The plan by the Nigerian National Petroleum Corporation (NNPC) to build a crude oil pipeline from the Kaduna refinery to Niger Republic may have hit the rocks, as investors have show low interest in the project because it is commercially unviable
As part of efforts to address frequent disruptions to the supply of crude oil to the Kaduna refinery, arising from the Niger Delta militancy, the Group Managing Director of NNPC, Dr. Maikanti Baru had after bilateral discussions with the Minister of Energy and Oil of the Republic of Niger, Hon. Foumakoye Gado, confirmed that the federal government was planning to begin the construction of about 1,000km of pipelines to convey crude from the Nigerien oil field in Agadem to the Kaduna refinery.
To actualise this plan, Baru said NNPC would hold discussions with the Chinese firm operating the Agadem oil field located in the East Niger Rift Basin.
According to the spokesman of the corporation, Ndu Ughamadu who disclosed that discussions on the proposed project were still ongoing, investigations revealed that the project was not commercially attractive to investors.
Amehnews recalled that the idea of building the pipeline was originally mooted by Chinese National Petroleum Corporation (CNPC), which had approached the Bureau of Public Enterprises (BPE) to acquire the Kaduna refinery around 2005 with a commitment to pipe crude oil to the plant from Niger Republic.
When CNPC found oil in Niger Republic some years back, it approached BPE and offered about $103 million to acquire the Kaduna refinery during the privatisation exercise carried out by the Olusegun Obasanjo administration but their offer was rejected.
“Their financial bid was low because they also offered to build about 700 kilometres of pipelines from the refinery to Niger Republic and also use their money to rehabilitate the refinery.
“But the federal government informed them that NNPC already had a pipeline from Escravos to Kaduna. But they preferred to build their own pipeline because of the constant vandalism of the Escravos-Warri pipeline, which feeds the Kaduna refinery.
“When they could not buy the Kaduna refinery, they went back to Niger to build a small refinery,” he explained.
The official added that CNPC left Nigeria in March 2016, noting the crude pipeline from Kaduna to Niger was no longer attractive because the crude reserves in Niger are very small, while the low oil price environment had made the project unattractive.
“Besides, other investors are not favourably disposed to partner NNPC in the project because the project is not viable.
“When they consider the price of crude oil and the low reserves in Niger, and juxtapose this against the capex of building the pipeline and opex of maintaining the pipeline, the project seems commercially unviable.
“For political and market integration, it may look attractive, but it is not commercially competitive. Once the crude oil coming from Niger Republic is not in excess of 100,000 barrels per day, no investor will be willing to partner NNPC.
“The command and control era is over; it was the past military administration that conceived the Kaduna refinery but that era is over. We are in an era of market competitiveness. So the pipeline project is dead on arrival,” said the NNPC official, who spoke off the record.
A former top official of the BPE, Mr. Dan Kunle affirmed that the Chinese firm had actually approached the privatisation agency to acquire the 110,000 barrels per day Kaduna refinery and build a pipeline to Niger Republic but the bid was rejected because it was considered too low.
“They (CNPC) offered about $100 million but BPE rejected their bid because Nigerians will cry blue murder that the agency has given out the refinery for a pittance,” he said.
“Actually, they offered to build a pipeline to bring crude oil from Niger to refining in Kaduna, Niger will take their own share. But the bid was rejected and since no investor show interest to embark on the project as at today.
“It was viable in 2004-2005 but it is no longer viable in 2017,” Kunle added.
The CNPC and Niger had in 2008 signed integrated upstream and downstream deals on the Agadem field involving oilfield exploration and development, construction and operation of a long-distance pipeline and a joint venture refinery.
By the terms of the contract, CNPC would complete the first phase of construction and bring the oilfield, pipeline, and refinery into operation within three years.
The project was completed on schedule.
A Nigerian delegation had in November 2011 represented former President Goodluck Jonathan when Niger inaugurated the 20,000 barrel-per-day Soraz refinery near Zinder, close to the Nigerian border.
The refinery is 60 per cent owned by CNPC and 40 per cent by the government of Niger.