ABUJA — Nigeria’s state-owned refineries were shut down because their operations were commercially unviable, not because they had completely stopped producing petroleum products, outgoing President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, has said.
Osifo said the Nigerian National Petroleum Company Limited (NNPCL) was forced to halt operations after the cost of processing crude became higher than the value of the petroleum products produced.
“So, the refineries were actually shut down, not that they were not functioning,” Osifo said.
He explained that the facilities were still producing some petroleum products, but continuing to operate under the prevailing conditions would have resulted in further financial losses.
Using an example to illustrate the economics of refinery operations, Osifo said a refinery should ideally generate products worth more than the crude and operating costs invested in the process.
He said the experience demonstrated the need to prioritise commercial viability when reviving Nigeria’s refineries rather than keeping the facilities operational simply for the sake of production.
PENGASSAN backs private majority ownership
Osifo also backed plans to introduce greater private-sector participation in the ownership of Nigeria’s refineries, arguing that private majority ownership could improve efficiency and reduce government interference in operational decisions.
He said PENGASSAN was advocating a structure under which private investors would acquire up to 51 per cent of the refineries, while the Federal Government would retain a 49 per cent stake, similar to the ownership arrangement of Nigeria LNG Limited.
“They are going to buy some shares of government from this refinery. So, for us, we are advocating that, because the company is about 3 in 1 company, so let them buy up to 51 per cent. Let government retain 49 per cent as it is in NLNG,” he said.
According to Osifo, majority private ownership would enable refinery management to take operational and maintenance decisions without going through lengthy government approval processes.
“What that is going to do is that the decision-making is going to leave the hand of government, so that if you want to do any maintenance, you don’t need to discuss it in federal council meetings anymore,” he said.
He argued that private investors would be more likely to make decisions based on commercial considerations and profitability.
“And because they are private people, they take business decisions, not decisions made from sentiment, emotions, or political leanings, but decisions that will grow the business,” Osifo said.
PIA stability needed for investment
On the broader oil and gas sector, Osifo acknowledged reforms introduced by the Petroleum Industry Act (PIA), including the creation of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the midstream and downstream regulatory framework and the restructuring of NNPCL as a limited liability company.
He also cited the PIA’s provisions on host community development and frontier exploration.
However, Osifo warned that subsequent changes to some fiscal provisions of the PIA and the use of an executive order to alter provisions of the law could create uncertainty for investors.
“For us, one of the ways to attract investment is for you to have some level of certainty,” he said.
He said investors need clarity on taxes, royalties and other financial obligations before committing capital to oil and gas projects.
“But if I’m investing today and I’m doubtful that tomorrow the laws will change and the laws might not favour me, I will be a bit worried in how I carry out my investment,” he said.
Osifo urged the government to allow the PIA and its regulatory framework to operate for a reasonable period before introducing major changes, stressing that oil and gas investments typically require long-term planning and capital commitments.
“In the oil and gas business, you don’t just invest today and you think you will reap tomorrow. At times, for this investment, you start reaping even after the 30th year,” he said.
His comments place commercial viability, private-sector participation and regulatory certainty at the centre of the debate over the future of Nigeria’s state-owned refineries and the wider investment outlook for the country’s oil and gas industry.
