All posts tagged feature


S/Sudan’s Nilepet Wants to Be an Operator by 2022

South Sudan’s state hydrocarbon company, Nile Petroleum Corporation (Nilepet), has set a target of 2022, to be a leading and competitive integrated oil and gas corporation of choice in South Sudan and beyond.

“We want to have our own block to operate”, says James Yugusuk, the company’s Director General for Downstream. “We want to raise world class South Sudanese technical staff and we want to construct four refineries: one in Bentiu, Paloch, Pagak and Thiangrial. All those are producing blocks. We also want to construct depots in major towns in South Sudan which is a very ambitious plan because we need to have strategic reserves. We want to extend our retail outlets to all the major towns in South Sudan. We want to have a very robust and highly effective JV and this is for companies and people who are willing to do that. We also want to have a strong footprint in the research and development programmes”.

Starting from 2013, Nilepet started participating in Joint Operating Companies in the country, holding stakes on behalf of the government in these JOCs through which it builds capacity of its staff. Between 2015 and 2018, Nilepet established joint ventures with oil service companies “and we continue to build the capacity of our national staff such that between 2022 and 2027, we’ll become a standalone operator, able to work up and develop hydrocarbon acreages by ourselves.

Nile Delta, for one, is a JV with 51% Nilepet and 49% held by Niger Delta Exploration and Production of Nigeria. “The mandate is to work on gas monetization and production optimization. This JV is also operating in the current producing blocks.

SIPET, for another, is an engineering and construction company which is 80% owned by Nilepet and 20% by QDC, a Chinese Engineering company. The areas of service are project management, consultancy, operation and maintenance. It is working on some of the country’s producing fields.

Nile Drilling is open to any international partner. “It is 90% Nilepet and 10% open to any willing investor”, Yugusuk explains. The specialization is drilling, and work over services.

“Nile Services and Logistic Company is 51% Nilepet and 49% from a local investment group and a South African company”, Yugusuk discloses. “It is into logistics and of course, it is still under development”.  Another JV that we have is the Nile-Delta Systems which deals in ICT and it is currently operating and it is 51% Nilepet and 49% ASECCO Polland.

“We have SNP Group which is 30% Nilepet and 70% a Russian company called Sufinat it is working on the Bentiu refinery and it is currently operating.  We have Dietsmann Nile S.A Ltd which is 31% Nilepet and 69% Dietsmann Technology which is an Italian company that deals on technology. It is operating.

“Again, we have NIYAT which is 40% Nilepet and 60% Eyat-Sudan. It specializes in road construction and maintenance”.

This story was originally published, for the market intelligence benefit of paying subscribers, in the July 2020 edition of Africa Oil+Gas Report. Here’s the link to the subscription portal.

 

 

 


Local Content Fund Is Nigeria’s Energy Bank in The Making

By Adeniyi Adeoloye

There is need for an Oil &Gas Bank in Nigeria, in the opinion of a cross section of stakeholders in the country’s E&P sector.

“It is imperative for government to encourage the licencing of an Oil &Gas Bank”, declared Tunde Afolabi, Chairman of Amni International, giving a keynote address at a webinar on funding for the sector. “And Government should have significant subscription in the shares of the bank”.

Austin Avuru, former Chief Executive Officer of Seplat Petroleum, observed that “there is an Energy Bank in the making in Nigeria, if we watch carefully”.

“All of us operators, today contribute 1% of our budget to the Nigerian Content Fund, a fund that is run by the Nigerian Content Development and Monitoring Board (NCDMB”

The fund can act as seed capital for starting out an Energy Bank for the Nigerian hydrocarbon industry. “The local content fund currently has about $200Million and has the chance to grow to about $1Billion in the next 10 years given the proposed legislation that is underway at the National Assembly that seeks to increase the contribution to the fund to 2% from the current 1%”, Avuru explained.

“You don’t need more than that ($1Billion), to seed a bank that will cater solely to the needs of the industry”, especially the needs of the indigenous Nigerian firms who today struggle with funding their operations.

