The Nigerian National Petroleum Company Limited (NNPC) has announced that it will no longer finance the Port Harcourt and Warri refineries through loans backed by crude oil production. Instead, the company will adopt a funding model based on the refineries’ performance to help them operate as commercially sustainable businesses.
NNPC said both refineries must become financially independent as it shifts to a commercial model that requires them to secure funding for their operations instead of relying on loans.
The NNPC CE said the company’s long-term plan is to make the refineries commercially viable so they can attract financing on their own.
Ojulari explained that future funding for the refineries will depend on how well they perform and how productive they are, rather than on crude oil production.
“You heard me talking about our refineries. We’re moving away from situations where the refineries are taking loans based on barrels and not linked to the productivity and performance of the refineries. We are changing that.
“Our solution has to be that those refineries are able to work, raise their own, and deliver, not more contractors coming to take value. That’s the strategy. That’s sustainability. And that’s what will live beyond us,” Ojulari said.
The announcement reflects a change in NNPC’s approach to financing its refineries as the company continues efforts to operate the state-owned facilities under commercially sustainable business models.
Ojulari said NNPC has already reviewed its investment portfolio and removed projects that did not have clear financing plans or realistic prospects for profitability.
“We recognize that our portfolio has put NNPC into a lot of problems in the past years, where a lot of infrastructure development projects do not have a clear line of sight to finance. They do not have a clear line of sight to profitability. We eliminated all of that from our portfolio last year,” he said.
He also said the company has introduced a new financing approach for major infrastructure projects, pointing to the Ajaokuta-Kaduna-Kano (AKK) gas pipeline as an example.
“For the first time, we put in a new financing for infrastructure that has never been done in Nigeria, ‘Project Nexus,’ where we are able to put financing against the AKK pipeline based on its own throughput, not from another barrel from anywhere. That is the way we are going,” Ojulari stated.
He added that NNPC will apply the same commercial approach to its refinery plans through partnerships covering engineering, logistics, technology, and marketing.
“Our refinery ambition depends on integrated partnership. You can see that across engineering, logistics, technology, and marketing. Our energy transition journey requires collaboration with innovators and researchers, development institutions, and new technology,” he added.
Ojulari’s comments came weeks after NNPC signed a Memorandum of Understanding with Sanjiang Chemical Company Limited and Xinganchen (Fuzhou) Industrial Park Operation and Management Company Ltd. to explore a technical equity partnership for the Port Harcourt and Warri refineries.
The proposed partnership, which could follow the ownership model of NLNG, may allow the Chinese companies to acquire about a 51 percent stake in the refineries as part of plans to rehabilitate, expand, and reposition the facilities on a commercial basis.
Under the proposal, the Chinese firms would help complete the remaining engineering work, support operations and maintenance, expand capacity, integrate petrochemical projects, and develop gas-based industrial projects around the refinery sites.
The arrangement also aims to replace the traditional contractor model with long-term equity participation and joint governance, subject to technical, commercial, financial, and legal due diligence before the parties sign any binding agreement.
During a recent visit to the Warri refinery, Ojulari described the plan as a strategic effort to turn the refineries into profitable and sustainable businesses rather than simply completing rehabilitation work. He said NNPC is looking for the right technical and financial partners to help the facilities operate efficiently and create long-term value.
His comments further confirmed that NNPC plans to move away from financing refinery operations through loans and instead position the Port Harcourt, Warri, and Kaduna refineries as commercially viable assets capable of attracting investment and generating their own funding.
Although many people believe the refineries may never operate successfully again, Ojulari remains confident that the plants will return to commercial viability.
source: punchng.com
African Energy Council