The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, Thursday revealed that the Federal Government would in this year spend N3.4trillion on the importation of petroleum products.
Addressing newsmen in Abuja, he refuted reports that quoted him to have said that government was concessioning its refineries.
He said that government has no plans to concession the refineries but it is only making arrangements for private financing of their repair. The minister denied that the claims that Oando has won the contract for financing the repair of the refineries.
According to him, Nigeria that consumes 35million daily presently has domestic refining capacity of six million liters, which is about 25% of the demand.
The minister said “the importation of products even between January and December of this year, amounts to 20million metric tonnes and a total amounting of N3.4 trillion. The logistic cost of that importation shipping clearing and all that is about N1.34trillion since the same one year period.”
Owing to this domestic and demand situation, the government had to plan for the improvement of its domestic refining capacity.
Kachikwu noted that government raised a technical and steering committees on the financing of the refineries that its report will be presented to the National Assembly and Federal Executive Council upon conclusion.
He however noted that what has been so far established is the magnitude of work that is required in the entities.
The minister said that apart from piping, about $1.1billion, $1.2billion (depending of the category), will be required to fix the refineries.
His words: “Internally, we have been able to determine the amount we want to do this work in terms of what work is required to be done. And the total cumulative amount if I am not mistaking is the $1.1, $1.2b type category depend on the refineries with specific breakdown. That of course does not include the cost of piping.”
Explaining why government has decided to deal with the Chioda, Sapiem and GGC, he said that Chioda built Kaduna refinery, Sapiem built Warri refineries while CGC built the PortHacourt refineries.
These companies, according to him, have the designs, engineering outlay and upgrade capability for the refineries.
Today, the reality is still that the reality for downstream product surges that very few people will undertake the financing. So that is why we have created a business model that tie them to the Direct Sale Direct Purchase (DSDP) Programme and that is still working and that is still work in progress.
“When they finish this and are done with the analysis, I will expect that they will then invite everybody who is interested to the commercial terms set out formally…before we get to FEC, National Assembly and Mr. President. We haven’t reached there and so nobody can say contracts have been given.”
Kachikwu advised the International Oil Companies to invest in building refineries in Nigeria in order to avoid the negative effects of dip in oil prices.
He said more importantly, we need to address IOCs in terms of what they need to do to help local refining because if you encourage all these refining capabilities whenever they run out of crude availability we need to look at them why are you taking out crude when you can get the same pricing equivalent in local refining.”
In terms of the incentives or guarantee for the corporations that would finance the repair of the refineries, he said that there will incremental volumes, access to sales to cushion the challenge in the markets in terms of pricing.
He revealed that the Organization of Petroleum Exporting Countries (OPEC) is reaching out to its non-members including the US on measures to control the glut in the market.