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Nigeria in Final Talks with Firms to Overhaul Refineries

Source: Reuters 2/27/2018, Location: Africa

Nigeria’s state oil firm NNPC is in the final stages of talks with two consortiums that include top traders, energy majors and oil services companies to revamp its dilapidated refineries, sources familiar with the matter said.

The move is aimed at helping Nigeria, Africa’s biggest crude producer, save billions of dollars on fuel imports.

Four banking and trading sources told Reuters the groups would be paid via the offtake of refined products rather than cash, putting the onus on them to revive the refineries and keep them running smoothly to ensure their investments earn a return.

President Muhammadu Buhari pledged to fix the refineries when elected in 2015 but little progress has been made so far.

Nigeria’s refineries operate far below their combined capacity of 445,000 barrels per day (bpd) due to years of neglect, as well as theft from pipelines and sabotage.

This forces the country to import nearly all the fuel it consumes, a hefty burden because of price caps on gasoline. The government said it spent $5.8 billion on imports since late 2017.

Private firms largely stopped importing gasoline after the government scrapped subsidy payments to help them sell at the capped price, leaving NNPC to import 90 percent or more of Nigeria’s needs.

The first group comprised the world’s largest oil trader, Vitol, with Italy’s Saipem, U.S. firm General Electric and Nigerian traders Sahara Group and MRS Oil Nigeria Plc and would refurbish Warri refinery in southern Delta state and the refinery in northern Kaduna state, the sources said.

A second consortium included global commodities trader Trafigura, Italian oil major Eni, Spanish refiner Cepsa and Nigeria’s Oando, the sources said.

This group would carry out repairs at Port Harcourt, which consists of two refining plants, the sources said.

Vitol, Trafigura, Cepsa, Oando, Saipem, Sahara and Eni declined to comment. General Electric was unable to immediately respond to a request for comment. MRS did not respond to requests for comment.

NNPC did not immediately provide a comment.

Further details on the deals being discussed, including the cost of repairs, were not immediately clear.

Oil minister Emmanuele Ibe Kachikwu previously said the government would raise $1.2 billion to upgrade its refineries and would end reliance on imports by 2019.

Kachikwu said this month Nigeria planned to announce the names of private investors in its refineries in coming month.

Nigeria’s gasoline consumption is now roughly 40 million litres per day in the nation of almost 200 million people.

Shortages have plagued the country for years. During the Christmas holiday, queues for gasoline emerged across the country, prompting intervention from NNPC and calls for calm from NNPC and the president.

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