The Senate’s decision halting the concession of the Port Harcourt refinery to Italian oil giant, Eni and their Nigerian partner, Oando, sends signals to investors that the country is yet to turn the corner from being a hostile investment climate and speaks to a lack of cohesion among different organs of government, experts say.
Ibe Kachikwu, Nigeria’s minister of state for petroleum resources and Maikanti Baru, group managing director of the Nigerian National Petroleum Corporation (NNPC) have stated at different for a, the goal of reducing petroleum importation by 60 percent in 2018 and making Nigeria a net a exporter of petroleum products by 2019.
A halt on further action as directed by the Senate, imperils these ambitions and puts at risk an investment package worth $15billion, which includes building a 150,000 barrel per day refinery and power plant.
“This sends a very bad signal to investors, ” Chijioke Mama, energy analyst and founder of EnergyDatar, an energy advisory firm, told BusinessDay, “Nigeria continues to lower the bankability of its infrastructural projects by entrenching policy and decision flip flops.”
A motion brought by Mohammed Sabo, APC-Jigawa, on May 30 faulted the concession agreement because it purportedly did not follow due process, as partners were selected without open and competitive bidding and did not get the endorsement of the Bureau of Public Entreprises (BPE) and the National Council on Privatisation.
Sabo said the deal, “hatched in the dark without the knowledge and participation of the relevant stakeholders” would short-change the Federal Government.
But this is coming at a time that the NNPC is ramping reform efforts. Fuel imports into Nigeria reduced by 6.3 percent to 40.9m litres in January, as the corporation raised combined installed capacity utilisation of the country’s refineries located in Port Harcourt, Warri and Kaduna, by 29 percent. The corporation was hoping to build on these gains before this action.
“The Senate says it wants a more transparent process and I can’t fault them on that,” says Akin Iwayemi, an energy expert with the Nigerian Association for Energy Economics, in a telephone conversation.
“We are talking about doing things in a different way from the past. Before the concession of any public assets, BPE must be involved in whatever form it is done. Unfortunately, this government does not always speak to each other,” said Iwayemi.
Chijioke Mama contends that Kachikwu has explained that this was an invitation to competent persons. “There are moments when such approaches become exigent. However making decisions in silos should be stopped. All stakeholders should be kept in view of the what and the why of national issues.”
Adeola Adenikinju, a gas policy analyst for the World Bank and professor of Economics at University of Ibadan, says there are two issues to look at, what does the law say about the process and the state of the refineries.
“If the law says clearly what should be done and it is being violated, the Senate has the right to proceed to stop it until you follow what the law says, rule of law is important.
“On the other hand, those refineries have been extremely inefficient and government has mismanaged them thoroughly, so if we have options in a process that is transparent, that will ensure that Nigeria gets the best terms, then we can go ahead,” said Adenikinju.
After a futile attempt at collocating refineries with prospective investors in April last year, the NNPC developed a Tolling Plant Model, where the refinery does not take title to the crude, but rather charges a tolling/processing fee to the owner of the crude, which was PPMC on behalf of the corporation but both measures didn’t yield desired results, hence a recourse to concession.
According to the terms of the Memorandum of Understanding (MoU) between Eni and NNPC, ENI is committing to hep refurbish the Port Harcourt refinery, build Phase 2 of the Okpai Power Plant and further investments in Nigeria’s oil and gas industry worth billions of dollars. Final agreement was supposed to be reached by end of July 2017.
ISAAC ANYAOGU
