Exclusive-Nigeria’s NNPC seeks $1 billion oil prepay to revamp Port Harcourt refinery

Exclusive-Nigeria’s NNPC seeks $1 billion oil prepay to revamp Port Harcourt refinery

LONDON/LAGOS (Reuters) – Nigeria’s state oil agency NNPC is in talks to boost around $1 billion in a prepayment with buying and selling corporations to refurbish its largest refining advanced at Port Harcourt, seven sources aware of the discussions stated.

FILE PHOTO: Autos queue for the pump after a brand new petrol worth is launched on the NNPC retail outlet in Abuja, Nigeria September 3, 2020. REUTERS/Afolabi Sotunde

If the financing is concluded, the lengthy overdue rehabilitation of the refinery ought to scale back Nigeria’s hefty gasoline import invoice.

It could additionally mark Nigeria’s second oil-backed financing because the COVID-19 pandemic that has added to the issue of discovering buyers as gasoline demand is sapped by lockdowns and renewable power is gaining floor over fossil fuels.

The cash can be repaid over seven years by way of deliveries of Nigerian crude and merchandise from the refinery as soon as the refurbishment is full, the sources stated. Cairo-based Afreximbank is main the financing.

“Afreximbank is wanting right into a facility for the refurbishment of the Port Harcourt Refinery. Nevertheless, the borrower is but to be decided,” a spokesman for the financial institution stated.

NNPC declined to remark. The sources stated discussions had been going down with a variety of overseas and Nigerian buying and selling homes, together with some who’ve beforehand laboured with Nigeria, and who requested to not be named.

Aside from the issues of the pandemic and elevated investor desire for carbon-free power, defaults and fraud in commodity buying and selling, primarily in Asia, have decreased the urge for food of overseas banks for publicity to commodity commerce finance.

A supply at one overseas financial institution, additionally asking to not be named, stated it was unlikely to take part in Nigeria’s newest effort due to decrease credit score availability and elevated reluctance to take out publicity in an excessive danger nation.

Nigeria, Africa’s most populous nation, has 4 refineries with a mixed capability of 445,000 barrels per day (bpd): one within the north at Kaduna and three within the oil-rich Niger delta area at Warri and Port Harcourt. The Port Harcourt advanced consists of two crops with a mixed capability of 210,000 bpd.

In 2019, the refineries misplaced some 167 billion nairas ($439.47 million), and solely Warri processed any oil. In April 2020, they had been all shut pending rehabilitation.

Nigeria has struggled with the poorly maintained models for many years. Successive NNPC chiefs and politicians have introduced a sequence of unsuccessful plans to revamp, privatise or broaden the refineries.

NNPC deserted the same try in 2019 to accomplice with oil merchants, producers and engineering corporations to fund refinery revamps after greater than a yr of talks, saying it could fund the initiatives itself.

The hardly purposeful crops go away Nigeria fully depending on imports, and subsidy schemes additionally value the nation billions of {dollars}. Nigeria says it eradicated subsidies, however, the state’s NNPC is successfully the only gasoline importer, utilizing some 300,000 barrels per day of oil to swap for gasoline.

In December, NNPC opened a bid spherical for a contract to rehabilitate the Port Harcourt advanced. NNPC chief Mele Kyari additionally stated final yr that personal corporations would run the refineries as soon as they had been rehabilitated.

In July, international power dealer Vitol and Nigerian agency Matrix backed by banks agreed to lend NNPC $1.5 billion to help its upstream arm NPDC, though the discussions that led to the deal predated COVID-19.

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