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Warri, Kaduna Refineries Face Privatization

Nigerian Natonal Petroleum Corporation Says The Kaduna And Warri Refineries May Have To Be Sold If They Fail Revival Tests


Government may consider a new management option for Warri Refinery and Petrochemical Company Limited and sister Kaduna Refinery and Petrochemical Company Limited if they fail to revamp and revive their process plants by December

Besides privatizing inefficient refineries, government also declared plans to take advantage of the prevailing low crude oil prices cycle to expand the nation’s domestic refinery capacity and generate more revenue and non-revenue economic benefits for the country.

Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, stated at a media forum in Lagos that all the nation’s three refineries located in Port Harcourt, Warri and Kaduna must revamp and attain 60 percent process capacity by December to privatization.

He said the refineries which started undergoing refurbishment process since last year would be observed for another 90 days at the end of which government would consider the privatization model to adopt in placing them into the efficient hands of the private sector.

Below 60 percent capacity, he said, any of the refineries would no longer operate profitably and would not be supplied crude oil feedstock through traditional allocation processes. He said the situation would leave the corporation with the option of exploring private sector management for the underperforming refinery.

He specified that the acceptable 60 percent performance benchmark must not be a flash in the pan, adding that it would require sustainable uptime at the refinery’s fluid catalytic cracking unit (FCCU) which, according to experts, is the optimum process unit.

To scale the 60 percent performance hurdle the refineries must add value to crude oil at all the process units in order to cut waste, enhance commerciality of operations and optimize resources.

He said the average performance level across all the nation’s 445, 000 barrels per day installed refining capacity was about 30 percent.

Enquiries by The UNION showed that the 125, 000 barrels per day Warri Refinery and the 110, 000 barrels per day Kaduna Refinery are contribute little or nothing to the overall performance rating as they suffer both protracted downtime and low capacity availability.

However, out of the nation’s three refineries, only the 210, 000 barrels per day Port Harcourt Refining Company (PHRC) Limited currently has all its three key process units including the Crude Distillation Unit (CDU), Vapour Distillation Unit (VDU) and Fluid Catalytic Cracking Unit (FCCU) on-stream after an internal rehabilitation programme.

The company which initiated and successfully evolved the petroleum industry local content model for incountry refinery refurbishment and upgrade is already working to ramp up its production performance level to 80 percent installed capacity in order to enter a sustainable commercial comfort zone.

Dr. Kachikwu who declared changes in business strategy for the corporation’s subsidiaries and affiliates also pointed out that only PHRC appears to have crossed the performance hurdle and stressed that government would no longer run unprofitable businesses when better option exist in private sector partnership.

He pointed out however that the management options for underperforming refineries would not hamper ongoing efforts at refurbishing the plants. He explained that the need to shop private investors for the refineries have made their rehabilitation very necessary.

He pointed out that some of the refineries currently hold scrap values and would not yield good revenue returns if privatized in their present conditions, adding that government is committed to their upgrade before exploring alternative management model that would ensure their efficient operations.

After revamping the refineries, he said, their business models would be examined to determine the management approach to take. He hinted that government might shop for private partners with credible pedigree in crude oil processing to manage the salvaged refineries.

The model, he said, would protect and preserve the public interest in the refineries without compromising efficient commercial and technical operations at the refineries.

In providing market outlook for the local petroleum industry, Dr. Kachikwu said plans were on to expand existing refineries to broaden the country’s revenue windows under the prevailing crude oil price downfall.

He said that in driving the expansion, government would also explore localization of refinery industry in order to maximize economies of scale optimize industry skill set and beat down cost drivers in the business.


– Sopuruchi Onwuka

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