Afolabi’s key argument was that “an oil and gas focused bank will understand the market fundamentals and the rudiments of running an E&P business”. His paper laid out a list of challenges that stand in the way of financing of projects by indigenous Nigerian E&P companies from Nigerian banks. “Facilities granted by banks to the marketers of petroleum products are included in the count of what was given to the oil and gas sector, which comes to 50% of what is granted.

The webinar, entitled Long Term Funding of E & P Business in Nigeria- Strategies for Sustainability, was organized by the Nigerian Association of Petroleum Explorationists.

This story was originally published in the August 2020 edition of Africa Oil+Gas Report. Mr. Afolabi’s full paper is published in the October 2020 edition.


FAR’s Voluntary Suspension from ASX Continues

Two weeks after it voluntarily asked the Australian Stock Exchange (ASX) to suspend trading of its stocks, FAR has announced that the suspension continues

The request was made on September 14, 2020 to allow ASX to review FAR’s Half Year Accounts and raise certain queries with FAR. It was meant to run for 10 business days.

“Since that date ASX and FAR have exchanged communications and ASX currently expects to complete their process later this week”, FAR says in a release out today September 28, 2020.

Why should we care?

FAR holds equity in the Sangomar project, Senegal’s first oilfield development, operated by Woodside Energy. It also drilled the first well in The Gambia in 40 years, although Samo-1 turned out to be a disappointing dry hole.

But FAR is very broke. It has reported that the COVID-19 pandemic and the falling oil price impacted its ability to finalise financing arrangements for its share of the oilfield development and has made the decision to commence a sale process for all or part of its working interest in parallel with investigating alternative sources of finance. While it is talking with third parties evaluating its Senegal asset for the purpose of sale it has reported that In the event that it is unsuccessful in selling its Senegal asset, “such circumstances would indicate that a material uncertainty exists” that may cast significant doubt as to its continuation as a going concern.

In the meantime, however, FAR says the Voluntary Suspension from trading on ASX  “remains in place until a further announcement in respect of the Half Year Accounts is made”.


Somalia: Past Petroleum Agreements are Null and Void

Somalia’s newly promulgated Petroleum Law, takes a dim view of agreements signed with governments who had ruled the war-torn country for most of the last 30 years.

All agreements pertaining to petroleum that were signed with administrations existing in parts of Somalia or previous provisional governments in the period between December 1990 up to September 2012 are considered null and void”, the law says. “All the agreements signed between foreign companies with the Somali government before 1991 are considered as valid agreements and they will be given good consideration”, the legislation declares. “These companies which had previous agreements before 1991 will have to renew them with the Federal Government of Somalia in accordance with Article 54”.

The new law establishes the Somali National Oil Company (SONOC) “as a commercial enterprise Controlled by the Government to conduct Petroleum Operations in Somalia. SONOC shall be entitled to exercise the right of participation referred to in article 35(1) of the Somali Petroleum Law. SONOC may acquire an Authorization by direct acquisition or pursuant to a bid process conducted by the SPA in the same manner as any other Person.

Each Production Sharing Agreement shall stipulate:

  1. the right of SONOC to participate in Petroleum Operations, up to a maximum participation right of 20%; and
  2. the right of a State-Owned Contractor which is Controlled by the Federal Member State of the Federal Republic of Somalia in which the Authorized Area is located to participate in Petroleum Operations, up to a maximum participation right of 10%.

The decision by SONOC to participate in Petroleum Operations under a particular Production Sharing Agreement shall be made by the Minister, if a recommendation to participate has been made by SONOC. The decision by a State-Owned Contractor which is Controlled by the State of the Somalia Republic in which the Authorized Area is located to participate in Petroleum Operations shall be made by the government of the State in which the Authorized Area is located.

The participation rights under Section 35.1 may occur during any phase of Petroleum Operations in accordance with the terms and conditions established in the Production Sharing Agreement.

This piece was originally published, a full month ago, in the August 2020 edition of Africa Oil+Gas Report

 


NCDMB Invites Tenders for Infrastructure Work, Consultancy

The Nigerian Content Development and Monitoring Board (NCDMB), the agency that oversees localization effort in the country’s oil industry, has invited tenders for construction of Optical Fiber Backbone Network (OFBN).

