The Bureau of Public Enterprise (BPE) plans to commence the privatisation of the Warri Refinery which produces 12,400 barrels per day, Old Port Harcourt, Kaduna Refinery and New Port Harcourt refinery which pumps out 150,000 daily.
“I think the most important thing they [the buyers] need to bear in mind is crude theft and pipeline vandalisation because when you have such a huge investment and you are not able to refine products then you have a huge challenge,” Luqman Agboola, Acting Divisional head of Energy at Diamond bank told CNBC Africa.
Crude oil theft and pipeline vandalisation have been frustrating the Nigerian government and the petroleum industry for so many years and has put the national economy at risk.
“So the key issues really is going to be, how are pipelines going to be secured, how are we going to have uninterrupted supply of crude to the refineries, I think that is going to be the major issue.”
In addition, most of the refineries to be sold have not been maintained properly and have not performed optimally for the most part of the last decade thus making the investment riskier. Nonetheless, Dangote Group continues to make huge investment commitments in the industry.
“I want to believe that whoever is going to be buying those refineries are going to be doing their due diligence and they are going to put a price on it and that price needs to be inclusive of what needs to be done to bring them to optimal performance,” he explained.
According to Agboola, the fact that the refineries have been mismanaged for so long is not a challenge as the buyers can minimise the impact this will have on the refineries.
“Given the situation with those refineries, how long is turn around maintenance going to take, and government having said we are going to privatise by next year,” he said.
Currently, Nigeria spends billions of dollars importing refined petroleum products while some analysts believe that if these processes work as planned, within the next two years the country could cease the importation of these products, Agboola believes it will take much longer than that.
“I can assure you that there are not going to be investments going into those refineries any longer and that means that until we finish the privatisation process, whoever buys is not going to begin to put money to refurbish those refineries, so those are the issues we are going to face,” he added.