The Nigerian National Petroleum Corporation (NNPC) has developed a new commercial model that may attract investors for the Port Harcourt and Warri refineries.
The Corporation disclosed that President Muhammadu Buhari has approved its implementation of a new commercial model that would get investors to invest in the restoration of the efficiency levels of its refineries in Port Harcourt, Warri and Kaduna.
Speaking at the ongoing Nigeria Oil and Gas Conference in Abuja on Wednesday, the Chief Operating Officer (COO) of Refineries of NNPC, Anibor Kragha, said under the new model, strategic investors who be engaged and would come in with refining and funding expertise to partner with local investors who understand Nigeria’s downstream oil market and revamp the refineries.
NNPC’s refineries have for years operated below their capacities. They have also become more of loss entities in the monthly profit and loss accounts of the corporation.
Kragha however stated that within the new model, this would change with capital investments by investors who would be repaid from incremental production of the refineries on prior agreed terms.
He also explained that it would not sell equities of the refineries to any of the investors, adding that the arrangement would be purely based on invest, operate for a period and earn returns on investments.
He said government had met with the original builders of the Kaduna and Port Harcourt refineries – Chiyoda and JGC, to undertake technical appraisal of the refineries, from which the final funding model for the new arrangement would be agreed.
“Because of what is happening and the global trend, President Muhammadu Buhari gave approval for strategic investments to be made in the refineries, so the investment model is basically this way – strategic investors who can bring refining expertise and funding will partner with local partners with downstream experience to actually go into the refineries, invest money over and within 24 months to get us to 90 per cent capacity utilization.
“We are in the preparation stage. We had meetings with Chiyoda who was the original refinery builder of Kaduna and JGC who built Port Harcourt, and the idea for going with them is that because they do this consistently, they have access and we expect them to open their supply access to us to enable us get parts and pricing at better rates.
“We are getting a lot of interests and expressions from a wide range of people. GE has a consortium they are bringing, there is ENI and Oando as well. The Original Refinery Builder (ORB) will sit together and come up with an aligned cost that we will put into financial models.
“The only way we are going to do this is that they will only get paid from incremental revenues that are generated by incremental production from the refineries, essentially, they have to put their money where their mouth is and because we have technical expertise and funding, we can make these refineries work,” he said.