A new report by the Nigerian Extractive Industries Transparency Initiative, NEITI which puts average capacity utilisation of Nigerian refineries at 8.55% in 21 months is questioning Federal Government’s insistence to hold on to the derelict assets.
The report states that the refineries did not process crude oil at all in seven out of the 21 months under review.
“Consolidated capacity utilisation of the refineries was above 20% only in August 2015 (24.08%),” the report states.
Meanwhile, NEITI reports also, that the Nigerian National Petroleum Corporation (NNPC) recorded a cumulative loss of N418.97 billion in 21 months between January 2015 and September 2016 earning marginal profits in only two months during the period under review.
“Apart from January 2015 when the group made a profit of N7.6 billion, it also realised N0.27 billion as profit in May 2016, with total profit in 21 months coming to N7.87 billion, as against the loss of N418.97 billion, with total loss coming to N411.1 billion,” NEITI said in its report.
Out of the 245.48 million barrels that NNPC received for domestic supply in 21 months, only 24.78 million barrels were delivered to the refineries for processing, amounting to only10.06% of what the NNPC received for domestic consumption, said the report which ranked Kaduna and Port Harcourt refineries as worst and best performing refineries respectively.
Ibe Kachikwu, receiving members of the House of Representatives Committee on Petroleum (Upstream), who were on oversight visit to the ministry on December 20, said Nigeria’s three refineries were not up for concession or privatisation.
Kachikwu said government rather favours private sector investments and subsequent joint ownership and management of the plants for greater efficiency, adding that it would not spend its money to repair them.
In March this year, the Nigeria National Petroleum Corporation (NNPC) opened bids for the co-location of refineries with the objective of increasing the nation’s refining capacity from 445,000 barrels per day to 650,000 and claimed it received bids from nine companies.
Yet nine months later, there is no evidence that the refineries have met their capacity, prior to the collocation bid, let alone added capacity.
Austin Avuru, chief executive officer of Seplat Petroleum Development Company Plc, a major player in the oil and gas industry, in a December 3 article for African Oil & Gas Report, called for the sale of the refineries, as they have been a drain on the national purse.
“The NNPC’s own financial reports in the last ten years, show that about 80 per cent of the losses they have been reporting come from operations of two major segments of their business: refineries and the PPMC (Petroleum Products Marketing Company) so what does the country honestly lose today by selling the refineries?” he asked.
Cyprian Nwuya, former Lagos State chapter chairman of the Institute of Chartered Accountants of Nigeria, agrees. He says the refineries are adding little value to Nigeria and they should be sold.
Taiwo Oyedele, PwC head of Tax told BusinessDay that he is in total support of selling virtually all of government’s assets, especially the refineries on the basis that private sector led businesses are well managed.
“Generally, in terms of assets, I think government should sell off everything, not just because we need this money but because we need those things to run efficiently.
“America produces more than 9 million barrels of crude oil per day, they don’t have a national oil company, they make more money from oil than Nigeria, so from the angle of efficiency they should be sold,”
A review of NNPC losses indicated volatility in the pattern in which its expenditure consistently outstripped revenues, with the difference varying from N3.55 billion in January 2016 to N45.49 billion in September 2015.
Waziri Adio, executive secretary of NEITI, commended the NNPC for providing up-to-date information to Nigerians on the state of the country’s petroleum sector, through the monthly financial and operational reports published since August 2015.
Adio however called on the NNPC to improve on its self-declared commitments to openness, transparency, and accountability.