FG spends N1.47trn on endless refineries’ revamp, maintenance in five years

By MICHAEL EBOH

Respite seems not to be in sight as to commencement of local refining of petroleum products anytime soon, as series of data obtained from the Nigerian National Petroleum Corporation, NNPC, weekend, revealed that the country expended N1.47 trillion on revamping, maintaining and running the four refineries in Port Harcourt, Warri and Kaduna states, from January 2015 to June 2020.

Despite this huge amount expended on the refineries the Nigerian National Petroleum Corporation, NNPC, disclosed that the facilities had remained largely ineffective and moribund.

The refineries had persistently constituted a sore point in Nigeria’s petroleum industry and had served as a major source of revenue leakage and fraud over the years, with successive administration spending billions of naira on never-ending rehabilitation and turnaround maintenance.

Refineries’ blues

Despite the unending revamp of the three refineries, the facilities continue to serve as a drain-pipe for the country’s finances, as the reports giving a breakdown of the figures, revealed that the NNPC, in 2015, expended N82.82 billion on the refineries; while in 2016, N78.95 billion expenditure was recorded on the refineries.

In 2017, the reports added that more than half a trillion naira was expended on the refineries without any meaningful impact, as the refineries remained comatose. In particular, it stated that N604.127 billion was spent on the refineries by the NNPC in 2017; while the amount expended on the refineries dropped to N426.66 billion in 2019; dropping further to N218.18 billion in 2019.

It also stated that the NNPC declared N64.534 billion expenditure on the three refining complex from January to June 2020. The three refining companies are Warri Refining and Petrochemical Company, WRPC and Kaduna Refining and Petrochemical Company, KRPC, both having one refinery each; while Port Harcourt Refining Company, PHRC has two refineries.

However, despite the huge amount expended on the refineries, their woeful performances remained, as the NNPC stated that they posted trading deficits of N82.09 billion, N77.84 billion, N32.84 billion, N131.64 billion and N149.23 billion in 2015, 2016, 2017, 2018 and 2019, respectively, while in the first half of 2020, they posted trading deficits of N58.736 billion.

From their combined installed capacity of 445,000 barrels per day, the reports further put the capacity utilization of the three refineries at 4.88 per cent in 2015; 11.92 per cent in 2016; 18.13 per cent in 2017; 10.13 per cent in 2018 and a woeful 2.19 per cent in 2019.

Specifically, at the end of 2019, the NNPC stated that: “No associated crude plus freight cost for the three refineries since there was no production but operational expenses amounted to N13.55 billion. This resulted to an operating deficit of N13.46 billion.

“In December 2019, the three refineries processed no crude and produced -619 metric tonnes, MT, of finished products; comprising -2,593 MT and 1,974 MT by Warri Refining and Petrochemical Company, WRPC, and Port Harcourt Refining Company, PHRC, respectively. Combined yield efficiency is 0.00 per cent, owing largely to ongoing rehabilitation works in the refineries.”

Privatise refineries

As a result of the huge losses the refineries are causing the country, Programme Coordinator of the Nigeria Natural Resources Charter, NNRC, Ms. Tengi George-Ikoli, insisted that the Federal Government should immediately privatize the refineries, to improve Nigeria’s access to finished products in-country, reducing potential for over reliance on external support for products, to preserve Nigeria’s sovereignty.

According to her, the government should sell off unviable government-owned oil assets to raise revenue and boost efficiency in the short to medium term.

To optimize the opportunities from oil and gas exploitation to withstand the prevailing COVID-19 shocks and its after-effects, George-Ikoli stated that Nigeria must consider a number of policy options to stabilize the sector, maintain revenue flows, attract investment and drive growth, among which is the privatisation of the refineries and the sale of unviable government oil assets.

However, realizing the woeful performance of the refineries, Group Managing Director of the NNPC, Mallam Mele Kyari once again said the NNPC was committed to revamping the refineries and returning them to full capacity.

Particularly, he disclosed that Tecnimont SPA, Italy (TCM), the representative of JGC; the Original Refinery Builders (ORB) of the Port Harcourt refineries had completed phase one of their engagement, comprising the inspection and integrity studies of the PHRC, adding also that the NNPC had appointed its engineering subsidiary, National Engineering and Technical Company, NETCO/KBR as Owners Engineer (OE) for the rehabilitation of the Port Harcourt and Warri refineries.

In addition, for the Warri refinery, Kyari stated that Saipem had submitted a revised Technical & Commercial Proposal for phase one of the refinery’s rehabilitation, adding that the NNPC Tenders Board, NTB, had granted approval for NETCO and KBR to conduct Technical Audit on the refinery and submit a report for consideration. For Kaduna Refining and Petrochemical Company, KRPC, Kyari disclosed that activities for Phase one inspection of the refinery were scheduled to commence in the third quarter of 2020.

He added that the committee on the refinery’s Operations & Maintenance (O&M) had submitted its report, noting that the contracting strategy for engaging the O&M was being developed with consideration for private investor funding. (Sunday Vanguard)