NNPC adopts IJV model for govt refineries, shops operating partners
Sopuruchi Onwuka
After pumping significant N4.5 trillion into failed rehabilitation of the nation’s three refineries and trialing several business strategies to jumpstart government’s four refining plants into life, the Nigerian National Petroleum Company (NNPC) Limited is said to be considering the incorporated joint venture model for its three refining companies.
The new model which now displaces the earlier reported decision to outrightly auction the refineries to investors is said to be the outcome of consultations which, sources hinted, reminded the company of its mandate of goalkeeper for the domestic fuel market.
Right from its inception, the NNPC has been consistently charged with the role of engaging in commercial operations along the full industry value chain while positioning as the supplier of last resort for the domestic fuel market. And the role of guaranteeing domestic fuel supply sustainability informed government’s investment in massive downstream facilities and infrastructure currently managed by the national oil company.
However, the nation’s downstream facilities including four refining plants, over 5000 kilometers of distribution pipelines, regional depots for transportation fuels and cooking gas as well as marine facilities for imports have all dilapidated under the watch of NNPC.
With acute supply gaps providing strong market incentives for private refineries and the prevailing race to dominate the home and regional markets by new refining companies, some of which are still in feasibility, project and operating stages; the commercial viability and value of the NNPC operated refineries continue to diminish.
New helmsman, Bayo Ojulari, the upstream expert who was called up from retirement to introduce the efficient hands of the private sector in the national oil company also appears to be overwhelmed by the level of ineptness in the refineries. He had dismissed earlier works done on the refineries as sham and declared intention to sell the plants at loss.
But analysts had interpreted the decision to sell the refineries after significant revamp efforts as capacity deficit on the new management and board of the company. Questions have been asked about why new buyers would invest in the plants if they were total junk.
Investigative industry journal, Africa Oil + Gas Report, revealed weekend that Ojulari’s management was nudged into adopting IJV model after the company concluded an interna asset audit which entailed benchmarking its operations.
Following a new direction from stakeholders, the NNPC management is now working out detail of the new partnership model that still concedes majority and operating stake to private investors while retaining overriding but minority commercial interest in the business.
Although it was reported that three companies have been penciled down for consideration, it is unclear whether they are indigenous or foreign firms.
Oracle Intelligence reports that similar concepts had been sold to Nigerians in the past by the former boss of the defunct Nigerian National Petroleum Corporation (NNPC), Dr Ibe Kachikwu, who doubled at the petroleum minister in the first four years of the current APC-led administration of the federal government.
While Kachikwu called it the NLNG model, referring to the IJV arrangement that gives Shell-led partners the combined 51 percent operating stake in the well run and very profitable natural gas liquefaction and export business.
It is not clear what percentage equity NNPC Limited is currently willing to sell, but sources said that government’s interest might be far less than the 49 percent the national oil company holds in the NLNG arrangement.
