Reps halt NNPC’s $400m loan for refineries upgrade

*Nigeria's House of Representatives.

*Nigeria’s House of Representatives.

…AS NNPC fails to show proof of Presidential approval for projects

Oscarline Onwuemenyi

21 July 2016, Sweetcrude, Abuja – The House of Representatives Committee on Privatization and Commercialisation on Wednesday stopped the bid by the Nigerian National Petroleum Corporation (NNPC) to acquire a $400 million loan for the upgrade of the four refineries in the country.

The Hon. Ahmed Yerima-led committee said the NNPC was breaching Section 11 (g) of the Public Enterprises ( Privatisation and Commercialization) Act 1999, which gives the National Council on Privatisation (NPC) the power to do such.

Members of the Committee said the NNPC should suspend outrightly the proposed restructuring and privatisation of the four refineries because of the breach of the regulations in the Bureau of Public Enterprises (BPE) as well as the Presidency’s delay in inaugurating the National Council on Privatisation (NCP).

The Committee further said it would formally communicate to President Muhammadu Buhari on the need to adhere to due process and avoid the pitfall of commercialisation and privatisation exercises that were made in the past.

The Committee noted that breach of policy guidelines and extant regulatory framework and undue rivalry among Government agencies is giving investors concern.

Chairman of the Committee on Commercialisation and Privatisation, Mr Ahmed Yerima in his ruling directed BPE to take over the process and also directed NNPC to suspend all the activities put in place.

He said without the relevant regulatory agencies, the committee House will not support the project.

According to NNPC document submitted to the Committee and obtained by our Correspondent, “in 2015, the refineries posted combined losses of N82 billion and processed only 8 million barrels of crude in total.”

At the meeting, yesterday, the failure of the NNPC management to present documents showing the approval allegedly given by the President for the proposed improvement of the refineries’ capacity utilisation to 80% within one year on the basis of the subsisting ownership structure, made members of the committee angry.

Also, the $50 million agreement signed by NNPC with a Chinese company, without any clear work plan got the disapproval of the lawmakers.

Group Executive Director (Refineries) Anibor Kragah, who spoke for NNPC, said the report on the privatisation of the refineries, was not true.

According to him, “The proposed investment proposals do not involve commercialisation or any transfer of ownership, assets, shares or control of the three refineries NNPC owed refining companies and are fully aligned with the current administration’s drive to ensure that the midstream and downstream sectors of the Nigerian Oil and Gas industry become self-sufficient in refining of petroleum products in the shortest time frame to ensure the country’s economic growth.

“The need to rehabilitate the refineries is also in alignment with the aspirations of the National Assembly as communicated to NNPC at several engagements.”
The refineries, he said, have recorded very poor performance over the last decade (30% average capacity utilisation vs global benchmark of 90%).

He said NNPC does not need to subject the process to BPE approval, adding that that “BPE also shared its concerns regarding the viability of utilising JV arrangements for the rehabilitation exercise and the potential implications of the proposed activities on any FGN privatisation plans in future.”

The exercise, Kragah said, has been put on hold in line with the directive of the House, adding that the Corporation has so far placed tender for investors to expressed interests.

BPE Acting Director General, Dr. Vincent Akpotaire, however, denied knowledge of the process, saying the privatisation of the refineries has always been part of the Bureau’s work plan tagged ‘potential transaction’.

According to him, due to the political mood at the time due to the death of late President Umaru Yar’Adua, the previous exercise for privatisation of 51% equity stake of both Kaduna and Port Harcourt refineries to Bluestar Oil Services Limited (preferred bidder) for $561 million and $160 million were truncated.

Sales of the refineries were cancelled and the bid money refunded with accrued interests paid to the two bidders.

He said there is the need to review the funding challenges in the oil and gas sector.

“The glaring inefficiencies in the sector coupled with the bureaucratic nature of NNPC that the JV model has a gloomy future is very unlikely to succeed given the that it is the same agency and people that have been unable to run the refineries that will be called upon to regulate and supervise the joint venture operations,” Akpotaire said.

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