Withdrawal of refinery licences

The Minister of State for Pretroleum Resources Emmanuel Ibe Kachikwu


The move by the Federal Government to withdraw the refinery licences that have remained unutilised in the hands of some private investors is a step in the right direction. Given the huge amount of money being spent by the country on fuel importation, the solution to that profligacy is, no doubt, local refining for which the licences were given. Having failed to live up to expectations for so many years and for whatever reasons, the licensees are genuinely no longer deserving of such permissions.

The licences were granted in the belief that, by now, they would be operational and help to reduce the incessant fuel scarcity caused by the overdependence on importation. But, alas, this is the case.

Minister of Petroleum Resources, Ibe Kachikwu, the other day, reiterated that the aim of giving the licences was to reduce the huge capital flight as a result of fuel importation. It was also envisioned that the licensees would proceed to meet local demand and look at possible exports.

Kachikwu said he had come to the conclusion on the matter of the unutilised permissions after thorough examination in collaboration with the Department of Petroleum Resources (DPR), the agency with the statutory responsibility of processing applications for various licences, permits and approvals across the oil and gas chain.

It would be recalled that in June 2002, the Federal Government, under former President Olusegun Obasanjo, granted licences to 18 private firms to construct and operate refineries.

The companies included Akwa Ibom Refining and Petrochemicals Limited, Tonwei Refinery, Ilaje Refinery and Petrochemicals, NSP Refineries Oil Services Ltd as well as Ode-Aye Refinery Ltd. 

Others were Orient Petroleum Resources Ltd and Owena Oil and Gas Ltd, Southwest Refineries and Petrochemicals Company, Starex Petroleum Refinery Ltd, The Chasewood Consortium, Total Support Refineries and Union Atlantic Petroleum Ltd. 

The private refineries were supposed to complement the existing ailing four state-owned refineries, which despite having a combined production capacity of 445,000 barrels per day (bpd), were and still are unable to meet the nation’s petroleum products demand. 

It is worrisome that 15 years after the licences were granted, there is practically no visible construction by the private concerns, which effectively defeats the purpose of granting the concessions in the first place.

There must, of course, have been inherent flaws in the way those licences were granted. It is either the government set stringent hurdles that were difficult to scale or the investors lacked the capacity to deliver. In all, it is safe to say that due diligence was not done, the companies licensed were not ready and the permissions granted have hardly been anything more than the papers on which they were written.

Even as this has justified the decision to withdraw the licences, it is pertinent to ask, if only for record purposes and avoidance of such empty exercises in the future: what were the terms of the agreements? What were the specifications of the refineries and time-lines for delivery? Why were the firms unable to deliver and which party between the government and the licensees, if that was the case, has been more culpable in failing to meet its own commitments.

It is heartwarming, at this juncture that the Dangote Group is in the process of completing its refinery and ENI, the Italian oil giant, is in the process of building one in Nigeria.

Whereas, Dangote Group is building a $12 billion ultra-modern refinery project that is scheduled for completion in the first quarter of 2019 in Lekki, Lagos, the Federal Government and Nigerian Agip Oil Company (NAOC), a subsidiary of Italy’s ENI, have signed a $15 billion refinery project in the Niger Delta that will include investment in power. Although, Dangote Group has perfected plans to lay gas pipelines from Bonny through Ogidigba, Olokola down to Lekki and Escravos, the Agip refinery has the added advantage of being located in the Niger Delta which is the source of the feedstock.

These refineries are coming as a light at the end of a dark tunnel. If the country had had the benefit of good leadership, Nigeria ought not to be an importer of finished oil products in any form, including the opaque and corruption-ridden swap arrangement operated by the Nigerian National Petroleum Corporation, NNPC, not to talk of contracting private oil marketers to import the same products for which huge subsidy is paid. The result of these is such monumental corruption as is threatening to drown Nigeria today.

The first refinery in Nigeria was built by Shell BP in 1965. Unfortunately, Nigeria as a state went into refining but went on to prove incompetent and too corrupt at it.

On that account, the ENI initiative proposed to be located in the Niger Delta area is a positive development. To take maximum advantage of it however, the Niger Delta states’ governments should brace up for capacity development. The refineries will need trained technical manpower. The states should do a human capacity audit, institute a scheme for training and getting the people employed in the oil refining company. The states may wish to team up instead of working on individual basis to be able to do this and take advantage of new developments.

As the nation grapples with its many economic challenges, every avenue to add value to mineral or agricultural resources, get the people employed, create wealth and alleviate poverty must be strategically explored.

In this article:
Ibe Kachikwu


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