• Board tinkers with new purpose for KRPC

Sopuruchi Onwuka

Nigerian National Petroleum Company (NNPC) Limited may be determined to reinvent some of the operated public sector refineries but it is evidently meticulous and detailed in evolving processes that transcend viable operations towards building robust crude processing hub for Africa.

The company which announced a new business model that would cede significant equity to operating partners in exchange for capital importation is said to be currently sifting through a list of credible incorporated joint venture partners for two of its biggest refineries located in Port Harcourt and Warri.

Group Chief Executive Officer, Engr Bayo Ojulari, had in a fireside chat at the Nigerian International Energy Summit (NEIS) in Abuja confessed that the national oil company does not have the capacity and expertise to operate and commercial refining business. His confession sits down well with stakeholders who have been fed numerous lies about failed refinery rehabilitation for over 40 years.

Ojulari had stated that the current board and management of the company discovered that the three refining companies of the NNPC Group form the irredeemable centers for commercial losses, explaining that the latest show of rehabilitation effort was a massive financial drain on the country and the economy.

He stated that the board and management of the company had considered several exit options including outright sale of the refineries before settling for a new IJV model that relieves the company of operating responsibility while protecting public interest in the domestic fuel market supply.

He hinted that NNPC was working on an IJV deal to get a Chinese refiner into partnership on the refineries, adding that the national oil company has determined to yield substantial equity stakes to attract the new partners to Nigeria.

But the plan to revive the NNPC refineries under a new business model comes at a time the domestic fuel market has also changed. Fuel subsidy regimes which supported the financial sleaze of the past have been dismantled with the deregulation and liberalization of the market.

Also, the 650,000 barrels per day Dangote Refinery is dominating the Nigerian and African fuel supply market, establishing a competitive sector where economies of scale and operating efficiency confer commercial viability of refining ventures.

Dangote Refinery has since declared plans and effective moves to expand its refining capacity from current 650,000 barrels per day to 1.4 million barrels per day. And several medium and scalable refining projects including the 200,000 barrels per day BUA Refinery, WalterSmith’s Ibigwe Refinery, Aradel’s Ogbele Refinery, OPAC Refinery, Ikwe Onna Refinery, Azikiel Refinery and many more are underway.

It is estimated that by the time NNPC is able to relaunch its refineries, the domestic refining space would have been very crowded, with crude oil demand far outstripping current and projected gross national production. And the situation would entail that every refinery project would be based on imported crude oil feedstock.

Our sources admit that the new management of NNPC is also working on how to fit efficiently into a new market reality. We gathered that business units of the national oil company established purely for delivery of political dividends would now face justification for continued investments.

When restored online, the Warri Refinery and Petrochemical Company (WRPC) Limited would operate existing 125,000 barrels per day processing plant with the option of expanding processing capacity with introduction of new modules.

Also, the Port Harcourt Refining Company (PHRC) Limited is planned to restart operations with existing two plants comprising 150,000 barrels per day single train refinery and the secondary 60,000 barrels per day refinery which churns out naphtha and sundry distillates.

The two plants confer the PHRC with combined processing capacity of 210,000 barrels per day. And if NNPC can attract two investing partners, its plants would be able to launch back into the market with combined capacity for 335,000 barrels per day.

Our enquiry yielded that there is no immediate plan to revive the 110,000 barrels per day plant operated by the Kaduna Refinery and Petrochemical Company (KPRC) which is the third business arm of the national oil company in the refining industry.

According to whispers which are still muffled at the NNPC, the board and management of the national oil company may have given up hopes of revamping the Kaduna refining plant following challenges associated with crude oil supply logistics. A feedstock pipeline which connected the Kaduna refinery from Warri petroleum production hub is currently perceived a basket with no integrity for holding liquids.

Alternative plan under consideration is how to convert the plant into a petrochemical complex before connecting it to the Ajaokuta-Kaduna-Kano (AKK) gas pipeline. If the plan is approved by the board, then what would come back online would be a petrochemical complex without a refinery.

Under the new arrangement, Oracle Intelligence gathered, . If the plan is approved by the board, then what would come back online would be a petrochemical complex without a refinery.

Under the new arrangement, Oracle Intelligence gathered, NNPC is working to restore 335,000 barrels of its existing 445,000 barrels per day refining capacity. And the new business model also provides for further capacity expansion but on strict commercial feasibility considerations.

According to our sources, internal reorganization, market repositioning and new business development models currently ongoing at NNPC Limited mean that the planned rehabilitation and restreaming of operated refineries may not be getting the accelerated process anticipated from the new management of the national oil company.

Instead, NNPC is said to be working out a collaborative arrangement that might also tap into its equities in private refineries, including the Dangote Refinery which also enjoys crude supply deals with the national oil company.

During a visit to Dangote Refinery in Lagos, Ojulari had stated that both companies have resolved to work together in delivering government’s economic aspirations in the petroleum industry, including domestic energy security. The scope of partnership proposed by Ojulari was not defined but later developments have shown that Dangote Refinery has widened its fuel distribution channels to include traditional partners of NNPC in the market.

Our inquiry also showed that NNPC and Dangote have activated upstream exploration and production joint venture on development and operation of oil mining licenses (OMLs) 71 and 72 in the Niger Delta. Under the arrangement, Dangote’s upstream affiliate, West Africa Exploration and Production Company Limited operates the oil blocks in which NNPC Limited holds overriding commercial interests.

With NNPC holding overriding stakes in Dangote’s upstream development and production operations, and minority interest in Dangote’s refining business; it is expected that the emerging relationship would enhance crude oil feedstock to the massive refinery while there would be more diversified channels to the domestic fuel market.

Ojulari had at the conference in Abuja expressed happiness that Dangote refinery came online at a time deregulation of the domestic fuel market caught the NNPC unawares in 2023. He said it would have been a nightmare for NNPC if the domestic market had been plunged into supply chaos.

As it stands at the moment, it appears that NNPC is leaning on Dangote Refinery to maintain a stable domestic market while it takes time to evolve a credible business model that puts NNPC at the center of emerging domestic refining industry that transforms Nigeria from a net fuel importer to a continental refining hub.