It has also invited Expressions of Interest for

Organization of Joint Industry Awards for Cost Conscious Operators in the Nigerian Oil and Gas Industry
Collation and Analysis of Data for Divers, Marine Vessel Operations, and other ski 11 sets relevant to the offshore Oil and Gas Business in Nigeria
Provision of Comprehensive Corporate Branding for NCDMB New Headquarters Building
Development/Publication of Bespoke Advertisements on NCDMB Corporate Advertisements and Key Operations
Consultancy service for feasibility study on Oloibiri Museum and Research centre in Bayelsa State.
Consultancy service for design competition on Oloibiri Museum and Research centre in Bayelsa State.

 

Full details in the link here


Wabote Gets Another Four Years

He has mitigated the challenges of low crude oil prices that have marked his tenure

Simbi Kesiye Wabote has been re-appointed to run the Nigerian Content Development and Monitoring Board (NCDMB), for a second term of four years.

President Muhammadu Buhari renewed his appointment as the Executive Secretary of the board, just as he renewed the appointments of Bello Aliyu Gusau as the Executive Secretary of the Petroleum Technology Development Fund and Ahmed Bobboi, the Executive Secretary/Chief Executive Officer of Petroleum Equalization Fund (PEF).

The renewal followed recommendations to the President by Timipre Sylva, Minister of State for Petroleum Resources.

Wabote, who previously ran the National Content unit at Shell Nigeria, is the third Executive Secretary of the 10-year-old institution, the most ambitious oil industry localization agency on the African continent.

An NCDMB press release quotes the Nigerian Presidency as saying that “Wabote earned the renewal after recording sterling achievements, including managing the Nigerian Content Development Fund prudently, completing the 17 storey headquarters building of NCDMB and for initiating many landmark projects that are widely commended by industry players”.

Wabote has superintended Nigeria’s petroleum industry localization effort in a period marked by low crude oil prices, but by targeted investments in industrial parks and refineries, he has aided the fostering of beneficiation of raw hydrocarbon for the purposes of growing an industrial economy.


West African Gas Pipeline Authority Looks to Hire New Director-General

Afrique Conseil, the consulting firm based in the Republic of Benin   has launched a a vacancy announcement for candidates to recruit a new director-general to head the West African Gas Pipeline Authority (WAGPA).

The WAGPA is the regulator of the West African Gas Pipeline (WAGP) built and operated by WAPco.

Eligible candidates must be nationals from one of the four State parties of WAGPA – Togo, Ghana, Benin, and Nigeria. Those qualified will be selected based on their resume or professional experience in any of these countries.

The deadline for application is October 15, 2020, according to the recruitment notice published on the WAGPA’s website.

With headquarters in Abuja, Nigeria, WAGPA is an international body with legal personality and financial autonomy established by the WAGP Treaty signed on January 31, 2002.

See the link for details.

 


Angolan 2020 Onshore Bid Round Now to Open in January 2021

Angola 2020 Onshore Bid Round will officially open in January 2021 and bids must be submitted by March 10th 2021.

Nine blocks are on offer, in the Lower Congo and Kwanza Basins.

The country’s International Competitive Bid Round for oil gas licenses, announced last year, is a scheduled offering for onshore and offshore, in the period 2019-2025.

Last year, Angola’s National Agency of Petroleum, Gas and Biofuels (ANPG), awarded three blocks: 27, 28, and 29, offshore in the deepwater Namibe Basin.

This year, the bidding plans have been disrupted by COVID-19 complications.

The blocks on offer are CON1, CON 5, CON 6, KON 5, KON 6, KON 8, KON 9, KON 17 & KON 20 (See map here), located in the Lower Congo Basin and the Terrestrial Kwanza Basin.

Data available includes 2D seismic coverage of the LowerCongo Basin, a recently updated Geological Map and Database of the Onshore Kwanza Basin and a compilation of recent aeromagnetic data covering the Transition Zone and Shallow Waters of the Lower Congo and Kwanza Basins.

 

 


Cairo Based East Mediterranean Gas Forum Finally takes Off

By Toyin Akinosho, Publisher

Six of the seven founding states of the Eastern Mediterranean Gas Forum signed its charter September 22, 2020, marking the official commencement of the body.

