No subsidy removal until refineries are working under next government – Sylva
The regime of the President, Major General Muhammadu Buhari (retd.), will not be able to complete the repairs of the comatose refineries and will be expecting the next government to continue with it.
The Minister of State for Petroleum Resources, Timipre Sylva, said this on Tuesday on NTA’s Good Morning Nigeria programme which was monitored by The PUNCH.
But in its reaction, the Trade Union Congress restated its warning to the Federal Government not to remove fuel subsidy until the commencement of the local refining of crude oil.
On its part, the Independent Petroleum Marketers Association of Nigeria warned that without repairing refineries, fuel price hike was imminent.
Earlier on the NTA, the minister said he was hopeful that the Buhari regime would be able to complete 60 per cent of the repair of the two Port Harcourt refineries before leaving office while the ones at Warri and Kaduna would take much longer.
Sylva said, “We agreed from the very beginning that the completion date will overflow into the next administration but we agreed that there are milestones. We expect that by the end of this year, in Port Harcourt, we expect to achieve at least 60 per cent of the capacity production from Port Harcourt.
“We are hoping that by the end of next year, the rehabilitation will have been completed. Of course, Warri and Kaduna started after Port Harcourt refineries and of course, it is going to progress at a slower pace.
“But I believe that at the end of the year, all the refineries – Port Harcourt, Warri and Kaduna – will be operating at a certain capacity. I cannot tell you what capacity it will be operating by the time we leave but they will all be at least partially functional and we expect that since governance is a continuum, the next government will take up from wherever we stop and get it to the finishing line.”
The minister maintained that subsidy removal was the best way to attract investments into the oil sector and fight petrol theft but said Buhari wanted to protect Nigerians who were already suffering.
Sylva stated, “We are still very much committed to subsidy removal. It is just the timing that we are saying ok. Let us re-jig the timing. If it was six month, let us be given a longer time. Every other aspect of the Petroleum Industry Act is moving on.”
The minister described as unfortunate the N3tn petrol subsidy budget for 2022.
He said the money could have been used to achieve more important things that would have a direct impact on the lives of Nigerians.
“Look at it. N3tn is budgeted. You can imagine if this N3tn was budgeted for something else. Do you know what that means for the country? Who is going to benefit from this?” he asked.
Sylva said in countries like Kuwait and Saudi Arabia, the petrol subsidy had been scrapped.
He argued that even when the refineries are working, they will continue to operate at a loss unless subsidy payment and price regulation stops.
The minister said by the time the Dangote refinery is inaugurated and Nigeria completes the repair of the government-owned refineries, Nigeria should be producing about one million barrels of refined crude oil per day.
He, however, said the Dangote refinery would not crash the price of petrol significantly because it would be selling petrol at the international price.
“Dangote yes started his refinery under a subsidy regime. But if you notice, it was carefully planned as an export refinery and that is why it is in a free zone. It is by his port because he is not refining to sell at a loss as the other refineries were designed to do.
“He designed his to sell at a profit internationally mostly. If we are to buy from him, we will also buy at the international market (rate). The only saving that we will make is the cost of freight. So, that is Dangote’s own model. It would not function under a subsidy regime. So, it is agreed that no refinery in the world can survive in a subsidy regime,” Sylva added.
Reacting to the minister’s statement, oil marketers said it was unfortunate that the policies of the government had remained unstable, adding that stakeholders were dismayed by the minister’s comment.
Without repairing refineries, fuel price hike imminent – Marketers
“Stakeholders are frowning upon such statements and are dismayed by this, because the policies of the government are not stable. Implementation is always another different thing,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, stated.
He told one of our correspondents that the statement showed that the government was not ready to push for the implementation of its policies in the oil sector.
Chinedu said, “I once told you that if care is not taken petrol will sell above N200/litre soon and people were calling me, including government officials, to ask what the basis of my claim was.
