Chiyoda Stalls on Nigerian Refinery Maintenance; Government Cuts Petrol Price, an Industrial Info News Alert

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The social turmoil and nationwide strikes in reaction to the Nigerian government's removal of the subsidy on fuel has led to Chiyoda Corporation (TYO:6366) (Yokohama, Japan), the original builders of the refinery at Kaduna, to back away from an invitation from the government to perform maintenance turnarounds at three refineries in Kaduna, Warri and Port Harcourt.

The Minister of Petroleum Resources, Diezani Alison-Madueke, announced that formal contracts would be signed with all the original builders of the country's refineries to perform turnarounds by the end of last week.

The motivation for the maintenance program was to obtain 90% utilization of refining capacity and demonstrate to the public that the government is serious about solving the oil-rich country's refining and fuel supply crisis. She added that the original builders had provided an aggressive timetable, accompanied by assurances that all three refineries would be producing at 90% capacity within 24 months.

Levi Ajuonuma, the group general manager for public affairs for the Nigerian National Petroleum Corporation (NNPC), assured Nigerians in a statement that the country would become a net exporter of petroleum products within the next 24 months, and that following the removal of the fuel subsidy several investors are ready to engage in projects. The minister had previously said that investors from China had expressed interest in building more refineries in Nigeria.

The country's four refineries have an installed capacity of 445,000 barrels per day and a nationwide supporting network of pipelines and depots. But through lack of maintenance, mismanagement and corruption, output has fallen well below installed capacity.

The minister said that the removal of the fuel subsidy would help to curb corruption and provide for the reinvestment of funds in critical social infrastructure. She said that it was not possible to have petrol at the subsidized price of N65 ($1 = 161.5 Naira) at the pump in Nigeria with neighboring countries' petrol prices at levels between N175 and N200. This has caused Nigerian petrol and petroleum products to be exported to fetch a higher price.

There has been aggressive transformation in the regulatory agencies of the downstream sector, the minister said. Appealing to labor to return to work, she said removal of the subsidy was key to releasing funds so that infrastructure, roads and irrigation projects could be built.

President Goodluck Jonathan made a nationwide television address and announced that the post-subsidy price of petrol was to be reduced from N141 to N97. In response to this, the labor unions said that they were suspending street protests but said the strike would go on. In a soup of committees, commissions and panels considering the fuel sector, deregulation and corruption, labor unions have not been wholly without sympathy for the government's position and are due to make a statement and then give their final word on the situation tomorrow (Wednesday).

No doubt there will be a no-show from Chiyoda for the signing of the maintenance turnaround program until the way forward between government and labor has been clarified.

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