The East Mediterranean region has flashed brightly on the global hydrocarbon map in the last ten years, with the discoveries and development of over 50 Trillion of cubic feet of gas off Egypt (Zohr, 30Tcf, 2015, discovered by ENI); Israel (Leviathan, 22Tcf, 2010, discovered by Noble Energy) and Cyprus (Aphrodite, 5Tcf, 2011, discovered by Noble Energy).

Egypt, Greece, Cyprus, Italy, Israel, Jordan, and Palestine have all signed. Palestine was absent and will sign later. France has formally requested to be a member and the United States has registered intention to be a permanent observer. While Turkey is keen, its politics has appeared to rile up some members.

Turkey has been exploring for hydrocarbons in contested areas of the eastern Mediterranean, Cyprus and Greece have argued.

For Egypt, whose capital Cairo is the forum’s headquarters, it was a major step in the ambition to be the region’s energy hub.

The organization will serve as a market platform for natural gas producers, consumers, and transit countries in the region to develop existing resources and develop the infrastructure for future exploitation, in addition to regulating natural gas policies in the region that protect the rights of member states to preserve their resources, the signatories said in a joint statement after the online ceremony.

Member states will exchange information and seismic data studies on potential gas wells and delineate new gas finds that straddle maritime borders. Member states could even get preferential rates on each other’s gas supplies, as well as preferential access to liquefaction facilities, he said.

The forum had a launch meeting in 2019, during which the founding members agreed to move ahead with creating a regional market to develop the eastern Mediterranean’s estimated 122 Trillion cubic feet of gas reserves.

 


Our Archive/Nigeria’s Refining Gap: The Road to Privatisation and Back

OUR ARCHIVE

DATELINE, ABUJA, AUGUST 2007

Calls for a halt to the waste of resources on Nigeria’s state owned refineries go back several decades, as the story below, from our file records of 13 years ago, shows…

In mid July 2007, less than two months after assumption of office, Nigeria’s president Umar Yar’adua ordered that two refineries that had previously been sold to the private sector be returned to state hydrocarbon company NNPC (Nigeria National

Petroleum Corporation). It was an anticlimax to a four-year, controversial privatization process, which ended just in May 2007 with 51% stake in the largest refinery, the 210,000BOPD plant in Port Harcourt, sold to Bluestar Consortium for $561Million. Mr. Yar’dua instructed the NNPC to get the refineries working to at least 70% capacity within twelve months. It was a triumph for the NNPC, which had preferred to be left to run the refineries. But was it a triumph for efficiency? Has Mr. Yar’adua rolled back the painful “gains” of deregulation in the downstream oil and gas sector? As part of our ongoing series on the Refining Gap in Nigeria, senior correspondent EJIKEME OKEKE-AGULU pieces together a six year story, highlighting the see-saw nature of the sale…

In NOVEMBER 2000, GIUS OBASEKI, then Group Managing Director of the NNPC,

gave an overview of the state of the three government owned refineries in the country. He was satisfied with himself. The “Port Harcourt Refinery is running at 75%” he told Yakubu Lawal, energy editor of The Guardian of Nigeria. “I can run Port Harcourt at 100%,” Obaseki said “But professionally, I will be doing myself damage because the cracker- the FCC will not be in place till the middle of next year”.

The country’s refineries have a nameplate capacity of 445,000BOPD; with the Warri Refinery, in the midwestern part of the country, designed for processing 125,000BOPD of crude, the Port Harcourt Refinery, (which is really two in one), located in the east of the country, designed to process 210,000BOPD and the Kaduna Refinery, sited in the north, having an installed capacity of 110,000BOPD.

It was expected, from Mr. Obaseki’s comment then, that Port Harcourt Refinery, by far the largest, would be running 100% by the middle of 2001 though subject to crude availability as the GMD had presumed. This was to be two years into the then new democratic dispensation. Obaseki also told Yakubu Lawal that the Kaduna refinery was “running 60% after a lot of maintenance work”. This performance, he promised, would be tremendously increased, such that by 2001, the Kaduna refinery would “operate at the same level with Port Harcourt”. There was a caveat, however. “Unless we are left to do our work”, Obaseki told Lawal, “we won’t get to where we want to be.”

