Contrary to earlier plans to privatise all the country�s refineries, the Federal Government has announced it would no more put up the Port Harcourt Refinery for privatisation.
Minister of State for Petroleum Resources, Edmund Daukoru, who made government�s position public in Abuja, Friday, attributed government�s volte-face to improvement in the operations of the country�s refineries.
“Government is satisfied with the progress made in plants rehabilitation and their performance. It is as a result of the improvement in the operations of the refineries that President Olusegun Obasanjo granted the request to exempt Port Harcourt Refinery from the ongoing privatisation”, Daukoru told participants at a one-day NNPC Management Downstream Retreat in Abuja.
Defending the decision, he said, “Mr President has said privatisation is not an ideology, and I couldn�t put it any better. Privatisation is a means to service delivery and improvement in service delivery. If that service delivery can be achieved by other means, so be it. The case was made that the Port Harcourt Refinery has come a long way from the condition that it was inherited. And so, we felt that it was only fair to give it a chance to do even more. We�re interested in service delivery, not in ideology.
“These are the longer-term decisions as approved by the Federal Executive Council (FEC) at the start of the second tenure of Mr President. You cannot grow a world-class integrated company without that company having a downstream arm. Crude prices are, in fact, being driven by products prices, constraints in downstream refining capacity as the market conditions arise. Let me say that just as the privatisation programme is not ideology-driven but need-driven, so also is the decision to retain the refineries, in particular, the Port Harcourt Refinery.
“It is not being retained for ideological reasons; it is being retained for hard-headed commercial reasons�that where there is refining capacity in the world, you should not dispose of what you have, but rather you should be adding capacity. Retain what you have, improve on it and even add capacity to achieve export possibility”.
The minister could not confirm plans to expand the Port Harcourt Refinery. Said he: “I would not say there are plans, but there are plans, in deed, for more refining capacity, not expansion of Port Harcourt�s. Private firms are being encouraged to come and build refineries. “Remember, licences have been given, but, alas, everyone wants oil block before they build refinery.
“That cannot be because the world market is asking for products. It is a viable business in its own right and I don�t see why we should be giving people oil blocks, allowing them to lift crude oil to use to build refineries. We will still ask people to come and build refineries. We are appealing to them to see it as a good investment in its own right”.
Fielding questions on the planned repair of vandalised pipelines in the creeks of the Niger Delta by militant groups, Nigerian National Petroleum Corporation (NNPC) Group Managing Director (GMD), Funsho Kupolokun, said access would be possible in a week�s time.
“We hope we would be able to enter the creeks in a week from now. We have the contractors mobilised on site, but we�ve not been able to enter because of the problems you know. Hopefully, we will be able to enter in one week. We tried passing crude in parcels to the refineries, but we found the cost was on the high side, so we dropped the idea. The optimum solution is to repair the pipelines and transport crude to the refineries in the usual manner”, Kupolokun said.
The NNPC boss said the Port Harcourt Refinery, currently operating at 85 per cent installed capacity, had thrown up another challenge of products evacuation.
In his words, “If you talk about Port Harcourt 1 and 2, the two refineries are running at a rate that is creating another challenge; the challenge of evacuation. We now find ourselves in a scenario where the rate of production from the two refineries in Port Harcourt is higher than the rate at which we could load. Sometimes, we have to keep one of the refineries for two days to be able to cope with loading. This is a challenge that we never had in the past”.
Corroborating Daukoru�s statement that government would hold on to the Port Harcourt Refinery, he said: “National agenda is about reforms; it�s about liberalisation; it�s about deregulation, and a cardinal principle of liberalisation is availability of access in an open, non-discriminatory basis for any participant in the industry. That means the pipelines should be available for whoever wants to use them at a price that is transparent and in a non-discriminatory basis; the same with the refineries and the facilities around the refineries and depots. And, therefore, the only one man who will be willing and capable to do this is the NNPC”.
Continuing, he said: “Beyond that, Port Harcourt is strategic. It is the only facility in the whole of the Gulf of Guinea that has export capability. West Africa today is at 200, 000 barrels per day (bpd) shortfall that has to come from the Mediterranean. The only refinery that has the capability of meeting that shortfall is Port Harcourt, because we have export capability, and therefore, it is the only place in West Africa that can become the hub for petroleum products supply and distribution.
“All other regions in the world have a hub. You go to north-west Europe, it is Rotterdam; the Mediterranean has its own hub, United States, it is New York; the only place that can play that role here is Port Harcourt, and the only way Port Harcourt can play that role is by remaining in the hands of the NNPC”.
Meanwhile, Oil prices, yesterday, jumped above $78 per barrel courtesy of the violence in the Middle East and suspected explosions at a pipeline in Nigeria.
On Friday, Israel widened its offensive on Lebanon, with fighter-bombers blasting the airport for a second day, igniting fuel storage tanks and cutting the main highway to Syria.
The escalating violence pushed prices higher, helped by rising global demand and fears that supplies from major producers, including Iran and Nigeria, could be interrupted.
The world’s fourth-biggest oil exporter, Iran, said it would not abandon the right to nuclear technology and Israel moved naval vessels into Lebanon’s waters to impose a blockade.
An energy analyst with Purvin & Gertz in Singapore, Victor Shum, said: “We are certainly in uncharted territory. I wouldn’t be surprised if $80 is attained soon with this slew of geopolitical events in a tight market.”
Manager of Risk Management at Mitsubishi Corporation, Tony Nunan, noted: “Geopolitical risk is out of control. There’s a pipeline attack in Nigeria, Israel is taking a strong stance and that’s adding fuel to the fire, but more than anything, it’s U.S. gasoline demand holding up and the Iran situation.”
Iranian President, Mahmoud Ahmadinejad, said his country would not abandon its right to nuclear technology after Tehran’s case was referred back to the U.N. Security Council over its nuclear dispute with the West.
In Nigeria, there were two suspected explosions at a crude oil pipeline operated by Nigerian Agip Oil Company (NAOC), which feed the Brass oil terminal, causing massive oil spills in Bayelsa State.
The series of real or potential supply threats have helped drive oil’s 24 per cent rally this year against a background of growing world demand.
With oil above $78 a barrel, global indicators were mostly negative for North American stock markets early Friday.
Wall Street futures suggested a strong start for regular trading after Thursday’s triple-digit declines, but European indexes dropped in early action.
Asian markets plunged, rattled by soaring oil prices, escalating instability in the Middle East and the first interest rate increase in Japan in six years. Japanese stocks dropped 1.7 per cent, Hong Kong lost nearly two per cent and Australian shares tumbled 2.3 per cent.
In Tokyo, stocks fell after the Bank of Japan raised its key interest rate to 0.25 per cent from virtually zero, sending a signal that the world’s second-largest economy has pulled out of a decade-long slump.
Despite near record-high prices, growth in oil demand will rise more quickly through to 2011 than it did in the past decade, the Paris-based International Energy Agency (IEA) had said.
The IEA, adviser to 26 industrialised nations, predicted the world would need an extra 1.57 million bpd of oil to fuel economic growth in 2007, up from growth of 1.21 million bpd this year.