerian gas supply, security and sustainability has caused the power generating companies including the NIPP plants (owned by FGN), a very serious performance hardship emanating from the inadequate and inconsistent gas volume and quality supplies. The appropriate gas pricing and tariff is yet another serious fiscal issue but that can be addressed as a subsidiary item in the entire Gas Master Plan implementation strategy when it is opened up. Your so called Gas Investment Blueprint was just paperwork and had no investment appetizing content. This may be the reason why nothing has been heard since the public declaration was made by you last year.

8.    You should resign now because all the gas power generating plants in Nigeria depend largely on the gas supply from NGC and they have continued to perform below optimal, compared to SHELL operated AFAM 6 Power Plant and OKPAI Power Plant operated by AGIP. You superintended over NNPC as the GMD until you were promoted to become Minister of State for Petroleum and now Chairman of the Board of NNPC, but you have not been able to either stabilize the supply of gas to all the power generating plants in Nigeria nor have you been able to proffer an alternative solution to the erratic supply of gas. I am sure you are aware that Ghana and Senegal are planning to build Regasification plants to receive LNG from near suppliers such as Nigeria, Malabu or any other economically viable sources across the globe. We are yet to know when you will initiate the first Nigerian Regasification plant as an alternative to the pipeline vandalization and maintenance problem. Nigeria has 49% of the 22 million tons LNG capacity at Bonny Island, it is all for export. How can you explain this?

9.    You should resign now because NNPC in all intents and purposes is still a loss making going concern and not a profit declaring entity. This is because you should be aware of the huge judgment debts and numerous arbitrations resulting from various contractual defaults and failures that are hanging on NNPC and by extension, the Federal Ministry of Finance. All these may eventually be paid for by the National Treasury. This is the reason why it may even be wiser for you to recommend to the National Council on Privatization and the President to liquidate the four Federal Government owned crude oil refineries across Nigeria as they remain loss making business subsidiaries of NNPC. It is time to cut the cancers and stop the bleeding.

10.    This is my tenth reason for you to resign and I speak as an ordinary citizen. You have allowed NNPC to go into retail petroleum product competition with the six former majors; National Oil (Conoil), Mobil, Total, AP (Forte Oil), Texaco (MRS), Unipetrol (Oando) that are now fully private. This NNPC retail strategy has continued to distort the true pricing mechanism for petroleum products in Nigeria. It has continued to disallow the federal government to know the true scientific subsidy margin to be provided for either PMS or Kerosine. It has also disallowed the six majors from expanding their investment ambitions because they have waited to see a clear market deregulation but you have not addressed this anomaly in the last two years. I think in my ordinary layman understanding of market economy, you would have done better for the Nigerian people in the last two years if you had encouraged Mr. President who is the Minister of Petroleum to open up the downstream and midstream sectors with close Monitoring and Regulation rather than working hard to consolidate the stronghold of NNPC in the retail segment. PPMC cannot even maintain and put into full function all the product pipelines and depots across the country as they now depend heavily on the independent oil marketers’ storage facilities. The independent oil marketers have built storage and tank farms with capacity bigger than PPMC attracting huge bank loans that are unattended to due to the opaqueness of the market. These are clear evidences that you have not used your office and position to help the operators and participants in the oil and gas industry to grow and to increase market efficiency both rather they remain under the yolk of avoidable bad debts. I hope the subsidy refunds are being paid to date.

Mr. Kachikwu, you have earned political power and privileges in the last two years but you have not used it to resolve the problems you met, rather you have continued to compound them and create new problems. You talk to us at every opportunity with the media as if we must swallow everything you say without cross checking the facts in the last two years. I and many Nigerians await your resignation now, so that you would have made history in the Nigerian Public Service and then become the best friend of the ordinary citizen.

Email: [email protected]