From the results on the ground, Mr. Obaseki either “wasn’t allowed to do his work”, or the problems were overwhelming.

By 2003, two years after the Port Harcourt and Kaduna refineries were supposed to be working at full steam, and four clear years into President Obasanjo’s take over of power from the military, the thinking in government had changed from “government can run the refineries” to “let us privatise the refineries”, or so it seemed. Port Harcourt, Warri and Kaduna, didn’t achieve the full delivery of petroleum products they were designed to output. The Bureau of Public Enterprises(BPE), Obasanjo’s privatisation agency, had stepped up to the plate.

“All of the refineries are in need of complete overhauling”, the BPE said. “Bad management and poor maintenance have cut refining output considerably, it lamented.

“The Government has attempted to meet the shortfall by importing gasoline. The domestic shortage of refined products persists, and has led to numerous clashes and accidents” said the BPE and “the most recent incident occurred in Warri, Delta State, where more than 1,000 people lost their lives when a gasoline pipeline exploded and caught fire. Villagers were scavenging for gasoline, which had been in very short supply.” The BPE spelt out a number of options being considered by the Government in reforming the refineries and that included: leasing, privatisation, contract management, and joint venture.

THE PRIVATISATION JOURNEY HAD BEGUN.

On his return for a second term in May 2003, President Olusegun Obasanjo signed off on the privatization of the  three refineries. The Privatisation was to be carried out under the auspices of the National Council of Privatisation (NCP).

Transaction commenced in October 2003 with a 60-day sales study of the refineries by the then advisers, Credit Suisse First Boston (CSFB), set up to assess the saleability of the facilities and establish potential bottlenecks that may likely impact closure of transactions and recommend appropriate litigants. The advertisements for Expressions of Interest (EOIs) from prospective bidders in all the refineries commenced simultaneous with the Sales Study. This sales study was completed in December 2003, though Warri Refinery was not covered due to precarious security situation in Warri and environs at the time.

For the Port Harcourt Refinery (PHRC), a Preliminary Information Memorandum (PIM) was sent to the final list of Expressions of Interest (EOIs) approved by the Steering Committee, which included the oil majors. The PIM was also distributed to prospective bidders for new oil blocks in the 2005 Licensing Rounds.

A BPE report says that “The unbundling and corporatisation of PHRC as a separate business entity from NNPC was undertaken, with a detailed assessment of environmental impact of the refinery operations and submission of a detailed report indicating the extent of environmental liabilities and the required remediation plan in other to effectively sell off 51% of the government’s stake in PHRC”.

In November 2005, the Bureau issued the final Information Memorandum (TM) and relevant bid documents to the short listed bidders, viz,

Essar Infrastructure of India;

Oando Plc;

Refinee Petroplus; and

Transcorp Plc. The four firms submitted their technical and financial bids at the deadline of December 2, 2005.

But the BPE said the four bidders did not meet the minimum qualification benchmark after evaluation. They were asked to resubmit revised bid by April 24,2006 after pointing out the areas of weakness in the bids, which did not meet up with some, or all such minimum qualifications as;

o Technical expertise in refining will be a prerequisite;

o Credible Investment Plan aimed at critical rehabilitation and expansion of refining capacity; o A Social Plan also key in dealing with over- staffing;

o Evidence of financial resources; and

o Demonstration of managerial ability. As stated by the BPE

Efforts to understand where each of these four bidders failed the test proved abortive as the BPE never replied to the various queries sent to it by this magazine.

The four bidders however submitted revised bids by the deadline of 24 April 2006. Most of the bids were disqualified after the BPE found that technical partner was a member in more than one consortium.

Following multiple membership in bidding consortia by a technical partner, which would have led to disqualification of most of the bidders, the Technical Committee of the NCP directed that a new RFP (Requests for Proposal) be issued to bidders after further clarification on the bidding procedures. The four companies were eventually pre-qualified for the financial bids opening, scheduled for July 2006.

On the order of President Obasanjo, the process was halted and the transaction re-opened to other bidders.

