Why NNPC’s contract-driven model sank refineries

CHIEF executive officer of the Nigerian National Petroleum Company (NNPC) Limited, Mr Bayo Ojulari, says Nigeria’s state-owned refineries collapsed not because of a lack of funding or contractors, but because the company failed to prioritise how the plants would actually be run.

Speaking at the recently concluded Nigerian International Energy Summit (NIES), Mr Ojulari said government attention had always been fixed on financing and engineering, procurement and construction (EPC) contracts, while the long-term task of operating the facilities was neglected.

According to him, once financing and EPC deals are completed, the contractors exit with their profits, leaving NNPC to manage the plants for decades without the right operational systems in place.

“Anyone who provides financing expects returns. EPC contractors execute their job, get paid and leave. But NNPC is left with the responsibility of running those refineries for 20 to 40 years, and we never really focused on that,” he said.

READ ALSO: NNPC: $3bn spent under Kyari, but Ojulari now says refineries were burning cash

Mr Ojulari noted that although operations and maintenance (O&M) had been widely discussed, it was usually treated as just another contract, rather than a core function of the business.

Globally, he explained, strong refinery performance depends on a dedicated operational excellence team. Without this, resources are wasted and systems are drained.

“You end up with financing, EPC and O&M contracts, all taking money out of the system, but none truly invested in its long-term success,” he said. “There is no way a business like that can survive. The system was designed to take, not to build.”

He said the current NNPC leadership is now trying to correct that imbalance by focusing on operational readiness from the earliest stages of projects.

Drawing from his experience in international oil companies, Mr Ojulari said large energy projects appoint an ‘operational assurance’ lead from day one to ensure that whatever is built can be safely and efficiently operated.

He cited his time at Shell, where he served on the commissioning team for the Qatargas project. According to him, operational readiness audits were conducted both before construction and again when the plant was nearly completed, allowing problems that could affect performance to be corrected early.

“These reviews showed us where operability would fail if we didn’t act,” he said. “So we invested in training, systems and people to make sure the plant could run successfully.”

Mr Ojulari stressed that while mega projects may take three to five years to build, they are expected to operate for 25 years to 50 years, meaning operations should be the main focus from the start.

“Why spend decades running a facility you didn’t design to operate properly?” he asked. He admitted that in the past, NNPC treated these operational challenges too lightly.

Mr Ojulari also revealed that the company is currently in talks with a Chinese firm over a possible partnership on one of the state-owned refineries.

Debt write-off

The federal government recently wrote off most of the legacy debts owed to the federation account by the NNPC Limited, clearing about $1.42 billion and N5.57 trillion after a reconciliation exercise approved by President Bola Tinubu.

Details of the move are contained in a regulatory report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which was presented at the November 2025 meeting of the Federation Account Allocation Committee (FAAC). The write-off covers longstanding obligations linked to crude oil liftings, production-sharing contracts and joint-venture royalties accumulated up to the end of 2024.

According to the commission, the debt cancellation followed recommendations of a stakeholder alignment committee set up to reconcile financial claims between NNPC Ltd and the federation.

“The commission recently received a presidential approval to cancel the outstanding obligations of NNPC Ltd as at 31st December 2024 as submitted by the Stakeholder Alignment Committee on the Reconciliation of Indebtedness between NNPC Ltd and the Federation,” the NUPRC said.

READ ALSO: Nigerian govt cancels $1.42bn, N5.57tn NNPC legacy debts linked to years of mismanagement

Before the adjustment, NUPRC had reported that NNPC’s outstanding obligations to FAAC totalled about $1.48 billion and N6.33 trillion. Following the reconciliation, $1.42 billion and N5.57 trillion of those balances were struck off the books.

The write-off represented roughly 96 percent of the dollar-denominated debt and about 88 percent of the naira liabilities previously classified as outstanding.

The write-off became necessary after years of mismanagement by the past leadership of the national oil company. The NNPC had focused on turnaround maintenance over the years, leaving the operational side of the business unattended to, experts say.

The NNPC under former Group Managing Director, Mr Mele Kyari, for instance, spent nearly $3 billion on the rehabilitation of Port Harcourt, Warri and Kaduna refineries, but none of them is working at the moment.

A United Kingdom-based investment consultant, Dr Chuka Chile, said: “Mr Mele Kyari’s tenure deserves to be probed for failing Nigeria’s dream of having national refineries. We need to know what happened to the $1.5 billion spent on Port Harcourt Refinery and $1.4 billion expended on Kaduna and Warri refineries,.”