Ex-Petroleum Minister Reveals How Buhari Rejected Saudi, Qatari Bids for P’Harcourt Refinery

Former Minister of State for Petroleum Resources Ibe Kachikwu has disclosed that former President Muhammadu Buhari rejected proposals to hand over the Port Harcourt refinery to private investors, including Saudi Arabia and Qatar, for rehabilitation during his tenure.

Kachikwu, who was also a former Group Managing Director of the then Nigerian National Petroleum Corporation, made the revelation recently while speaking at a business mentorship lecture series organised virtually by the Nigerian Content Development and Monitoring Board.

He explained that after restarting the refinery in 2015 with local engineers at a cost of less than $40m, his plan was to concession it to private investors, including Saudi Arabia, Qatar and Nigerian consortiums, who had already shown interest.

“If I remember very well, in December 2015, we took the unusual step of reopening the Port Harcourt refinery using local engineers from NNPC who understood the facility and could repair the refineries, and it cost us probably less than $40m at the time. So again, I refused to go into this love to turn around maintenances which are costing billions. I never did any.

“My attitude was that the private sector should take over the refinery, pay government licence fees and taxes, and put in the funds to repair it and make it operational. There were investors ready to take it, but the proposal was not approved. I believed we should hand over the refinery. Saudi Arabia was ready to take it; Qatar was ready to take it. Private Nigerians who have had a bid process put together teams which should have taken over the refinery, paid government licence fees and taxes and some level of joint venture money. And then, go ahead to repair the refinery and make it operational, but it failed because it wasn’t approved,” Kachikwu said.

According to him, when privatisation efforts stalled, he introduced the idea of co-location projects that would allow new investors to build within the premises of the existing plants and share facilities such as storage, pipelines and terminals. However, he said the government later abandoned that plan and returned to the old model of refinery repairs.

“When that failed because it wasn’t approved, I went to co-location, trying to bring new investments into the same refinery but in a fenced yardage, but be able to share certain facilities like storage, pipelines, terminals and that sort of stuff. When the government abandoned it and said no, they want to go and repair refineries again, we’re still there today,” he explained further.

Kachikwu added that his resistance to costly turnaround maintenance contracts was part of the reason he pushed for private sector involvement.

The former minister said Nigeria could have achieved self-sufficiency in domestic refining earlier if the privatisation and co-location models had been pursued, rather than recurring government-led repairs that have left the refineries moribund.

He recalled awarding licences to nine modular refineries, four of which he said are working today.

Recall that the Port Harcourt, Warri and Kaduna refineries are still not working despite the billions of dollars invested in turnaround maintenance. The Port Harcourt refinery, which was declared operational last year by the Mele Kyari-led Nigerian National Petroleum Company Limited, was later shut down in May.

While Nigerians called for the sale of their facilities, the new Group Chief Executive of the Nigerian National Petroleum Company Limited, Bayo Ojulari, refused to sell them.

Ojulari had stated that the Port Harcourt refinery was losing as much as N500m every month on operations before rehabilitation works were suspended. According to Ojulari, the refinery was pumping about 50,000 barrels of crude, but less than 40 per cent of the equivalent of what was going in was being processed effectively.

He said, “When I resumed, one of the first priorities I focused on was the refinery. I did a quick review to see if we could quickly fix it. What I found is that we were losing between $300m and $500m on a monthly basis. The first thing we said was, ‘Rather than continue to lose, let’s quickly stop and look for a way to put this refinery into a sustainably profitable venture.”

Amid speculations that the refineries may not work again, Ojulari showed strong determination that they will work again.

Contrary to the views of the President of the Dangote Group, Alhaji Aliko Dangote, that the refineries might not return to operations, Ojulari said the NNPC is highly determined to achieve this.

The organised private sector, the Manufacturers Association of Nigeria, petroleum marketers, and other stakeholders have all called for the sale of the refineries, but Ojulari rejected the advice. In July, Dangote stated that the refineries, which are under the management of the NNPC, had gulped up to $18bn, yet they have refused to work.

Recall that Ojulari himself echoed a similar sentiment in an interview with Bloomberg at the same time in Vienna, Austria, stating that the country had invested heavily in the refineries without getting any tangible results. He said reviews were ongoing and that would lead the NNPC to do things differently.

“And as you know, we are determined! We are determined to make sure that our refineries work. We’ve been spending a lot of time on detailed reviews (sic), taking all the learnings. We are driven by the fact that the Nigerian states and the future of Nigeria’s success are above any individual of us. That’s what drives our determination to ensure that we put a solution that is sustainable for our refineries,” he said last month.

Ojulari, who officially ruled out the sale of the Port Harcourt refinery, reaffirmed his commitment to completing “high-grade rehabilitation” and retention of the plant.

He stated that the position isn’t a shift. Rather, it was informed by ongoing detailed technical and financial reviews of the Port Harcourt, Kaduna, and Warri refineries.

The statement indicted the past NNPC executive, quoting Ojulari as saying that “the ongoing review indicates that the earlier decision to operate the Port Harcourt refinery prior to full completion of its rehabilitation was ill-informed and sub-commercial.”

He was quoted as saying, “Although progress is being made on all three, the emerging outlook calls for more advanced technical partnerships to complete and high-grade the rehabilitation of the Port Harcourt refinery. Thus, selling is highly unlikely, as it would lead to further value erosion.”

Meanwhile, Nigerians are hopeful that more resources will not be wasted on efforts to revamp the moribund facilities.