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WHO KILLED AMAKPE REFINERY ?

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THE STORY OF AMAKPE REFINERY

“The only freedom deserving the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily, or mental and spiritual. Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.” — John Stuart Mill.

When the news about AMAKPE refinery conception was broken over ten years ago by late Dr. Nsidibe Ikpe in Florida and Chief Usua Amanam in California, many of us in the Diaspora were euphoric with excitement. There were many reasons that could have elicited such excitements. For one, this was seen as a major industry in a state that was and still primarily a civil service state. The fact that this could collaboratively be undertaken by two diverse individuals was enough of a trailblazing thus posing a challenge for others who thought such teamwork could not be possible among and between Akwa Ibomites. Another underlying factor was that this project was the brainchild of individuals who over the years have contributed financially and otherwise to Akwa Ibom community in United States in uncountable ways. Thus our interests in the project knew no bound. When the refinery was conceived, it was estimated to cost about $38 million.

Now, with price escalation, variation, and inflation, it is estimated that it will require additional $20 million. From the available information posted on the AMAKPE website, Akwa Ibom State government under Gov. Attah invested $10 million for 25% ownership. Other funding sources included the promoters’ equity, loans from the U.S government (EXIM), loans from the Nigerian government (NEXIM), and loans from Sterling bank of Nigeria. The broad support the project received shows that this is a good project. As strange as this may sound, in the waning days of the previous administration a lawsuit was filed by the state government demanding the withdrawal of its 25% equity from AMAKPE investment. This would signal the commencement of in-house huddles and bottlenecks that AMAKPE refinery would face.

In March 2007, Department of Petroleum Resources (DPR) canceled all the refinery licenses it issued to prospective refineries in Nigeria including AMAKPE. For conditions of reinstatement DPR called on the affected companies to “provide evidence of available funding, complete engineering design and work plan as well as payment of applicable refinery construction license.” About a couple of months after this cancellation, AMAKPE refinery became the first to meet this condition. And DPR in July 2007, issued a Refinery Construction License to Amakpe Refinery and later that month, the Export Import Bank of the United States (U.S. Ex-Im Bank) approved a Comprehensive Loan Guarantee that was combined with Primary Promoters’ Equity Contributions and Investment Capital to finance major components of U.S. and Nigerian costs for the construction of Phase 1 – 6,000BPD of the 12,000BPD Amakpe Crude Oil Refinery Project at Eket.

Information available at the website shows that in August 2007, construction at the refinery project site at Ikot Usekong in Eket, about 12 km from the Exxon/ Mobil Qua Iboe Terminal (QIT), commenced. Widely available report have it that following the approval by the Akwa Ibom State Government, represented by AKIIPOC as equity partner on the Board of Amakpe Refinery, a foundation laying ceremony for the refinery project was scheduled to take place at the refinery project site at Ikot Usekong on Saturday, October 27, 2007 at 11am, with His Excellency, Governor Godswill Akpabio as Guest of Honor. Present at the ceremony site were the principals of Amakpe refinery, Chief Usua Amanam and Mrs. Helen Ikpe, representatives of U.S. Ex-Im Bank, UPS Capital, Financial Bridge and Ventech Engineers, all of who traveled from the United States to attend the foundation laying ceremony.

To the consternation of Akwa Ibom State citizens and those who traveled all the way from United States, His Excellency Governor Godswill Akpabio abruptly blocked the ceremony from taking place. No expression or words were adequate enough to describe the feelings. Disappointment and embarrassment caused the U.S. delegation, representatives of the U.S. Embassy in Lagos and the invited guests, local and foreign by this singular act of Akwa Ibom government spoke volume.

