Private Sector Funding For Refineries Hampered By Interest Rates, Others
Interest rates on pre-funding loan and commercial pricing for Direct Sale-Direct Purchase of crude between the Nigerian National Petroleum Corporation and international oil companies, among few other concerns, are issues that stalled the provision of funds for the revamp of Nigeria’s refineries by private investors.
It was gathered that although everything required to get the rehabilitation of the refineries going had been progressed to an advanced stage, negotiations with the consortia of private sector financiers to secure funding for the project had stalled.
In an in-house report for January 2019 obtained from the national oil firm in Abuja on Monday, the Group Managing Director, NNPC, Maikanti Baru, specifically stated that the negotiations “stalled as NNPC and the consortia have varying positions on key commercial terms.”
Baru explained that the development had led to a slight delay in the full take-off of the refineries’ rehabilitation project as scheduled.
He added, “Interest rates on pre-funding loan and commercial pricing for DSDP, among other commercial terms, have impacted finalisation of the funding agreements and first drawdown on funds to mobilise the original refinery builders to site.”
The DSDP arrangement between the NNPC and international oil companies basically allows the corporation to exchange crude oil with international oil traders for imported petroleum products over a period of time.
For instance, on November 1, 2018, the NNPC announced that it had signed a six-month DSDP agreement with the British Petroleum’s trading arm, BP Oil International Limited, for the supply of Premium Motor Spirit, popularly known as petrol.
It explained that the agreement was part of measures to sustain the supply of petroleum products across the country and that the pact represented 20 per cent of NNPC’s total PMS supply under the DSDP arrangement.
In the January report, Baru, however, gave the assurance that the refineries’ rehabilitation project was still on course as alternative financing schemes and engineering, procurement, and construction execution strategies had been developed to ensure that rehabilitation work on the refineries commenced in the first quarter of 2019.
He said, “The scope of work for detailed technical study (Phase 1), which is inclusive of early works and placement of orders for long lead items, and price negotiations have been firmed up with the original refinery builders, once the funding is secured and the contract is executed, the ORBs will mobilise to site.”
He said that despite the challenges being experienced with the refineries, major rehabilitation works were carried out on them.
The NNPC boss stated that the Warri Refinery and Petrochemical Company had it Distribution Control System successfully upgraded, while the Port Harcourt Refining Company and Kaduna Refining and Petrochemical Company had major interventions in their Fluid Catalytic Cracking Units, Power Plants Units, as well as Catalytic Reforming Unit and Crude Distillation Unit, respectively.
“WRPC has demonstrated that it can successfully operate all its process units if it gets a continuous supply of crude oil. The NNPC Escravos facility that has constrained crude oil supply to WRPC is expected to be fully operational by second quarter of 20 1 9 and the refinery’s performance is projected to improve,” Baru said.
The NNPC helmsman said plans were on to boost local refining capacity, as the corporation was working to establish two condensate refineries at Western Forcados Area and Assa North Ohaji South areas of Delta and Imo states respectively.
Baru also stated that plans were on to establish a collocated brownfield refinery at the PHRC complex; and get a consortium of an international oil company, ENl , and its local partner, Oando , to build a greenfield refinery.