There were reports then that the refinery was being underpriced and the president ordered the refinery to be returned to the NNPC. There was no improvement afterwards and so the advertisements for EOIs were again placed in December2006 with the deadline for submission of EOls was 19 January 2007. Six bids were received by the deadline from the following prospective investors which included; Mittal Investments Ltd; Indorama International Finance Ltd; Global Oil & Energy; Link Global International Ltd; Taleveras Group; and Oil Works Ltd (DFP project Finance Ltd). Following evaluation of the new EOIs, the following consortia, consisting both existing and new bidders, were approved to proceed to the next stage of the transaction: Essar Infrastructure of India, Oando Plc, Refinee Petroplus, Transcorp Plc, Mittal Investments Ltd, Indorama International Finance Ltd, Global Oil & Energy, and Link Global International Ltd. As at then, it was only the Transcorp that still represented her bid.

The Bluestar Consortium was not in the race.

But sequel to the disengagement of CSFB as transaction advisor, the Bureau sent out Terms-of-Reference (TOR) and an invitation letter to three international firms: HSBC, BNP Paribas & Standard Bank of South Africa asking them to submit proposals to act as transaction advisors for the privatisation of both Port Harcourt & Kaduna Refineries. Only BNP Paribas submitted a proposal and was appointed as the new advisor to complete the refineries transaction.

Three bidders (Oando Plc; Refinee Petroplus; and Bluestar Consortium (incorporating Transcorp) submitted their technical and financial proposals and following evaluation of the former, the three were pre-qualified for financial bids opening. The Bluestar Consortium emerged winner with a bid of $561Million for 51% stake in the plant.

FOR THE KADUNA REFINERY, following China National Petroleum Company’s lower bid of about $102Million for the Northern refinery, NPC conducted a detailed due diligence on KRPC between 17 October and 4 November 2006 prior to submission of bid for KRPC. And they submitted their technical and financial proposals. At the bids opening on May 17, 2007, it offered to pay a revised offer price of$ 102 million, which was below the reserve price. Blue Star Oil Services Consortium also took up the challenge of buying into the KPRC with an offer price of $l60Million for 5l % equity; an amount exceeding the $102 million revised offer by China National Petroleum Corporation (CNPC).

Irene Chigbue, the Director General of the BPE, said that the Bureau’s mandate has never been to sell government’s enterprises for the purpose of generating money for government. “Our greater mandate is to allow the private sector drive the nation’s economy. It is not how much we are getting from these sales that matter, but the overriding desire to see our refineries meet the local need for fuel, thereby saving the country from huge foreign reserves call arising from fuel importation.”

But the Nigerian Labour Congress and the Trade Union Congress in their fight against the refinery sale and increase in petroleum pump price that said government failed in their duty at ensuring that it maintains control on utilities that directly affects the ordinary citizen.

David Mark, then newly elected senate president (presiding over the upper legislative house) said “that there might be friction if government sells an enterprise that has social impact and there is no social cushion to alleviate the pains”.

Emman Egbogah, regional director Society of Petroleum Engineers (SPE) Africa region and former Technology adviser to the Malaysian state hydrocarbon company Petronas: argued: “there are certain critical things the government should maintain a tag upon and I think in the case of Nigeria, there are many areas in which the government of course should have some contributions to make so that distribution will be equitable and maintaining a couple of refineries shouldn’t be too much for us”

IT HAS TAKEN FOUR YEARS, starting from the first few months of president obasanjo’s second term to the last weeks of the president’s tenure, to privatise the refineries, and all that has ended in a smoke, with the return of the refinery to the NNPC.

The NNPC had been wary of going full hog with the deregulation process; at some point the Port Harcourt refinery was withdrawn from the bid process. When an audience at a seminar in the course of an SPE conference asked Edmund Ayoola, a just retired Group Executive Director at the corporation, he fired back: “Why are people insisting on buying government owned refineries?” In a veiled reference to the lack of progress of companies licenced to construct refineries, he responded in frustration: “Why won’t people build their own?”.

Even while government kept on saying that NNPC would get out of the downstream business, the corporation continued to build mega filling stations all over the country.

The most immediate reason for the failed sale of Port Harcourt and Kaduna refineries has been the face of the winners. Bluestar Consortium consists of Dangote Industries Limited, Zenon Corp and Transcorp, three companies widely perceived to be run by cronies of the former president. “All the documents released by the BPE never at any point mentioned or noted Dangote Industries and Zenon (partners in Blue star) as a partner to any of the Bidders”, according to Labour.

