Building New Refineries In Nigeria: Deals signed, but no progress

UNBIASED AFRICA REPORT

By InformAfrica Editorial staffs 

InformAfrica – Nigeria is seeking to build new refineries and hopefully put an end to the flood of imported refined oil and fuel into the country, but in roughly 2 years, the Goodluck Jonathan administration has signed two refinery deals with no progress.

Crude oil refineries in Nigeria
InformAfrica team of web researchers have been following trends on the planned construction of the three new refineries in Nigeria for the past two years, especially the 1st projected $8 billion refinery in Lekki free trade zone of Lagos State. No progress have been announced or seen so far since 2010.

Over the years, the Nigerian government have signed several deals or Memorandum of Understanding (MoU) with foreign firms with the intention of building new crude oil refineries in the country, but the people of Nigeria are yet to experience the construction of this new refineries – yet alone repair the damaged or poorly functional refineries in the country.

Nigeria’s four refineries – with a total capacity of 445,000 barrels per day – are performing less than 30 percent of their installed capacity, according to official figures.

Corruption and a lack of proper maintenance of the refineries are often cited as reasons for their under-performance.

It was reported that Fuel importers including the state-owned Nigerian National Petroleum Corp. received 1.1 trillion naira in fraudulent subsidies from the Nigerian government between 2009 and 2011, according to a parliamentary committee that reported on the issue in April.

In a controversial attempt to make life more difficult for the common Nigerian – driving up cost of living, Goodluck Jonathan’s administration on January 1st 2012 removed Nigeria’s fuel subsidy, claiming millions of dollars are being wasted or stolen by oil import companies.

However, after unions staged a weeklong strike in January against his attempt to scrap fuel subsidy, President Goodluck Jonathan partially reinstated the subsidy. Nigeria imports most of its gasoline needs because it lacks the refining capacity to meet domestic demand.

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Nigeria is also Africa’s leading oil producer, but has for more than a decade been importing refined petroleum products from abroad to meet local demands.

In 2010 when Goodluck Jonathan resumed office as acting president after Umara Yar’Adua died, Nigeria and a Chinese state firm signed a $23 billion dollar(USD) deal to build three refineries and a petrochemical complex in Nigeria, according to an official statement released then by AFP news reports. The Nigerian National Petroleum Corporation (NNPC) and China State Construction Engineering Corporation Limited (CSCEC) sealed the deal on the 13th of May 2010. The two were expected to jointly seek the financing and credits from the China Export & Credit Insurance Corporation and a consortium of Chinese banks for the projects.

The 1st of the three refineries with an estimated cost of $8 billion was announced in June 2010 to be built in the Lekki free trade zone of Lagos, Nigeria’s biggest city, according to BBC news report two years ago. The two other new refineries is expected to be built in Bayelsa and Kogi, as well as a petrol-chemical complex. The Chinese firms will cover 80% of the cost, and NNPC 20%, while the state of Lagos will provide land and infrastructure.

InformAfrica team of web researchers have been following trends on the planned construction of the three new refineries in Nigeria for the past two years, especially the 1st projected $8 billion refinery in Lekki free trade zone of Lagos State.

In a news report published May last year 2011 by DailyTimes newspaper of Nigeria, the Lagos State Commissioner for Commerce and Industry, Mr Adeniyi Oyemade said that the Federal Government would soon start the building of a refinery in Lagos. The commissioner said (as of May 2011) that work would soon begin on the construction of Lekki Greenfield refinery, which he said, would refine between 200,000 and 300,000 barrels of crude oil per day. However, InformAfrica web research team are yet to discover any progressive news on the refineries promised by the Nigerian government.

Now, after two years have passed since Nigeria and a Chinese firm signed a 23billion dollar(USD) deal to build three refineries and a petrochemical complex; the Nigerian government have again this 2012 year, signed another Memorandum of Understanding (MoU) with a U.S petroleum resource firm.

According to recent report, the Nigerian government has signed a Memorandum of Understanding with US firm Vulcan Petroleum Resources and Nigeria’s Petroleum Refining and Strategic Reserve to build six new oil refineries in a deal worth $4.5 billion. Two of the plants, each of which will have a capacity of 30,000 barrels per day, are set to be operational within a year.

The construction of the six new refineries is being totally funded by foreign investors, a press release from Vulcan Petroleum Resources states that the deal will help Nigeria meet its growing domestic fuel demand by developing its own infrastructure instead of continuing to rely on crude exports.

