The Federal Government has dumped the privatization of the country’s 445,000 barrels capacity refineries, opting for management contract arrangement instead. This means the refineries will be contracted out to firms to manage and make returns to the government as against outright privatization.
This arrangement, a top official of the Nigerian National Petroleum Corporation (NNPC) said, is the best for the refineries considering their present state of decay.
The corporation, the official said, was able to convince government that no investor would want to buy the refineries in their current state.
“With their current state, even with the Turn-Around Maintenance (TAM), only very few and honest investors would like to buy the refineries because they are in very bad condition and if you call for their books they are not bankable anywhere. So, we don’t believe that people with honest intention would like to buy the refineries at this stage,” the official said.
He noted that the only way the refineries can be revamped is the management contract option, where individuals and firms adept in the business collaborate with NNPC.
With the new arrangement, the contractor will take no equity, but cash for the service rendered, while the contract would be structured in such a way that remuneration or compensation is based on performance.
NNPC, the source said, has been talking to a number of individuals and firms on this issue and hopes that by the time the Petroleum Reform Bill is passed into law it would have concluded negotiations with one or two of the contractors.
The plan of the management, according to the source, is to position the organization in such a way that its stocks can be quoted on the stock exchange.
The source said that NNPC is determined to get it right this time around, noting that “at the end of the exercise it hopes to deliver to Nigerians a world class refinery that will meet the expectations of the country and process at least 90 percent of the 445,000 barrels.”
According to him, “If you look at the performance of the refineries over the years, it is possible to achieve this. Anytime there is TAM the production level shoots up”. He added that “it is because we failed to do what we are supposed to do, that is why the refineries are not working.”
It would be recalled that Bluestar Oil Services Limited, a company jointly owned by Aliko Dangote and Femi Otedola, had bided and got both Kaduna and Port Harcourt refineries but had to withdraw from the deal after protest from labour unions, management and staff of NNPC trailed the sale.