The bid joins Chinese National Petroleum and India's Essar Oil, a powerful combo that has widespread and multivaried commercial opportunities to exploit the refined crude from Nigeria's largest refinery.
There were indications last week (see post) that Chrome had made the short list of just two companies that met all the requirements of the bidding process.
The editorial is interesting because it may or not be a first signal of a backlash against Chrome's owner, Sir Emeka Offor. Politics is Nigeria is far from monolithic, and there are always political enemies - most major factions also control a newspaper, as Offor does - and Offor has his share of both friends and foes.
Looking at all developments through the prism of ERHC can be misleading, however.
The Punch editorial seems far more well-balanced than most we read in the Nigerian press, and has none of the familiar grammatical and typographical errors that are rampant there.
The editorial appeared as Chevron announced that it would build a relatively small 30,000bpd refinery, the latest effort by multinationals to su8bstantiate their otherwise vague commitments to the "local content" regime declared by the Obasanjo administration.
Here is the editorial, which mentions Chrome in the third and (perhaps) the final sentence of the last paragraphs.
Privatisation of refineries
The short-listing of four firms to buy 51 per cent government equity in the Port Harcourt Refining Company by the Bureau of Public Enterprises (BPE) is a significant development in the delayed privatisation of the nation’s four refineries. The pre-qualified four firms, out of 10, that met the Dec 2 deadline, are the Oando group, Transnational Corporation consortium, Chrome/Chinese Petroleum Corporation/Essar Oil consortium and Refinee Petroplus consortium.
The soundness of the technical bids, according to BPE sources, will be evaluated on the capacity of the firms to commit $200 million investment in three years. Other criteria are experience in the ownership, management and operation of a crude oil refining plant; quality and credibility of a bidder’s post-acquisition plans as well as measures to address inherited labour matters.
The shortlisted players parade different credentials. The Transcorp group is a recent assemblage of industry chieftains that have put in place a fledgling mega corporation. Chrome is involved in prospecting for oil in Sao Tome and was the oil firm that carried out the controversial repair of Warri refinery. Oando has over 500 retail outlets in Nigeria and markets petroleum products in Liberia, Togo, Ghana and Republic of Benin. It owns Gaslink that has pioneered the distribution of gas to industrial consumers. In addition to bidding for the 210,000 barrels per day (bpd) Port Harcourt refinery, Oando plans to build a 350,000 bpd refinery in the Lekki Export Processing Zone. It is also involved in upstream oil operations.
For six years, many Nigerians have waited for the replacement of a corrupt, state-dominated regime of fuel importation with a private sector-led system of local refining and production of fuel products. A presidential promise that one refinery would be sold by Dec 2003 went unfulfilled. At first, government cited Labour’s opposition, but when Labour dropped its resistance, the excuse was shifted to finding buyers. When 13 firms expressed interest in 2003, the BPE refused to process their applications for over one year, while waiting for unwilling multinational oil firms to show interest. While the BPE held the privatization process in abeyance, the preferred firms openly rebuffed the offer to buy.
There are other signals in the system that have been confusing and discouraging potential investors. Such negative signals include the continued insistence by the Nigerian National Petroleum Corporation that it cannot guarantee crude oil sale to budding local refiners who are also forbidden from selling their refined products in Nigeria. The continued existence of the NNPC as a monopoly and the presence of the price-fixing Petroleum Products Pricing Regulatory Agency (PPPRA), are all indications that the government may not be prepared to foster a liberal market environment.
Yet the challenge remains how to reform the downstream sector in such a way as to create job and profit opportunities for Nigerians. Competent indigenous oil firms with solid infrastructure, therefore, are in an advantaged position to understand the prevailing operational clime. Speedy and steady local refining will help bring down the current high cost of import-dependent fuel. With the Central Bank admitting that high cost of fuel accounts significantly for the current inflationary pressures, there is need to dispose the refineries quickly in a transparent manner to those likely to run them successfully. In this case, the credentials of the shortlisted firms should be diligently scrutinised to ensure that only a credible company wins the bid. The refineries should not be sold to cronies of government who might bid very high to clinch a deal at all costs only to fail to deliver post-privatisation dividends.
The PUNCH, Friday, December 16, 2005
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