NNPCL mulls selling Port Harcourt, Warri, Kaduna refineries after spending $18bn on repairs

The Nigerian National Petroleum Company Limited (NNPCL) has signaled that it may put the Port Harcourt, Warri, and Kaduna refineries up for sale following years of unsuccessful turnaround efforts that reportedly consumed an estimated $18 billion.

This disclosure came from the Group Chief Executive Officer of NNPCL, Bayo Ojulari, during an interview with Bloomberg on the sidelines of the OPEC International Seminar held in Vienna, Austria.

Ojulari revealed that the company is reassessing its refinery operations and intends to conclude the ongoing strategic review by the end of the year.

“So, refineries, we made quite a lot of investment over the last several years and brought in a lot of technologies. We’ve been challenged,” he said.

He acknowledged that some of the technologies installed did not perform as expected, citing the age and neglect of the refineries as a contributing factor.

“When you’re refining a very old refinery that has been abandoned for some time, what we’re finding is that it’s becoming a little bit more complicated.“So, we’re reviewing all our refinery strategies now. We hope that before the end of the year, we will be able to conclude that review. That review may lead to us doing things slightly differently,” he added.

When asked about the potential divestment of the refineries, Ojulari indicated that the option remains open.

“What we’re saying is that sale is not out of the question. All the options are on the table, to be frank. But that decision will be based on the outcome of the reviews we’re doing now.”

On Nigeria’s oil production costs, he noted that current operational expenses are relatively high, largely due to the investment required to secure infrastructure.

“For the cost of crude production, there’s a capital cost and there are the operational costs. The operating cost right now in Nigeria is hovering over $20 per barrel, which is quite high.“Part of that is because of the investment we’ve had to make in terms of security of pipelines, which, as you know today, we have 100 per cent availability of our pipelines. That came out of the significant investment.“So we believe with time, with stability, that costs will start going down; but for now it’s somewhere between $25 and $30 a barrel.”

He also mentioned that the country aims to ramp up daily oil production to 1.9 million barrels by the end of the year.

Meanwhile, Aliko Dangote, chairman of the Dangote Group, has expressed skepticism about the ability of the NNPCL-run refineries to operate efficiently.

During a visit by Global CEO Africa members from Lagos Business School to his refinery in Lekki, Lagos, on July 10, Dangote voiced doubts over the effectiveness of the NNPCL’s ongoing efforts.

“(The turnaround maintenance) is like you trying to modernise a car built 40 years ago, when technology and everything have changed. Even if you change the engine, the body will not be able to take the shock of that new technology engine,” Dangote remarked.