Afrexim Bank Won’t Fund Port Harcourt Refinery Rehabilitation If Project Is Not Viable-Uwaleke

The Federal Government’s move to revive the Port Harcourt refinery will complement Dangote Refinery’s effort to enhance crude oil refining and cut the importation of petroleum products into the country.

This is according to Uche Uwaleke, a Professor of Capital Market and the President of the Association of Capital Market Academics of Nigeria who believes it will save Nigeria billions dollar annually.

The Federal Executive Council at the 38th virtual meeting last Wednesday presided over by President Muhammadu Buhari had approved $1.5bn to renovate the Port Harcourt refinery.

FEC said the contract for the project has been awarded to an Italian company, Technimount SPA. The company is also an experts in refinery maintenance.

The renovation would pass through three phases of 18, 24 and 44 months. The first phase which would take 18 months is projected to have 90 per cent refining capacity.

But the decision has been criticised with the founder of Stanbic IBTC Bank, Atedo Peterside, taking the latest swipe at the decision, saying the refinery should be sold to core investors.

On a contrary view, Uwaleke, told Channels TV on Monday that Afrexim Bank as a reputable institution would not spend a dollar on a dead project.

He said, “Afrexim Bank as a credible institution cannot put its foot out or commit its fund in that kind of venture if it was not sure that it is going to be viable.

“If we are in the position to produce 210,000 barrels, you can imagine what it will do to the level of fuel import. It will simply complement what Dangote is bringing. Dangote is bringing 650,000 barrels a day, if you add 210,000, mind you what is even the consumption level of PMS in the country? We know it is within the region of 50m litres.

“With the Dangote refinery and the modular refineries here and there, that will now help meet demand. Don’t forget too that the West African market is huge.”

The expert explained that the old Port Harcourt refinery which was established in 1965 and the new Port Harcourt Refinery that was established in 1989 were ideally designed to have a Turn Around Maintenance every two to three years, which was not done.

He said, “So this time around, what the government is seeking to do is to rehabilitate and that also means changing significantly some of those equipment, bringing them up to date so that at the end of the day.. you can restore them to their full capacity (210,000 barrels per day).

“What that means is that you now throw into the system about 10.4 million litres of fuel. That will go a long way in reducing the level of imports. It is something that is well intentioned especially given the funding as you heard the minister said. Afrexim Bank is bringing close to $1bn, then the Federal Government which is bringing $500m or there about.”

Uwaleke agued that the $1.5bn project is viable enough to repay the cost of its repairs.

He said, “When we say a project is viable, it means the project can pay back. That is why the contract is going to be operate and maintenance contract. It is going to be left in the hands of experts that will manage it efficiently to now leave some margins to be able to repay the loan. It is a loan, but this is a case of self liquidating loan. It will pay back itself, so in a way it is not going to add additional burden to the debt situation.

In 2020 the country spent N2trn to import fuel, while In 2019, N1.9trn was spent on petrol importation.

The refinery also had a recurrent expenditure of N98bn salaries in 2019. In 2019, the refinery generated zero revenue with NNPC being its only customer.

“That is the essence of the rehabilitation. When you rehabilitate, you now make it functional,” said Uwaleke.