Bayo Ojulari, group chief executive of the Nigerian National Petroleum Company Limited, has admitted that the state-owned giant is incapable of operating the country’s refineries at a profit.
Speaking at an energy summit in Abuja this week, Ojulari conceded that despite consuming billions in rehabilitation funds, the NNPCL is “fundamentally unequipped” to run efficient operations in its current configuration.
The candid admission represents a striking departure from decades of official optimism about turning around the refineries, which have operated at catastrophic losses whilst absorbing what some estimates suggest amounts to more than $20bn in maintenance spending over three decades.
“There’s no way in NNPC, with the structure we are in, we can run it positively. We don’t have the capacity right now,” Ojulari told delegates at the Nigerian International Energy Summit on Wednesday. “We need to bring in additional capacity to complement what we have.”
The remarks lay bare the extent of mismanagement that has plagued Nigeria’s refining sector, where installed capacity of 445,000 barrels per day across four facilities in Port Harcourt, Warri and Kaduna has for years produced negligible output. The country, despite being Africa’s largest oil exporter, has relied almost entirely on imported refined products to meet domestic demand.
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Ojulari’s diagnosis of the problem centred on what he characterised as a fundamental misunderstanding of refinery economics.
Whilst previous rehabilitation efforts focused on securing financing and engineering procurement contracts, he said, insufficient attention was paid to developing the operational excellence required to run facilities profitably over their decades-long lifespan.
“Anybody who wants to do the financing, we all get value for the person financing and not financing for free,” he explained. “The EPC contractors do their work and get paid. So they move on. So you, as NNPC, are left for the next 20, 30 years to run those refineries, and we’ve never really focused on that.”
The admission comes after NNPC recently halted operations at facilities that were processing crude at utilisation rates as low as 50 per cent, producing what Ojulari described as “mid-grade products” whose aggregate value fell below the input costs.
The federal government recently disclosed spending $1.55 billion for the rehabilitation of the PH Refinery, $740,669 for the Kaduna Refinery, and $656,963 for the Warri Refinery.
“We were pumping cargo, say every month, into the refineries,” Ojulari said. “That cargo is valued a lot. We’re spending a lot of money in operations, a lot of money on contractors, but if you then look at the net, we’re just leaking away a lot of value.”
The situation was compounded by what he described as intense political pressure to maintain operations despite mounting losses, creating a tension between commercial rationality and political imperatives.
“There was a lot of pressure on being able to maintain continuity,” he acknowledged, noting that NNPC historically served as “supplier of last resort” in Nigeria’s fragile fuel distribution system.
The company’s board has now approved a strategic pivot towards partnerships with entities that have demonstrated track records of operating refineries globally. “We are not looking for contractors,” Ojulari emphasised. “We’re looking for an entity that runs refineries.”
This approach marks a return, in spirit if not in form, to the privatisation attempted by former President Olusegun Obasanjo in 2007, when his government sold 51 per cent of the Port Harcourt refineries to the Bluestar Consortium for $561m. That sale was subsequently reversed by Obasanjo’s successor, the late President Umaru Yar’Adua, a decision that has proved costly in retrospect.
The refinery debacle has broader implications for Nigeria’s energy security and public finances. The country’s dependence on imported refined products has created chronic fuel scarcity, strained foreign exchange reserves, and exposed consumers to price volatility. Recent subsidy reforms have seen petrol prices surge, adding to cost-of-living pressures in an economy already grappling with high inflation.
The emergence of the privately-owned Dangote refinery, a 650,000 barrel-per-day facility that began operations last year, has added urgency to NNPC’s strategic rethink.
The $19bn plant represents the scale of private investment that has eluded Nigeria’s state refineries, whilst highlighting the gulf between public and private sector capabilities in complex industrial operations.
