‘Bureaucratic bottlenecks delaying take off of private refineries’

Otunba Lateef Lai Ogungbadero is the chairman, Board of Directors, BSM Int’nal Petroleum Refinery & Petrochemicals Limited. In this interview with Tayo Adelaja, he speaks about the issues affecting the country’s refineries, which include why private, licensed refinery operators have not taken off. Excerpts:

Do you agree that Nigerian refineries need to be privatised for effective performance?

Yes, if only we have a clear cut road map for a strategic acquisition which must be transparent, acceptable and beneficial to the Nigerian people and not just a transfer of ownership to some people who have been benefitting from the privatisation process in the country.

As the world’s 13th largest producer of crude oil, Nigeria has no business experiencing petrol shortages. But, as we have just witnessed, the country has become so dysfunctional that fuel queues and scarcity of petroleum products have become so frequent and the citizens go through a harrowing experience getting the products. Huge oil resources have turned to a curse. The main factors responsible for the distress facing us have been in the public domain since the shortages started in the 1990s.

Will the privatisation end the importation and scarcity of petroleum products or do we just do Turn Around Maintenance so that our refineries can produce optimally?

I believe that if our existing refineries operate at full capacity and with the addition of other private refineries spread across the geo political zones as well as cooperation with the labour unions, we can end the importation of refined petroleum products. We would as well stop the incessant scarcity which has the capacity to grind our nation’s economy to a halt such as we experienced in 2012.

BSM offered part ownership of existing petroleum refineries in Europe. It also offered turnaround maintenance of existing petroleum refineries in Nigeria at no cost to the Federal Government. Why must government spend billions of dollars to do turnaround maintenance? How much does a refinery cost? Let the minister or the leadership of the NNPC produce or come out and show Nigerians video recordings of any maintenance done on the refineries?

The simple fact is that the country has to import nearly 80 per cent of its requirement of refined petroleum products. In 2011 and 2012, she spent between 12 and 15 billion dollars annually to meet the deficit – something that, frankly, deserves sober reflection. It is also instructive that the cost effectiveness of the crude for oil SWAP deals has raised more questions in recent times.

In furtherance of official corruption, in 2011, the number of petroleum importers increased suddenly from 49 to 140, thereby incurring N1.7 trillion on petrol subsidy when only N248 billion was appropriated for this by the National Assembly.In 2014, the Federal Government has proposed N971.1 billion for petrol subsidy, about the same figure for the previous year despite the $1.6 billion injected into TAM. This means that the refineries are not reducing our dependence on imported refined products by a jot.

The failure of these government-owned and operated refineries costs Nigerian citizens colossal sums of money in foreign exchange and government revenue, to the detriment of education, healthcare and other badly needed public services.

N122 billion was essentially wasted in 2011 on maintaining refineries that never produce to their installed capacity. Refinery output fell between 2011 and 2012 from 24 per cent to 22 per cent according to NNPC Annual Statistical Bulletin. If these funds have been invested in the healthcare sector, for instance, they could have more than doubled the federal allocation to all 15 Teaching Hospitals and enhanced indelible services and training to millions around the country.

Poor refinery operation and maintenance, and fuel importation allegedly engendered massive corruption and fraud, which in turn, are adversely affecting the country’s image.

Without prejudice, the President, Dr Goodluck Jonathan, should compel the Minister of Petroleum Resources, Diezani Alison-Madueke, to step aside without any further delay to enable thorough investigation into the recent and ongoing scandals of corruption and financial impropriety in the oil sector including fuel subsidy, OML, where and who is keeping the moneys accrued to Nigeria in the spirit of accountability.

Nigerians, I am sure, are not against privatisation if that will actually end the current impasse. They are also interested in the work plan for the privatisation processes and how the interest of the nation would be protected in the contractual agreement regarding the privatised refineries. Privatising the refineries might not be a bad idea if it will achieve the same results and benefits the privatisation of the nation’s telecom sector brought for Nigerians. We expect the privatisation to generate more employment opportunities for the teeming unemployed youths, while the refineries are expected to work at full capacity.

We also expect that if the refineries are privatised and they work at optimum capacity and new ones are built, there will be an end to importation of petroleum products that has been mired in massive corruption through the so-called subsidy payments to the importers of the petroleum products. It is shameful that a country that is the sixth largest producer of crude oil in the world imports the finished products while its refineries cannot produce to meet local consumption. Even less endowed countries don’t import petroleum products. They have refineries that work at full capacity.

We cannot continue like this. The first step is to openly and urgently privatise the refineries and set a date when the importation of refined products would end.

You spoke about private refineries operating along with the existing ones, what has been the impediment to private refineries’ takeoff in the country and what do you suggest as a solution to it?

A decade ago or so, the Federal Government granted preliminary licences to 18 private companies to build refineries. They were shortlisted out of 31 applications received for preliminary licences to establish refineries across the country.

The firms that were given preliminary approval were, Akwa Ibom Refining and Petrochemicals Ltd., Badagry Petroleum Refinery Ltd, Clean Waters Refinery, Ilaje Refinery and Petrochemicals, Niger-Delta Refinery and Petrochemicals Company Ltd, and NSP Refineries and Oil Services Ltd., Ode-Aye Refinery Ltd, Orient Petroleum Resources Ltd., Owena Oil and Gas Ltd., Rivgas Petroleum and Energy Ltd, Sapele Petroleum Ltd, Southland Associates Ltd., Southwest Refineries and Petrochemicals Company, Starex Petroleum Refinery Ltd., The Chasewood Consortium, Tonwei Refinery, Total Support Refineries and Union Atlantic Petroleum Ltd.

The major challenges facing them are inadequate funds, and lack of support from the Federal Government for local investors.The major constraint is lack of funds.

Bad leadership is another factor. I am saying this because where there is the political will; there is a possibility. The challenges currently bedeviling the takeoff of private refineries is simply the bureaucratic processes stemming from lack of political will. It has been the bane of private refineries. For the companies given licences to establish but how many have been able to lay their foundation stone, let alone start the construction stages? There is definitely lack of political will to walk the talk.

Let me give an example of our company and how we are sabotaged in Zamfara. BSM entered into contractual obligations and secured importation of 200,000 metric tonnes monthly revolving of refined petroleum products for a five-year period, at no recourse to subsidy payment from the Federal Government. The price is affordable, specifically at N50 per litre which will be beneficial to the citizen of our country. We’ve secured two 300mw power plant units available for relocation to the country to facilitate regular power supply for its refineries investments and for the benefit of the people.

It is on record that BSM Int’nal Petroleum Refinery & Petrochemicals Ltd Consortium offered Zamfara State Government and NNPC a stake in its 200,000bpd BSM Petroleum Refinery & Hydrocarbon Park Complex Gusau in Zamfara State during the administration of the former governor of Zamfara State, Alhaji Mahmuda Aliyu Shinkafi. We procured advance payment guarantee bonds, notes financing agreement and schedule to finance the projects without recourse to government funding.

I met resistance in the new administration of Governor Yari despite our non-partisan in regard to politics and religious sentiments.

When we commenced operation, BSM consortium created jobs, employment & training opportunities in our determined pursuit of these objectives but the powers that be have made it totally impossible to continue. For your information, the President landed on our heliport during his visit to Gusau. Yes, a change in government ended the projects while all what we laboured for was totally destroyed without our having party affiliation. How can private investors be encouraged in such an environment that is hostile to investors?

First published in National Mirror on April 27, 2014