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NNPC explains delay in take-off of private refineries

The Nigerian National Petroleum Corporation (NNPC) provided insights into the reason why some completed private refineries are yet to commence production.

Mustapha Yakubu, the Nigerian National Petroleum Corporation (NNPC), Chief Operating Officer (COO) Refineries, gave the insights as a panelist at the ongoing 2021 Nigerian Oil and Gas (NOG) conference in Abuja.

The panel dwelled on the topic: “What strategies in the mid and downstream sectors will take Nigeria closer to energy self-sufficiency?”

According to Yakubu, the investors are yet to conclude an arrangement with the corporation on the procurement of feedstock for the refineries.

He disclosed that ordinarily, crude oil is sold in foreign currency but owing to the volatility of foreign exchange, NNPC has arranged to sell crude to private refineries in local currency (Naira).

“Today they have a challenge. Some of them constructed refineries today they cannot start because we are discussing how to allocate crude to them.

“We are asking them to pay in foreign exchange. You know what is happening to foreign exchange today: volatility. So, we have to find a common ground so there is a discussion in that regard to allow them pay in local currency” he said.

The COO noted that NNPC is collaborating with the private investors in order to encourage them.

He said the partnership has become necessary because it is possible for the investors to build refineries without have feedstock: crude or condensate to refine.

“Whatever they do, they have to work within certain regulations. Refineries are not bakeries. I can go to Wuse Market and buy flours. But for those refineries, you need feedstock whether crude or condensate.

“This crude belongs to the government so there is a need for collaboration. We need to support them. Because you can build a refinery and there is no crude. What happens? The partners will be running after them.

“Government needs to make money from this crude oil. A lot of sectors need money. The health sector needs money. There should be that assurance if I give you crude you have to pay for it and you need to also deliver the balance.

“The investors that are building refineries today we have to collaborate that is the way we can encourage them” stated Yakubu.

Also speaking during the occasion, Adetunji Oyebanji, Chairman, Major Oil Marketers of Nigeria (MOMAN), said that the private investors are reluctant to replicate the establishment of Compressed Natural Gas (CNG) across the country because of the high cost of the equipment.

He recalled that there are already seven CNG stations in Benin-City, adding that investment in the enterprise has been very slow.

The MOMAN Chief said the sophisticated equipment that is required to operate the CNG plant are very expensive and there are issues with availability and product pricing.

He noted that investors will always go there is the return on their investment not where they have barriers.

He submitted that there is no enabling environment to attract investors to the development of CNG in the country.

Driving home his point, he urged the stakeholders to imagine why the deployment of CNG has been slow.

He said: “Some entities have made a significant investment in downstream. Nipco Plc several years ago invested in seven CNG stations in Benin. The question is why has it not been replicated across the country. And why hasn’t it moved much faster?

“It always goes down to the economies of it. At the end of the day, anybody who is an investor needs a return on their Investments. It is between the availability of the product, pricing all come together because investment in CNG “Infrastructure is not cheap. It is not like coming up with a bakery. You need a lot of sophisticated equipment to compress the air. You need the pipelines system to move the gas.

“Obviously, there is a requirement for significant investment”.


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