NNPC: Warns Against Selling Refineries As Scrap, Seeks Equity Partners

• The NNPC will no longer fund refinery rehabilitation without a clear path to profitability, shifting to a technical equity partnership model.
• Group CEO Bayo Ojulari announced this change, citing past failures where contractors lacked a stake in the refineries' commercial performance.
• The new strategy requires partners to collaborate on ensuring the refineries generate profit, ceasing crude oil-funded rehabilitation that didn't yield positive outcomes.
• Prospective partners have undergone extensive due diligence, with the goal of making Port Harcourt, Warri, and Kaduna refineries self-sustaining and profitable.
• NNPC warns of potential resistance from entities that might prefer to acquire the refineries as scrap, rather than see them successfully rehabilitated.

The NNPC has made it clear that no further rehabilitation will be undertaken until a definitive pathway to financial viability is established, signaling a firm commitment to the profitability of Nigeria's state-owned refineries.

The Nigerian National Petroleum Company Limited (NNPC) has announced a significant policy change regarding the rehabilitation of its state-owned refineries, declaring that future efforts will only proceed with a clear path to profitability. This new directive, articulated by NNPC Group Chief Executive Officer Bayo Ojulari, mandates collaboration with technical equity partners who are prepared to hold a direct stake in the operational performance of these facilities.

Speaking in Abuja during a media parley to unveil the company's 2025 audited financial results, Mr. Ojulari highlighted the historical challenges faced by Nigeria's three state-owned refineries located in Port Harcourt, Warri, and Kaduna. These facilities have absorbed hundreds of billions of naira in rehabilitation and maintenance expenditures over many years, yet have consistently struggled to achieve sustained commercial production and profitability.

This strategic pivot marks a departure from previous arrangements, which often saw contractors paid for rehabilitation, operations, and maintenance without any direct financial incentive tied to the commercial success of the refineries. The NNPC's leadership has acknowledged that this past model failed to foster accountability and efficiency, leading to substantial financial outlays with limited positive outcomes.

Mr. Ojulari underscored the critical lessons learned from prior rehabilitation endeavors, emphasizing that the former model lacked a crucial element: incentivizing partners with a direct stake in the refineries' performance. Under the old system, NNPC bore all costs—financing, contractor payments, and operations and maintenance—without ensuring that these parties had a vested interest in the post-rehabilitation commercial viability of the assets.

Crucially, the NNPC has also ceased the practice of funding rehabilitation projects with crude oil when such arrangements do not guarantee positive commercial results. This change, according to the GCEO, has contributed to the improved revenue reflected in the 2025 financial statements, by eliminating what were identified as 'leakages' and 'waste' from funding initiatives that failed to deliver net positive outcomes.

The new framework dictates that any prospective partner must commit to a collaborative approach aimed at ensuring the refineries generate profit. The company has made it clear that no further rehabilitation will be undertaken until a definitive pathway to financial viability is established, signaling a firm commitment to the profitability of Nigeria's state-owned refineries.

Under the newly adopted technical equity partnership model, NNPC is actively engaging with prospective partners. Significant progress has already been reported, with potential collaborators undertaking a rigorous three-month intrusive on-site due diligence process. This involved more than 34 of their top engineers meticulously assessing the facilities.

The overarching objective of this refined strategy is to transform the Port Harcourt and Warri refineries, and subsequently the Kaduna refinery, into self-sustaining, profitable, and sustainable operations. This goal moves beyond mere restoration to functionality, focusing instead on long-term commercial viability. The NNPC anticipates defining this pathway forward in the near future.

Identifying suitable partners has been a comprehensive process. The NNPC initially considered over 50 potential entities, eventually narrowing the field to approximately 20, including prospective Chinese partners, through a lengthy and thorough selection procedure.

Despite the forward-looking approach, Mr. Ojulari cautioned that efforts to reposition the refineries for profitability could encounter significant resistance. He specifically warned against entrenched interests that might prefer to acquire the facilities as scrap, rather than see them revitalized under a new, performance-driven model.

He noted that these parties may have already formulated plans to that effect, suggesting that any credible and formidable solution for rehabilitation would inherently challenge these existing agendas. The NNPC is therefore prepared to navigate potential opposition as it pursues its objective of ensuring the refineries contribute positively to the national economy.

The company remains focused on its strategic vision to ensure that the Port Harcourt, Warri, and Kaduna refineries achieve sustainable and profitable operations, moving away from past models that lacked accountability and commercial success.

Lawyers advising potential investors or contractors in Nigeria's oil and gas sector must understand NNPC's new technical equity partnership model for refinery rehabilitation, which prioritizes profitability and shared risk over traditional contracting, and anticipate potential resistance from entrenched interests.

Source: Original reporting via Punch