The comatose Port Harcourt refinery in Rivers state one of the old Nigerian flagship refinery is set to consume over one billion dollars in order to revamp the National Petroleum Corporation (NNPC) disclosed recently.
The NNPC is said to be on a borrowing/financing drive to source funding in order tp prosecute the project. To realise its plans, the nation’s oil company is already in high-level discussion to raise the money via a prepayment deal with trading firms.
If the financing is successful, the long-overdue rehabilitation of the refinery should reduce Nigeria’s hefty fuel import bill.
It would also markNigeria’s second oil-backed financing since the Covid-19 pandemic that hasadded to the difficulty of finding investors as fuel demand is sapped bylockdowns and renewable energy is gaining ground over fossil fuels.
The money would berepaid over seven years through deliveries of Nigerian crude and products fromthe refinery once the refurbishment is complete, the sources said.
The Cairo-based Afreximbank is leading the financing.
“Afreximbank is looking into a facility for the refurbishment of the Port Harcourt Refinery. However, the borrower is yet to be determined,” a spokesman for the bank, said.
Though NNPC declined to comment, sources close to the talks said discussions were taking place with a range of foreign and Nigerian trading houses, including some who have previously worked with Nigeria, and who asked not to be named.
Apart from the problemsof the pandemic and increased investor preference for carbon-free energy,defaults and fraud in commodity trading, mainly in Asia, have reduced theappetite of foreign banks for exposure to commodity trade finance.
A source at one foreign bank, also asking not to be named, said it was unlikely to participate in Nigeria’s latest effort because of lower credit availability and increased reluctance to take out exposure in a high-risk country.
Nigeria has four refineries with a combined capacity of 445,000 barrels per day (BPD): one in the North at Kaduna and three in the oil-rich Niger Delta region at Warri and Port Harcourt.
The Port Harcourt complex consists of two plants with a combined capacity of 210,000 BPD.
In 2019, the refineries lost some N167billion ($439.47million), and only Warri processed any oil.
In April 2020, they were all shut pending rehabilitation.
Nigeria has struggled with poorly maintained units for decades.
Successive NNPC chiefs and politicians have announced a series of unsuccessful plans to revamp, privatise or expand the refineries.