Will DANGOTE REFINERY work? A historical perspective and lessons from PH, Warri and Kaduna refineries.

The first Port Harcourt Refinery was a Joint Venture between the Nigerian government and Shell-BP in 1965. Nigerian government acquired 50% shareholding under a participatory agreement and subsequently increased their shareholding to 60% by 1972. At that point the capacity had scaled from 30,000 bpsd to 60,000 bpsd, easily meeting the total product needs of the country. 

By 1978, under an outright buyout, the Nigerian government acquired the remaining 40% shares and the refinery became fully Nigerianized. The refinery was placed under the management of new company, the Nigerian National Petroleum Corporation (NNPC), which was a merger between the Nigerian National Oil Corporation (NNOC) and the Petroleum Ministry. The name was aptly changed to NNPC Refinery, Port Harcourt; to reflect the new ownership and location.

Following the success recorded with the Port Harcourt Refinery joint venture, the Nigerian National Oil Corporation (NNOC) had embarked on another project to set up a refinery in the city of Warri. The economic intelligence unit of the NNOC had projected that that local demand for refined petroleum products would exceed production in no time, if nothing was done. So by 1978, the Warri Refinery was commissioned and placed under the management of the NNPC.

Again, the economic intelligence unit in the now NNPC projected that demand would exceed the production capacity of both PH and Warri Refineries by mid 1980s, majorly due to the rapid economic growth in Northern cities of Kaduna and Kano, Middle Belt and a few cities in Southern Nigeria. This led to the decision to site a third refinery in one of the rapidly growing cities in the North. Kaduna Refinery was birthed and in 1980 the the refinery was commissioned by NNPC and was running at full capacity.

Having conquered the local product demand and to accommodate for more demand from the growing economy, the economic intelligence unit at the NNPC proposed the establishment of two new refineries in Port Harcourt and Calabar. The New Port Harcourt Refinery was projected to support the two older refineries in taking care of the local product demand, while the Calabar Refinery which was to be sited near a deep sea port, was for the production of refined products that would be exported to other countries. When NNPC presented the proposal to the government, the politicians, against the advice of the experts at the NNPC, refused to approve the Calabar Refinery; approving only the New Port Harcourt Refinery. In 1989 the NNPC commissioned The New Port Harcourt Refinery; meeting the projected local product demand.

Now shit gets really crazy (pardon my French). In the early 1990s, the then military government ordered the NNPC to withdraw all its funds from the commercial banks, transfer them to the Central Bank of Nigeria and close their accounts with the commercial banks. A few other things happened and it became clearer to all that NNPC was no longer an independent organization. It was now an all comers party. Top government officials and their lackeys bombarded and harangued the engineers and other experts at the NNPC with all manner of disruptions and insertions. Requests for maintenance of the refineries were not taken seriously and contractors for critical turnaround maintenance of the refineries were selected by government officials, instead of the professionals at NNPC. At this point everything went south and the rest they say is history.

Today, Dangote refinery represents a reset for Nigeria. A fresh start, if you will. However, to fully take advantage of this fresh start, the Nigerian government, within the next ten years, will need to do a few things and do them diligently.

1. The Nigerian government needs to increase its shareholding in the Dangote Refinery from 20% to 60% within the next five years and acquire the remaining 40% shares under an outright buyout within the other five years.
2. The Petroleum Ministry should be collapsed into the NNPC and it must be a completely independent company.
3. The NNPC should come up with proposals for phased establishment of more local refineries and international refining interests.
4. The hiring process for engineers and other experts at NNPC must be based on Merit with a capital "M".
5. The GMD must be appointed through a very rigorous interview process.

The above listed steps and then some, and we are off to a smooth start. 

Ifeanyi Aneke is an Engineer based in Lagos, Nigeria. Opinions expressed in this article are solely his personal opinion and do not represent the position of the organization he works for and its affiliates.