Besides the April general elections, no issue probably generated more public discourse in recent times than the sale of the Port Harcourt Refining Company (PHRC) and Kaduna Refinery and Petrochemical Company (KRPC) on the eve of former President Olusegun Obasanjo's departure from government.

Although both refineries were working below capacity, yet their privatisation threw up controversies of unimaginable proportion. Observers have expressed concerns that Nigeria, a foremost crude oil producer, could not refine its crude for domestic consumption.

Why government resorted to fuel importation rather than maintaining the refineries has not ceased to amaze Nigerians. Considering that it is the nation’s crude that is taken abroad to be refined and brought back as imported fuel, Nigerians have not stopped wondering why their government is “penny wise and pound foolish.” The country's refineries, with two in Port Harcourt, Rivers State and one each in Kaduna and Warri, Delta State, were long abandoned and have not operated at optimum capacity even at best of times.

It was one of the contentious issues the organised labour put forward recently in its four-day debilitating nationwide strike. Virtually all shades of opinion have criticised the hasty sale of the national assets to a select few. President Umaru Musa Yar'Adua had promised to revisit the sale of the refineries before the industrial action was called off by the organised labour in June.

However, in a surprise move Wednesday, Bluestar Oil Services Limited Consortium, owned by Alhaji Aliko Dangote's Equity Energy Resources, Mr. Femi Otedola's Zenon Oil, and Transnational Corporation resolved to beat a retreat from its acquisition of the refineries for 12 months, effective July 17. The consortium also demanded the refund of $721 million which it paid for the acquisition of 51 per cent Federal Government equity in the nation's biggest refinery.

This far-reaching decisions were conveyed to the Bureau of Public Enterprises (BPE), via a letter where the consortium maintained that it emerged the preferred bidder in the acquisition of the Port Harcourt refinery, after it paid $561 million.

The group backed out of the juicy deal following widespread criticisms by the organised labour and the recent campaign by the Nigerian National Petroleum Corporation (NNPC) that it is capable of managing the ailing refineries which operational capacity has dropped to below 40 per cent.

Analysts contend that the consortium might have retreated temporarily given its caveat that in the event NNPC failed to live up to its pledge at the expiration of the 12 months, the group would re-assume its interest in the plant at a renegotiated price.

The groundswell of strident criticisms trailing the sale of the refineries to a consortium comprising Nigeria’s two foremost tycoons, Dangote and Otedola, might not be unfounded given their closeness to Obasanjo. There were allegations of so many underhand practices in the sale that have since come to the public glare.

For instance, the Senate Ad-Hoc Committee on the contending issues in the nationwide strike revealed that the Port-Harcourt refinery is worth $2 billion. The committee queried the sale of the Kaduna and Port-Harcourt refineries for a paltry $721m.

Executives of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and National Union of Petroleum National Gas Workers (NUPENG) argued that the sale of Kaduna Refinery lack transparency. They vowed to resist the take over of the refinery until all issues raised by the workers were resolved.

PENGASSAN’S chairman, Mr. Henry Awan maintained that a deal sealed under the table is unacceptable. He contended that based on the glaring lack of transparency in the process and the insincerity on the part of BPE, the sale of the KRPC cannot stand.
On his part, NUPENG Chairman, Alhaji Abdullahi Mohammed argued that the process leading to the sale of the refinery was alien to the transaction.

He was quoted in an interview with a national daily as saying, “First, the sole bidder, China National Petroleum Corporation (CNPC) failed to match the undisclosed reserve price for the KRPC during the first and second rounds of bidding. Suddenly another company that calls itself Bluestar Oil Services Consortium that did not submit any bid, that did not conduct any due diligence on the facility acquired 51 percent shares of the refinery,” in a process the BPE described as “closed-in-bidding.” Mohammed, livid with anger condemned the entire process and asked that something be done by the Yar’Adua government to reverse the sale.

Accusing BPE of selling the refinery for a paltry $160 million, the two bodies contended that the actual worth of the refinery is N7.9 billion as at December 2006, adding that, “a partial TAM (Turn Around Maintenance) is scheduled to start soon with the arrival of over 90 percent of the materials at the cost of $75 million which was not even considered by the BPE.”

Similarly, Port Harcourt members of PENGASSAN and NUPENG, decried the “last-minute” decision of Obasanjo to auction the Port Harcourt refinery. Their anger was aggravated by what they called the “ridiculous amount” at which the refinery was auctioned.

According to Mr. Ligda Musa Dauda Kalishen, Vice-Chairman of PENGASSAN, Port Harcourt Refinery branch, “the facility valued at about $5 billion was auctioned for $561million.” 

Kalishen said the idea of auctioning the refinery was “a wicked one.” In all these sharp practices, culminating in the under-pricing of vital national assets,  Mrs. Irene Chigbue, Director-General, BPE, fitfully defended the sale before the Senate Ad-hoc Committee.
NNPC Group Executive Director, Refineries, Mr. Abubakar Lawal Yar’Adua, said the corporation had the capability of running the refineries efficiently if given the necessary assistance.

He said the corporation had planned to effect certain repairs on the refineries, which would have made them efficient but was stopped by the Obasanjo administration which preferred to sell them off.

“The solution to the nation’s petroleum shortages will not be found in the selling of the refineries, but in conducting proper turn-around maintenance on them as well as building new ones,” he had said.

The Department of Petroleum Resources (DPR) supported the call for cancellation and gave instances of countries where state-owned refineries have functioned profitably.

DPR Director, Mr. Tony Chukwueke, cited Algeria and Saudi Arabia, which were operating different models that ensured they refined enough petroleum products locally.
The Nigeria Labour Congress (NLC) Secretary-General, John Odah, also faulted the valuations of Kaduna and Port Harcourt refineries by BNP Paribas for which huge sums were paid.

Given this scenario, the consortium probably towed a sane path on Wednesday by arriving at its decision to withdraw. However, this has placed enormous responsibilities on the fledgling shoulders of the Yar'Adua government.

With NNPC and DPR's position on the issue, is the government willing to manage these refineries for public good or will it midwife a transparent privatisation agenda that will end constant fuel shortages? Only time will tell.

Godwin Aruna