February 20, 2018 10:25 AM / FBNQuest Research
the background of periodic challenges with the supply and distribution of
petroleum products, the board of the Nigerian National Petroleum Corporation
(NNPC) approved the list of firms to be selected for the rehabilitation,
operation and maintenance of its refineries at Kaduna, Warri and Port Harcourt
corporation’s already appointed advisors will be supplemented by independent
audit, environmental and regulatory firms to undertake the necessary due
diligence on the investment by the private sector.
The rehabilitation is to be carried out by
the original refinery builders. This policy decision has been taken because of
their inherent knowledge and competitive advantage. Additionally, they are best
placed to provide the necessary performance guarantees.
Funding for the rehabilitation of each
refinery is to be provided by an approved consortium under a prepayment structure.
The consortia will have firms with a proven track record in the field. They
will execute an operations and maintenance agreement, binding them, inter alia,
to the refineries operating at 90% capacity.
The consortia are also required to include
a firm with strong product marketing experience. This prerequisite is designed
to underpin the sale of refined products on the open market.
The corporation expects the conclusion of
the financing arrangements within three months and currently sees the rehabilitation
of the refineries on or before end-2019.
The advantages of the project are clearly
numerous. The first to mention is the scope for substantial FX savings on
imported products. We recall that the refineries have a combined capacity to
process 445,000 barrels of crude oil per day. The savings would allow the FGN
to deploy the funds to other priority areas of the economy. The project also
has great potential in terms of job creation.