Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke
ANOTHER
damning report has exposed the depth of corruption in the Nigerian oil
and gas sector. The Idika Kalu National Refineries Special Task Force,
like previous reports, revealed the dismal state of Nigeria’s four
government-owned refineries, thus depicting how colossal funds spent on
their Turn Around Maintenance have gone down the drain. The revelations
in the report are serious ones that cannot easily be dismissed.
The report claimed that Nigeria
had the third largest refining capacity on the continent with its
445,000 barrel per day installed capacity, but had 18 per cent capacity
utilisation and efficiency, compared to South Africa with a capacity of
540,000bd and capacity utilisation of 85 per cent and Egypt with
774,900bd capacity and 81 per cent efficiency level. The report then
made a watertight case for the sale of the moribund state-owned
refineries.
The Kalu committee further
revealed that, of the 42 oil refineries operating in Africa, the three
in Nigeria recorded the worst performance in terms of efficiency and
capacity utilisation. By the Nigerian National Petroleum Corporation’s
admission, the combined average refining capacity utilisation for 2010
was 21.53 per cent as against 10.90 per cent in the previous year. The
figure for 2008 was 24.11 per cent, which is 51.34 per cent more than
that of 2007. Even the marginal improvement in capacity utilisation was
achieved at a huge cost.
It is no longer news that the
country’s four refineries barely function, which is all right for those
with sufficient political connections to make big fortunes from imported
fuel. Every successive government had also had its share of the juicy
TAM contracts, most of them in a dubious manner. While the late
dictator, Gen. Sani Abacha, awarded a major contract valued at $215
million in 1997 for Kaduna refinery alone, the Abdulsalami Abubakar
administration in 1998 set aside $92million for the refineries without
achieving any result. During President Olusegun Obasanjo’s first term
(1999 – 2003), it was estimated that between $254million and
$400.4million was wasted on the rehabilitation of the refineries and
pipelines. In 2007, the TAM contract for Kaduna alone cost about $24
million in cash and materials worth $30 million, bringing the total to
about $54 million. The record is shockingly awful.
Curiously, that is exactly what
the Federal Government is planning to do again. The $1.6 billion
Alison-Madueke TAM is expected to begin in January 2013 and is scheduled
for completion in October 2014. Nothing will come out of it, except
opening up another avenue for graft. That the original firms which built
the refineries have been contracted by the Ministry for the purpose, as
repeatedly emphasised by Alison-Madueke, is immaterial. It is more like
an old wife’s tale. The experience since 1999, with hundreds of
millions of dollars appropriated yearly for TAM but without results, is
enough to establish the futility of further cash injections.
Why is it that oil firms
operating in the country run oil refineries elsewhere and refuse to do
so here? Singapore, with its total oil-refining capacity of 1.3 million
bpd, is a major oil refining and trading hub in the region, but has no
oil deposit. India imports 70 per cent of its crude oil requirements,
mostly from Middle East. However, the country is not only self
sufficient when it comes to refining the crude oil but is also able to
export refined petroleum products.
It is not the right thing to do
for government to build new refineries or even repair the existing
ones. As the Finance Minister, Ngozi Okonjo-Iweala, rightly suggested,
the private companies that have been issued licences to build their
refineries should be encouraged. The Kalu committee’s recommendation
that the refineries should be sold within 18 months should be
implemented. All over the world, refineries are changing hands on a
regular basis.
Among other deals, British
Petroleum just recently sold its Texas City Refinery in the US to
Marathon Petroleum Corporation for $2.5 billion. In April, Delta
Airlines announced that it was buying a closed 185,000 bbl/day Phillips
refinery in the Philadelphia area, United States for $180 million, and
would spend $100 million to get it back up and running. Let the buyers
of Nigeria’s obsolete refineries use their money to do the TAM, as was
the case with Delta Airlines and Phillips refinery deals.
This grand fraud must end. The
proposed $1.6 billion TAM for the refineries is uncalled-for and should
be dropped. Billions of dollars earmarked for renovating refineries have
vanished over the years. This $1.6 billion is also up for grabs.
Nigerians have had enough of the Federal Government’s insincerity and
intrigues on the refineries. It is deeply troubling that Alison-Madueke
& Co are still fixated on wasting resources on them. It can’t work.
The Federal Government needs to
create an enabling investment environment to encourage the private
sector, through various incentive packages, for the establishment of
private oil refineries for domestic consumption and export. The
stringent requirements for establishment of private refineries must be
reviewed. As Ghana has done, all that should be required for a private
refinery are proof of funding for the project; technical capability of
the company; refinery configuration and products specifications for the
refinery and evidence of land allocation.
Punch
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