CRUX OF THE MATTER
Above by John Mill attempts to capture to some extent the situation Amakpe refinery is made to face. Following the intervention of the presidency that led to the issuance of the MOU, the attitude and posture of the AKSG led by Gov. Godswill Akpabio changed for the worse. AKSG reduced its investment in the project to $6.5million from the initial $10 million and still insisted and was allowed to keep its shareholding of 25%. In spite of being the second largest share holder, the state government became more belligerent and all cooperation for the advancement and development of the refinery project was thrown out of the window. Could this be as a result of the intervention by the presidency? We can only speculate. The sum of $20,792,308 is now the required amount to complete full implementation of the refinery project. It is fair to say that the two principals, Mrs. Helen Ikpe and Chief Amanam have given all their available assets for the $24 million of UPS Capital/Ex-Im Bank, Sterling Bank and NEXIM Bank loans and have no other assets to collateralize for additional project loans.

Amakpe refinery is a Public-Private Partnership project (PPP). If the AKSG is still holding on to its 25%, it would be a matter of common sense for it to also contribute equitably to the estimated additional cost of about $21 million needed for the completion of the project. Rather, the state has not only bluntly refused to offer any additional assistance but makes sure no additional funding comes from any where else. To clear any lingering doubt on the construction progress, Amakpe arranged a visit to Ventech corporation at Pasadena, Texas where the fabricated equipment are still lying in wait (see the AKSG visit pictures on the Amakpe website). Ventech completed the fabrication of all the needed equipment since January 2010 and Amakpe refinery is being charged $50,000 per month by the equipment manufacturer for storage.

Furthermore and for the past one year, Amakpe refinery has been paying $500,000 per quarter on interest and part principal due on disbursed portions of UPS Capital/Ex-Im Bank, Sterling Bank and NEXIM bank loans. Now with the projected total cost of $59 million up from the initial $38 million, Is the state’s $6.5 million a fair amount for 25% ownership of Amakpe by AKSG? You do the math. No, it isn’t.

In view of the uncooperative posture exhibited by the state government, Amakpe principals decided to approach banks for the additional loan estimated about $21 million. Not only did the government refuse to deal with the bank, it threatened to revoke the certificate of occupancy issued to Amakpe should the bank went ahead with the deal. It is also on record that Delta state government was approached by Amakpe principals and they were interested in buying over the refinery in order to complete the project. It is again disheartening to note that our state government – the government of Akwa Ibom State – not only stood in between but made an impossible demand that for the deal to proceed it must be paid $5 million on top of what the it (AKSG) had put down in the project.

Without much else, we understand that with certain uncharitable utterances made by Gov. Akpabio, Delta state government decided to back out of the deal. Those who attended the August 7, 2010 AKISAN National convention at Baltimore, MD in United States would have heard government officials mentioned that the reason for government uncooperative stance was because of $2 million owed it by Amakpe refinery. One is tempted to ask, What is $2 million in comparison to the nearly $21 million sought for the completion of a project meant to generate over 1000 direct and over 5,000 indirect employment? Rather than coming up with its fair share, why is the government using the $2 million as reason which in itself is a ruse to kill Amakpe refinery without caring about the $6.5 million the AKSG has put in it? Even if the Amakpe principals are able to secure the sought loan, without the cooperation of AKSG, Amakpe is doomed.

One major reason is that it is only the state government that can negotiate with the land owners that span across the length of 12 km that the pipelines would carry the crude oil and, probably, the refined hydrocarbon from the Exxon-Mobil terminal to the refinery site. With the display of this type of hostility, how can this project survive under this polluted climate? The following portrays the milestones in the decade-old travail of Amakpe refinery.

* Creation of Amakpe and license issuance by federal govt. of Nigeria (the feds).

* License cancellation and revalidation by the feds.

* Litigation by AKSG to get back its money.
* Withdrawal of the case from court.
* Stoppage of the ground-breaking ceremony by AKSG.

