Why NNPC bought 20% equity shares in Dangote Refinery – Kyari

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The Group Managing Director (GMD) of Nigeria National Petroleum Corporation (NNPC), Engineer Mele Kyari, has disclosed that the corporation bought 20% equity shares in Dangote Refinery to boost the revenue accruing to the government among others.

He told Neptune Prime in an exclusive interview that it was a strategic investment done by NNPC for the government.

The NNPC boss who took time to explain why the investment is good for Nigeria said: “There is no resource dependent country like us that will allow such massive infrastructure that is clearly hinged on the oil and gas industry to happen without government engagement.

“It has many implications: first it is a huge investment that would engage thousands of workers, and it has clear energy security implications because supply of energy is a major security issue in any country.

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“Secondly, when benefits come, you will share. Thirdly and most importantly, you are in a position to determine how much of these products are released and you can determine the price in the market.

“It is a viable venture that Dangote will not like us to join, I can confirm to you that it is our request, we got the approval of the President before we approaches him.

“There is an impression in the market that we want to bail out Dangote. He is operating in this country and is bound by the policies. For us it is a very viable venture.

“We are buying at $2.7 billion dollars and it is a very good bargain. When you consider a refinery of capacity of 20 %at 2.7 billion is a very good bargain, when you want to build a refinery, to the capacity of 20 % of 650 which is around 110, 000 barrels per day.

“We are not just buying a refinery, but one that is attached with a petrochemical plant. Portfolio diversification is what every company does. All our peers, the other oil companies, Aramco, Equinox, everybody is diversifying. You don’t put all your capital in one place.

“Not only Dangote, everyone who tries to bring up a refinery of this magnitude with excess of 100,000 we will take equity in it. With our own refineries, our ultimate objective is to have ownership with some project capital so that we don’t own 100% of any refinery. This is best practice. Infact Dangote doesn’t need us as his refinery is 75 to 80 percent completed.”

On the Petroleum Industry Act (PIA), the GMD said,” I am aware of the anxiety about the Act which contemplate the ultimate removal of petroleum subsidy. But it didn’t set any date; it only created a transition which stipulates that when you change the price of petroleum, you do have issues concerning the cost of other commodities.”

According to him, there is an indication that those at the bottom of the society or the poor and vulnerable will be most impacted and that is the major concern of the President.

“Every petroleum product is deregulated except Premium Motor Spirit (Petrol), and that by implication is that the provision is around petrol. There is no intention to do it tomorrow, but there is a structural engagement going on to make sure that those pains that could come with the removal don’t affect the ordinary people,” he said.

Allaying the fears of subsidy removal and subsequent jump in petrol price, Kyari confirmed that there is no immediate intention to do so in the near future and that government is aware of people’s concerns.

“There is a long term plan and an implementation committee will sit down and look at it for a period of one year or so. It can be said that the subsidy would be implemented within a year, but obviously people should be assured that the government is aware of their concerns”, he said.

On how Nigerians would benefit from these transformations, he affirmed that indeed Nigerians will benefit from the investment in Dangote refinery.

“It will guarantee security for this country. When you have control of the 20% production, you can insist on taking delivery of that production. 20% of about 50 million liters in a day means you have 10 million liters under your control.

“Secondly, this refinery is a good business. We know that we are going to recover our capital within a maximum period of 5 years and it can be recovered in 3 years. If you can recover your cost, it means that you can make profit. Dividend will be given to the coporation and transferred to Nigerians and there is the assurance that thousands of jobs will be created.”

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On NNPC, he said the industry is talking of unbundling, adding that it is a corporation that was established by an Act of the National Assembly that would transform to a company governed by the Companies and Allied Matters Act, “and that means you must have greater transparency, declare dividend within certain period of time, and must not do as a corporation.

“NNPC Plc will not make cash call, so government is free from any financing. The company must go and look for finance to fund its operations.

Engineer Kyari said, “NNPC PLC will soon be a brand new company.

“PIB is a good news for our country. This should have happened 20 years ago but this is the best time to do it,” he said.

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