The new deal the Nigerian government signed with US foreign investors is being funded in entirety by the foreign firms. Press release statement released June 3rd this month failed to mention the foreign investors involved in this new refinery deal. Meanwhile, the cost of one of the three refineries expected to be built in Lekki free trade zone of Lagos by the Chinese firms as announced years ago – is quoted to be a split with NNPC 80% – 20% with the Chinese covering majority of the expenses, while the state of Lagos is to provide land and infrastructure.

The Nigerian federal government is showing little to no seriousness in building new refineries in the country or at least repairing the poorly functional ones to perform at their total capacity of 445,000 barrels per day – which will in turn put an end to the importation of refined oil in the country.

Nigeria Fuel Subsidy Protest, Lagos
People protest in Lagos following the removal of fuel subsidy by Goodluck Jonathan’s administration in January 2012.

Commenting on the recent deal Nigeria signed with the U.S firms, Nigerian-born entrepreneur and webmaster Kevin Onuma, who is based in the U.S, called it another “corruptive promise”. He continued: “Two years ago after GEJ took office, $23 billion for 3 new refineries was signed by the government, now this year another $4.5 billion signed again for 6 new refineries. Meanwhile, we have four (3*) poorly functional refineries with a total capacity of 445,000 barrels per day that are performing 30% less than their installed capacity. The FG is making no real visible attempt to repair this refineries – nothing is being done.”

The Nigerian federal government signing oil refineries deal that is being totally funded by foreign US investors does not seem like a good deal in favor of the Nigerian economy. Nigeria can afford to cover the total cost of new refineries in Africa’s most populous nation, and every Nigerian knows this.

The official statement released fail to mention what percentage of ownership belong to the Nigerian government and that of the foreign investors, in regards to the $4.5 billion deal for 6 new refineries. Neither did the official statement mention how the $4.5 billion dollars to be provided by US investors for building of the proposed refineries – will be refunded.

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The question every Nigerian should be asking for answer is “If the building of the 6 new refineries commences; what stake of ownership belongs to the US investors funding this project in entirety and what percentage belongs to Nigeria?”

InformAfrica web research team would like to share some of the commentary being discussed by fellow Nigerians and Africans around the world in regards to the new $4.5 billion deal signed with Vulcan Petroleum Resources Ltd:

  •  Before awarding new contracts for refineries, what are the working conditions of the existing refineries in the country? –Udo, Abuja, Nigeria 
  • Accountability is always a part of a successful deal; and, foreign investment is not to be received with a beggar’s hand. They are there to make money. The whole process should be properly negotiated and the operation of the plant plenarily regulated. Nigeria must have over 50 percent stake – in order not to be subservient to a foreign entity. –Abram
  • Please check out this Vulcan energy very well. I can’t see their website when i google the name – I hope this is not a scam to steal more money. i can only see a ertain Velcan Invests who invests in oil and gas not a refinery builder. we need to be on the alert o. – Adekunle Sogbesan, Lagos, Nigeria 
  • I just did a search on Vulcan Energy and even called their office in Houston Texas, the receptionist told me they were no longer there, something smells like rotten fish here. –Onifade, Northridge, California 
  • Nigeria as at the last accounting had 36 billion dollars in reserve, Now how can you be saving monies when you dont have good roads, reliable electricity supply, afraid to go out of your house at night, when there is a covert ethnic cleansing operation going on in the north, the only country in the world with a population of more than 100 million without a rail based mass transit system, where our universities are crumbling, our hospitals are a sham and the list goes on. I am happy for once that government is moving to solve the fuel availability problem. All these problems are man made, what is lacking is the VISION and sincerity to move Nigeria forward. As a side note, every Nigeria should be VIGILANT, because we all know how easy it is for good ideas and public funds to later metamorphose into PRIVATE estate. Where is this company based? have they done similar JOBS before….Vulcan – Energy. –George E 
  • Hmmm… what can we say … A foreign company wants to invest such an amount in Nigeria without the input of the FGN…. hmmm … The question everyone is forgetting to ask here is …. “what is going to be the end returns for this Vulcan PRL”…. “only a fool would invest such an amount of money if he is not going to make 20 times or more in profit” Our Fake Government of Nigeria should open its eyes and see that we are not selling the future of our youths. –Tosin, Bucharest, Romania  
  • Doing business with the west is like having a pet cobra. is it possible to cut europe and most of the west off from the world economy? –Leon 

Fellow InformAfrica readers, what is your opinion regarding Nigeria’s oil refineries or the newly signed deal with foreign US investors? 

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