NNPC Adopts Equity Model for Refinery Rehabilitation, Says Ojulari
The Nigerian National Petroleum Company Limited (NNPC) says it is changing its approach to refinery rehabilitation by requiring technical partners to have equity stakes in the facilities they help restore and operate.
Bayo Ojulari, Group Chief Executive Officer (GCEO) of NNPC, disclosed this on Tuesday during the company’s media parley in Abuja.
Ojulari said the decision followed lessons from previous rehabilitation projects, where contractors were paid for rehabilitation, financing and operations without having a direct financial interest in the long-term performance of the refineries.
According to him, NNPC wants future partnerships to ensure that technical operators have a stake in the success and profitability of the facilities.
“What we have learned from the past rehabilitations of the refineries was multiple. But I’ll remind you again of the two of them that I’ve always talked about,” Ojulari said.
He explained that the previous model created little incentive for contractors and other partners to remain concerned about the performance of the refineries after completing their assignments.
“One was that the model we have used before meant that we were incentivising people who work on the refinery, and there was no skin in the game,” he said.
“We pay for contractors, we pay for financing, we structure and pay for O&M, everything we pay for. Right? And then none of those parties that were working with us had a stake in the performance of the refinery after their work.”
Ojulari said the new model would involve technical partners taking equity positions and sharing in the performance and success of the refineries.
He added that prospective partners must have demonstrated experience in operating refineries or petrochemical plants and possess the technical capacity required to contribute to the facilities.
“What we want going forward is to have a refinery that is self-sustaining, that is profitable, and is sustainable,” the NNPC chief said.
Chinese investors complete Port Harcourt, Warri assessment
Ojulari also disclosed that a team of Chinese engineers had completed a three-month assessment of the Port Harcourt and Warri refineries as part of discussions on a potential technical equity partnership.
The development followed a memorandum of understanding signed by NNPC on May 4 with two Chinese companies to explore opportunities for completing and operating the two refineries.
According to Ojulari, the assessment was carried out to enable the prospective investors to conduct due diligence on the facilities before submitting their recommendations.
He, however, clarified that NNPC had not reached a final agreement with the Chinese investors.
The GCEO said the team would submit its assessment report and proposal, after which both sides would commence commercial and technical negotiations.
“There are strong indications and commitment of their interest as of now in Port Harcourt and Warri Refinery,” Ojulari said.
He added that the same process had yet to begin for the Kaduna Refining and Petrochemical Company, although NNPC intends to pursue its rehabilitation under the proposed technical equity partnership model.
NNPC operates three government-owned refineries: the Port Harcourt Refining Company in Rivers State, the Warri Refining and Petrochemicals Company in Delta State, and the Kaduna Refining and Petrochemical Company in Kaduna State.
Ojulari further said the relatively narrow margins in refinery operations made scale, efficiency and petrochemical production critical to achieving profitability.
He said NNPC was therefore exploring newer technologies and opportunities in petrochemicals as part of efforts to make the refineries commercially viable and sustainable in the long term.
