…Says Kaduna refinery likely to fail
30 July 2017, Sweetcrude, Lagos — The Federal Government has stated that it would close down any of the country’s petroleum refinery that fails to become commercially viable or profitable within a certain period of time.
The Federal Government disclosed this in the National Petroleum Policy recently approved by the Federal Executive Council.
The government also stated that it might have to concession, divest or sell off the non-performing refineries.
According to the policy, the aim is to make the Nigerian National Petroleum Corporation (NNPC) refineries successful, high volume, commercially viable enterprises, adding that they would be encouraged to become so and would be supported as much as it is within the government’s ability to do so.
The Federal Government also stated that each refinery will be given a transition period in which to set themselves up on their own feet.
“Ultimately though, if a refinery fails to make the transition and to become commercially viable, the Petroleum Policy is for the government to divest (sell off), grant a concession or if necessary, close down any non-performing government – owned refinery. In either instance, the site may be handed over to a suitably qualified private sector developer to build a new refinery facility on the same site,” it affirmed.
It added that of the three refineries, Port Harcourt Refining Company was best placed to scale through the transition, while it projected that Kaduna Refinery and Petrochemical Company might find it difficult to scale through.
The document said, “Of the three NNPC refineries, Port Harcourt, Warri and Kaduna, Port Harcourt is expected to be the best placed to succeed. It has installed its own independent gas fired power supply, it has undertaken its own turnaround maintenance, it is close to jetties and the pipeline length from crude oil suppliers is short (less of a pipeline security risk).
“It is operationally ready to produce refined products to international standards, although the cost structure is still not right.
“Of the three, Kaduna is perhaps the least ready, currently, because of its distance from crude oil supplies and reliance on a poorly maintained crude oil pipeline.”
The Federal Government further announced a new refining model, where refineries are expected to sell products directly to multiple off takers.
According to the policy document, the regulatory stance is to ensure operators of wholesale infrastructure and/or refineries do not exercise undue market dominance, adding that to ensure a level playing field, similar restrictions will apply to any other dominant private sector participant in the market.
“Therefore, refineries with ownership of their storage and loading arms are expected to sell directly to multiple off-takers and not only to NPMC,” it maintained.
Continuing, it said, “An evolutionary process could take the form of operating maintenance service agreements with third parties, product sharing agreements (with trading outfits willing to invest a capital for refinery upgrade, co-location, etc.) and sale of equity.
“Nevertheless, under the Petroleum Policy, a strong refining sector is sine qua non for the future of Nigeria, and steps will be taken to ensure successful, commercially viable high volume, high utilization refineries in Nigeria.”