Nigeria’s state oil company has moved to revive its long-troubled refining sector by seeking new international partners, following years of costly but underperforming rehabilitation efforts.
The Nigerian National Petroleum Company Limited (NNPCL) has signed a memorandum of understanding (MoU) with two Chinese firms—Sanjiang Chemical Company Limited and Xingcheng (Fuzhou) Industrial Park Operation and Management Co. Ltd—to explore a technical equity partnership aimed at completing and operating the Port Harcourt and Warri refineries.
The agreement, signed in Jiaxing, China, marks a strategic pivot for NNPCL after it oversaw rehabilitation projects valued at $2.39 billion that have failed to deliver sustained output.
The company said the deal follows over six months of engagement and is intended to identify partners capable of restoring and expanding Nigeria’s refining capacity, while also developing petrochemical and gas-based industrial opportunities.
However, NNPCL did not disclose the financial implications of the new arrangement.
Costly rehabilitation, limited results
Nigeria has invested heavily in revamping its three state-owned refineries—Port Harcourt, Warri and Kaduna—with limited success. In 2021, the Federal Executive Council approved $1.5 billion for Port Harcourt and $1.48 billion for Warri and Kaduna. The projects were structured in phases spanning several years.
Despite these investments, only the Port Harcourt refinery was briefly declared operational, resuming production in late 2023 before shutting down again months later. Warri and Kaduna refineries have yet to achieve meaningful or sustained output.
NNPCL’s latest financial disclosures underscore the scale of the challenge. The company injected an estimated N13.2 trillion into the refineries in 2023 and 2024, covering maintenance, operations and financing costs. Yet the facilities remained loss-making and failed to operate at commercially viable levels.
Combined liabilities of the refineries rose sharply—from N4.52 trillion in 2023 to N8.67 trillion in 2024—highlighting their continued reliance on NNPCL’s balance sheet. Port Harcourt accounted for the largest share of this debt, followed by Warri and Kaduna.
“Monumental loss”
NNPCL’s Group Chief Executive Officer, Bashir Bayo Ojulari, has openly acknowledged the scale of the problem, describing the refineries as a “monumental loss” to the country.
“We were just wasting money,” he said recently at an energy summit in Abuja, noting that despite regular crude supply and ongoing spending on operations and contractors, the plants operated at only 50–55 per cent utilisation and failed to generate meaningful returns.
Ojulari said one of his first decisions in office was to halt refinery operations to stem further financial losses and reassess their viability.
Pressure mounts for reform
The continued underperformance of the refineries has drawn criticism from industry stakeholders and former leaders. Prominent voices in the private sector have urged the government to privatise or sell the assets, arguing they have become a drain on public finances.
Some industry figures have also questioned whether the refineries can ever operate efficiently, given the scale of past spending—estimated by some at over $18 billion across multiple administrations.
Despite this, NNPCL’s leadership has rejected calls for outright sale, insisting the assets can still be revived under the right technical and financial structure.
A new approach
The partnership with Chinese firms signals a shift toward equity-based collaboration, rather than sole reliance on government-funded rehabilitation. Under the proposed arrangement, technical partners would play a direct role in funding, completing and operating the refineries, aligning performance with commercial incentives.
NNPCL said the MoU reflects a shared intention to pursue “long-term sustainable profitability” for Nigeria’s refining assets, though any binding agreements will be subject to further negotiations and regulatory approvals.
For a country that continues to rely heavily on imported refined petroleum products, the success—or failure—of this new strategy could prove pivotal to its energy security and fiscal stability.