* Intervention by the presidency.
* Signing of MOU.
* Attempts to kill Amakpe by AKSG.
All over the world, it is an acceptable economic practice for governments (city, state, and federal) to give financial and other incentives such as tax write-offs to businesses in order to attract them to their localities because of their benefits to the overall economy, especially in the area of employment. A case in point, President Obama in USA had early in his administration bailed out distressed banks, insurance companies, and automobile companies such as General Motors and Chrysler totaling hundreds of billions of dollars. Please note that unlike Amakpe’s case, U.S government never had a single share in of those entities. It is therefore, counter-intuitive for AKSG to engage in its present hostile path rather than take appropriate steps to help actualize this project with a gargantuan 25% state ownership. Department of Petroleum Resources has certified the refinery equipment now in dire need of fund for evacuation to Eket from Texas. The press release from the Federal government of Nigeria shows that they are very excited about the Amakpe refinery, but the AKSG statement does not seem to reflect the same enthusiasm.

The project seems to have stalled. It will be a monumental loss to let this project wither for a host of reasons:

1. Amakpe refinery will be the first major industry in Akwa Ibom state since its creation in 1987.

2. Amakpe refinery will be the second largest employer in the state after Exxon-Mobil. 3. Thousands of jobs will be created directly and indirectly.

4. Downstream industries will be created to take advantage of the byproducts of the refinery.

5. Amakpe refinery will generate a lot of economic activities in the state for construction companies, restaurants, housing, trucking companies, suppliers, etc. Information in Amakpe’s web site shows that $38.5 million has so far been invested. These funds came from equity from AKSG and the promoters, loans from the U.S government (EXIM), loans from the Nigerian government (NEXIM), and loans from Sterling bank of Nigeria. If this was not a good project, it would not have received such broad support. Rather than increase its investment share given the needed additional cost, it is unthinkable that AKSG would be requesting for a refund of $2 million when the project still require over $20 million for phase I completion. It is even more disheartening that AKSG statements at every opportunity since the signing of MOU have been that of killing the project by portraying it in negative light. Combination of these and endless frustrations by actions of the AKSG mentioned in the previous postings have pushed the widow, Mrs. Ikpe, to a near breaking point as she tearfully continually asks, “Would these have happened if my husband was alive?” This widow’s tears is hard for any human born of a woman to continue to ignore.

Recommendations for way forward
1. AKGS should make additional funding available in commensurate with the number of shares it holds in order to help move the project forward.

2. AKSG can increase its share of ownership and possibly force its partners to take a minority position or on the alternative, buy out its partners and take over the project. 3. AKSG could also guaranty additional loans for the project in exchange for a larger percentage of ownership, since the promoters may not have the additional assets to guarantee such funding.

If AKSG does not wish to do any of the above and increase its investment, it should, at the very least, do the following: 1. The governor should come out and publicly support the project. The speculation in Nigeria is that lenders and investors are uncomfortable investing in the project because they view the governor as being hostile to the project given all the negative statements the governor and other government officials have made in the past concerning Amakpe refinery.

2. This public support and positive statements, which should include a comfort letter, will go a long way in encouraging lenders and investors to support the project.

3. The issue of the governor’s public support is very important here because a project of this magnitude cannot be established in the state without the support of AKSG. For one thing, the distance from QIT to the refinery site is 12 km. There are possibly hundreds of individuals who own lands through which pipelines will pass. Therefore, the only way to lay such a pipeline hitch-free is through the government’s eminent domain power.

4. An investor could fear, and justifiably so, that their investment could be at risk if the government does not fully support the project. At this very moment it is speculated that Gov. Akpabio is US-bound in search of businesses. This is an irony at best in view of the climate created in his state of Akwa Ibom. As I’ve said before, perception is a reality. The time for Governor Akpabio to prove to the world that he is, in deed, not the “monster” many have come to perceive him is here and now. And I hope Amakpe refinery will not become the albatross on his neck.

About the Author: Dr. Tom Mbeke-Ekanem is a Regulatory Engineer with the California Environmental Protection Agency (Cal-EPA). Tel: (951) 640-0737. E-Mail: tedey@aol.com.

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