NNPC to change refinery rehabilitation model, says technical partners must own a stake
NNPC to change refinery rehabilitation model, says technical partners must own a stake
The Nigerian National Petroleum Company (NNPC) Limited says it will no longer rely on a refinery rehabilitation model where contractors are paid for the work without having a stake in the performance of the facilities.
Bayo Ojulari, group chief executive officer (GCEO) of NNPC, said the company now wants technical partners to take equity stakes in its refineries and have a direct interest in their performance.
Ojulari spoke on Tuesday at the company’s media parley in Abuja.
NNPC operates three government-owned refineries; the Port Harcourt Refining Company in Rivers, the Warri Refining and Petrochemicals Company in Delta, and the Kaduna Refining and Petrochemical Company in Kaduna.
He said NNPC’s new approach was informed by lessons from previous refinery rehabilitation projects, where contractors and other parties involved had no financial stake in the facilities after completing their work.
“What we have learned from the past rehabilitations of the refineries was multiple. But I’ll remind you again of the two of them that I’ve always talked about,” Ojulari said.
“One was that the model we have used before meant that we were incentivising people who work on the refinery, and there was no skin in the game. We pay for contractors, we pay for financing, we structure and pay for O&M, everything we pay for. Right?
“And then none of those parties that were working with us had a stake in the performance of the refinery after their work.”
The GCEO said the company’s preferred model is for technical partners to have equity in the refineries and share in their performance and success.
He said prospective partners must have a proven record of operating refineries or petrochemical facilities and be able to contribute technical expertise to the facilities.
“What we want going forward is to have a refinery that is self-sustaining, that is profitable, and is sustainable,” the NNPC chief said.
‘CHINESE INVESTORS COMPLETE REFINERY ASSESSMENT ‘
On May 4, the oil company signed a memorandum of understanding (MoU) with two Chinese firms to explore a partnership for the completion and operation of the Port Harcourt and Warri refineries.
Providing update, Ojulari said a team of Chinese engineers had spent three months conducting due diligence on the Port Harcourt and Warri refineries.
He said the assessment was conducted under the MoU to allow the investors study the facilities.
Ojulari said no final agreement had been reached with the investors.
The GCEO said the Chinese team would submit its report and proposal after the assessment, after which commercial and technical negotiations would begin.
“There are strong indications and commitment of their interest as of now in Port Harcourt and Warri Refinery,” he said.
Ojulari said the Kaduna refinery had not yet commenced the same process but NNPC hoped to begin work on it under the technical equity partnership model.
He also said refinery margins were relatively small, making volume, efficiency and petrochemical production important to the profitability of the facilities.
According to the NNPC boss, the company is also looking at newer technologies and petrochemical opportunities to improve the long-term sustainability of the refineries.
