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Our refineries are back in business!
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After Blue Star Consortium pulled out of the deal that saw it emerge preferred bidder for Port Harcourt and Kaduna refineries ostensibly because "due process" was not followed, the expectation was that the process would be restarted. But an emerging trend in the Yar'Adua administration has caught with the privatisation of the refineries now come to play. Privatisation of refineries has been jettisoned and there is a return to the command and control structure that nurtures political patronage through the award of contracts.
Before Obasanjo eventually agreed to privatise the refineries in the twilight of his administration, over $720 million had been spent on their repairs and turn around maintenance after which no litre of petrol could be obtained from the refineries. The sale of Port Harcourt and Kaduna refineries had brought hopes that after years of expensive but fruitless turn around maintenance of refineries, government was finally going to be relieved of the drain pipe so that much needed resources can be ploughed into providing basic amenities for the people.
All that has changed. Now, Abubakar Yar'Adua, the acting group managing director of NNPC and a longstanding staff of the corporation, may have successfully superintended the outright reversal of the privatisation programme. And to demonstrate that restoring the running of refineries back to NNPC is best for the nation, he promised that by December, last year that is, the refineries would be running at optimum capacity. That deadline was later shifted to February when it was determined that the rot in the refineries was initially underestimated!
For Kaduna refinery where over $23 million has been spent in importing equipment for its reactivation, an additional $20 million is been demanded before the plant can roll back to life. The interesting part to it is that even if all systems are put in place, officials of the refinery said it will still wait for Warri refinery to come back on stream after which crude oil can be pumped to Kaduna.
We are going back full circle to the same old routine of false hopes and serial postponement of promises that never get fulfilled. But there is class of Nigerians that usually derives fulfilment from chaos that has characterised the running of the refineries: contractors.
The fear is that the days of serial contract awards with the attendant inclination towards patronage that a real imperative for project execution. For every promise made and broken, contracts will be awarded, somebody or organisation is going to smile to the bank, but oil industry will be worse for it. The World Bank was reported to have evaluated the existing refineries as having dilapidated to the point of their being classified as scraps. Since their production lines are in as bad a shape as any government run establishment can be. And that is good news for contractors. At every point in time, some components of the refineries will break down, there will be cause to import more refined products while the failed components are fixed and more importantly, contracts have to be awarded to fix the machines. Having had little difficulty in convincing President Yar'Adua that the refineries will now work that he is the GMD of NNPC, Abubakar Yar'Adua and his team that have been in the oil corporation all this while will spare no effort and expenditure to keep the refineries working or seem to be working.
The wider implication for the jettisoning of privatisation is that the dream of having a flourishing refinery chain built by the private sector will evaporate. With NNPC still free to trade with the 450,000 barrels of crude oil set aside for local consumption the way it dims fit, it is unlikely that a clement atmosphere will be created to encourage private entrepreneurs to venture into the building of refineries. An organisation steeped in inefficiency but wielding the powers of a regulator and operator cannot be trusted to create a level playing field for the private sector to compete with it. That is the status of NNPC.
There is no telling the extent proponents of the ancient regime can go in the bid to restore their big government concept of governance. Recently, there was a hint by an administration official that the federal government may build refineries! If the reactionaries get President Yar'Adua to buy the idea and I reckon they will again have little difficulty doing that, this administration will be on course to replicating and outstripping Obasanjo's expenditure in his failed bid to fix the power sector.
Before Obasanjo eventually agreed to privatise the refineries in the twilight of his administration, over $720 million had been spent on their repairs and turn around maintenance after which no litre of petrol could be obtained from the refineries. The sale of Port Harcourt and Kaduna refineries had brought hopes that after years of expensive but fruitless turn around maintenance of refineries, government was finally going to be relieved of the drain pipe so that much needed resources can be ploughed into providing basic amenities for the people.
All that has changed. Now, Abubakar Yar'Adua, the acting group managing director of NNPC and a longstanding staff of the corporation, may have successfully superintended the outright reversal of the privatisation programme. And to demonstrate that restoring the running of refineries back to NNPC is best for the nation, he promised that by December, last year that is, the refineries would be running at optimum capacity. That deadline was later shifted to February when it was determined that the rot in the refineries was initially underestimated!
For Kaduna refinery where over $23 million has been spent in importing equipment for its reactivation, an additional $20 million is been demanded before the plant can roll back to life. The interesting part to it is that even if all systems are put in place, officials of the refinery said it will still wait for Warri refinery to come back on stream after which crude oil can be pumped to Kaduna.
We are going back full circle to the same old routine of false hopes and serial postponement of promises that never get fulfilled. But there is class of Nigerians that usually derives fulfilment from chaos that has characterised the running of the refineries: contractors.
The fear is that the days of serial contract awards with the attendant inclination towards patronage that a real imperative for project execution. For every promise made and broken, contracts will be awarded, somebody or organisation is going to smile to the bank, but oil industry will be worse for it. The World Bank was reported to have evaluated the existing refineries as having dilapidated to the point of their being classified as scraps. Since their production lines are in as bad a shape as any government run establishment can be. And that is good news for contractors. At every point in time, some components of the refineries will break down, there will be cause to import more refined products while the failed components are fixed and more importantly, contracts have to be awarded to fix the machines. Having had little difficulty in convincing President Yar'Adua that the refineries will now work that he is the GMD of NNPC, Abubakar Yar'Adua and his team that have been in the oil corporation all this while will spare no effort and expenditure to keep the refineries working or seem to be working.
The wider implication for the jettisoning of privatisation is that the dream of having a flourishing refinery chain built by the private sector will evaporate. With NNPC still free to trade with the 450,000 barrels of crude oil set aside for local consumption the way it dims fit, it is unlikely that a clement atmosphere will be created to encourage private entrepreneurs to venture into the building of refineries. An organisation steeped in inefficiency but wielding the powers of a regulator and operator cannot be trusted to create a level playing field for the private sector to compete with it. That is the status of NNPC.
There is no telling the extent proponents of the ancient regime can go in the bid to restore their big government concept of governance. Recently, there was a hint by an administration official that the federal government may build refineries! If the reactionaries get President Yar'Adua to buy the idea and I reckon they will again have little difficulty doing that, this administration will be on course to replicating and outstripping Obasanjo's expenditure in his failed bid to fix the power sector.
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