Mr. Dangote had tried to douse the tension arising from the transaction and the obviously connected Transcorp by saying that after refurbishing the refineries, a significant equity would be listed on the Nigerian Stock Exchange to afford Nigerians opportunity of investing in the national facility. But when the public outrage over the sale heated up, Dangote threw darts at the NNPC. He told the Daily Sun of Lagos, Nigeria that the government corporation received over $700Million, all within the last eight years, to fix the refineries.

“NNPC stinks”, Dangote charged. “The government did not spend $1.1Billion to refurbish the refineries as some papers report. I know that fact. The papers are there. For the last eight years, the government has given NNPC about $700MilIion to refurbish the two refineries—over a period of time. That money wasn’t properly applied. And even after it was applied, the refineries are still not working. They are still not working. They are worth nothing.” While Dangote fingererd the NNPC as a nest of corruption his critics accused him of using government connections to get them out of business.

Figures from NNPC down stream report for the first quarter of 2005, the latest figure obtainable from the Department of Petroleum Resources:

The Kaduna Refinery processed an average of 38,070BOPD of crude oil for the first quarter of 2005 with a shortfall of 71,930B0PD. The Port Harcourt Refinery on the other hand processed an average of 94,453B0PD, showing another deficit of 11 5,547B0PD while the Warri Refinery processed an average of 65,496B0PD and a shortfall of 59,504BOPD. In all the two refineries of Kaduna and Port Harcourt were only able to process 132,523B0PD out of their total installed capacity of 320,000bbls/d. But an American Energy Information Administration report on Nigeria puts her average crude oil consumption for 2006 at 297,000BOPD with a growth in demand of 12.8% annually.

The figures available in the first quarter of 2005 shows that that KRPC and PHRC received a total of 14,733,289Bbls in the first quarter of 2005 and processed about 11,927,082Bbls also in the same period leaving a total of 2,806,2O7Bbls unprocessed. These figures suggest that as at the time, the two refineries were actually working below 40% as at 2005.

Dangote insists that the sale was transparent enough. He told Daily Sun “BNP Paribas, which was also called in by BTE to come and also do evaluation, just a week before we bought the refineries. Both these two, their evaluation was low” both this two refers to Credit Suisse which had also carried out their own evaluation previously. “When we went out to bid, No.1, there was this company Petroplus or whatever consortium a Saharan Energy. Their group came and they bid $300million. But they couldn’t bring even a deposit. They were therefore disqualified. Oando bid $200million. And they were asked to bring half of the money. Instead of $100million, Oando could only bring $80million. So they were also disqualified. We said $200million for the 51 percent and we put down our $1 O0million. So we qualified. And now, we were asked to go back and bid again and come back with a new price”. It is clear then that Dangote was a late entrant and a lucky child of destiny at that or maybe he represented other interests. Oando would not respond to queries by AOGR.

Now that the Bluestar has pulled out of the Refinery deal and requesting a refund of $721m and the NNPC given another 12 months by the consortium of Dangote, Zenon and Transcorp will NNPC really deliver, after years of failing to deliver? Funsho Kupolokun, who took over from Obaseki in 2003 and has run NNPC ever since, is positive.

“Before February 2006, all the three refineries were running and NONE were running on less than 75% of installed capacity. This magazine’s attempt to get specific 2007 figures from NNPC headquarters in Abuja was futile by officials. Mr Kupolokun stressed that the refineries are comatose today because of the vandalised Chanomi creek crude pipeline and that they would recommence production by September 2007 after their repairs. “Then the refineries will be back; they have been tested and proven. Once we get the refineries running, we will keep improving on what we have done”.

Kupolokun told the Nigerian press, in the last week of July: “The refineries wee working by the third and fourth quarters of 2005. Our import level went down to as low as 30 cargoes and all the depots in Nigeria, except Ore, as at that date, were functioning.”  If Mr. Kupolokun is proved wrong, the costs to the struggling economy would be enormous.

This story was originally published in the August 2007 edition of the Africa Oil+Gas Report monthly..

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