“And I told them that once our naira suffers, it will be very difficult for us to continue to subsidise petrol. And it is this same ideology and policy of government at every point in time that we are suffering.
“When the government is not ready to push policies, they will want to implement something that is being done on the periphery, something that they are only doing on a PowerPoint display.”
Ukadike added, “After putting over N100bn on Port Harcourt refinery, up till now that plant has not produced one drop of petrol, diesel or kerosene. And we are all depending on the importation of petroleum products.
“How will the country survive like this? So we the stakeholders are just in a state of dismay. Even on the issue of subsidy, the government is just going forward and backward on it.”
TUC warns against subsidy removal without local fuel production
Also in a chat with The PUNCH, the Trade Union Congress warned the Federal Government against removing subsidy without local refineries working.
The TUC Secretary-General, Musa Lawal, who said this in an interview with The PUNCH, stated that the congress would not shift its position on fuel subsidy even if took 10 years for the government to fix the refineries.
He stated, “We have spoken several times on this that as much as we support deregulation, subsidy cannot be removed until fuel is refined in our country. So, if it takes them 10 years to produce fuel in our country, then they should hold on to subsidy until it is over.”
When asked about the cost implications on the nation’s coffers, Lawal argued, “Do you want to rule dead bodies? Then, kill everybody so there would be nobody to spend money on.”
It was exclusively reported in Sunday PUNCH that the Federal Government had processed $98m and N17.2bn as payments for the ongoing rehabilitation of the Port Harcourt Refining Company.
The report stated that the funds were processed after the initial payment of $194m by the government to Tecnimont SpA of Italy, being 15 per cent advance payment required for the rehabilitation of the facility.
It stated that the project was financed by an equity contribution by the sponsor and loan by lenders (AfrieximBank).
The report indicated that the Engineering, Procurement, Construction, Installation and Commissioning contract price remained at $1.397bn lump sum with $162m as provisional sum, bringing the total project cost to $1.559bn as approved by the Federal Executive Council.
The Federal Executive Council approved the contract for the EPCIC of the Port Harcourt refinery on March 17 2021, while work on the facility commenced last year.
The council approved the award of PHRC EPCIC contract to Tecnimont in March, and the contract agreement was signed on April 6, 2021.
The immediate past Group General Manager, Group Public Affairs Division, NNPC, Kennie Obateru, had explained in April last year that the rehabilitation of the Port Harcourt refinery would make part of the facility to start delivering refined products by September 2022.
Also, The PUNCH exclusively reported on Monday that NNPC spent N100bn on refineries’ rehabilitation in 2021 and that the funds were pumped into revamping the facilities on a monthly basis last year.
NNPC disclosed this in a report on the funding performance of the oil firm from January to December 2021, which was seen in Abuja on Sunday.
Although no refinery was mentioned in the report, Nigeria’s refineries had been under the management of NNPC, as the rehabilitation of Port Harcourt Refining Company had been ongoing.
The other refineries under NNPC’s management include the Kaduna Refining and Petrochemical Company, as well as the Warri Refining and Petrochemical Company.
In August last year, the Federal Executive Council approved the sum of $1.48bn for the rehabilitation of both Warri and Kaduna refineries.
Sylva had announced this at the end of one of the weekly FEC meetings held in Abuja.
He had explained that the rehabilitation of Warri and Kaduna refineries would be awarded to Messers Saipem SPA and Saipem Contracting Limited at the combined total sum of $1.484bn and would be rehabilitated in three phases of 21, 23 and 33 months.
On assuming power in May 2015, the President, Major General Muhammadu Buhari (retd.), pledged to revive refineries to optimum capacity,
In December 2016, the NNPC said the refineries would work at “full blast” by 2017.
The then NNPC spokesperson, Ndu Ughamadu, said in a statement the corporation would embark on a comprehensive rehabilitation of the refineries to achieve optimal capacity utilisation.
But in September 2017, the then NNPC’s Group Managing Director, Maikanti Baru, again said the refineries would be shut down for overhaul.