‘Why Kaduna refinery is not working, profitable’
On Thursday February 15, it would be exactly one month since the Kaduna Refining and Petrochemical Company (KRPC) shut down operations, due to the non-availability of crude oil.Besides the non-availability of crude, the facility, like others around the country has been functioning grossly under capacity since it has not undergone a Turn Around Maintenance (TAM) for a while now. The last was done in 2013.
It is these maintenance challenges that have equally been responsible for the refinery’s under capacity performance, just as experts in the sector are expressing deep concerns over the epileptic state of the facility.
The shutdown has effectively deprived Nigerians the four million litres of petrol, 2.5 million litres of automotive gas oil, and 1.6 million litres of kerosene, which the outfit was producing daily, in recent times.
With over $20b already spent on the TAM of the nation’s refineries since inception, Professor of Petroleum Economics and Policy Research, Omowumi Iledare, insists that corruption, tribalism and sundry mundane factors were responsible for the perennially poor state of the refinery.
Iledare, who is the President of the Nigerian Association for Energy Economics (NAEE) SAID, “I think the way the government spends money to maintain the refinery leaves a lot to be desired. As far as I am concerned, the government is not really particular about getting optimum value from the money it is investing in the refinery. That has been the hallmark from one government to the other.
“I don’t think this current government is doing any better as it does not have the opportunity cost mentality in the way it thinks about solving some of the problems. I don’t think we are incapable of effectively running the refinery, I just think we are not employing the resourses that we have for optimal value creation. If we do, the refinery will be up and running. It is not any big deal to run a refinery,” Iledare said.
Insisting that the government needs to be strategic in policy formulation, he also added that all the policies are supposed to be formulated by the Ministry of Petroleum Resources. Former President of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, shares Illedare’s view that the perennial loses accruing to the country on account of the failing Kaduna Refinery, were not unconnected with poor management of scarce resources, and deliberate attempt by the managers to keep it underperforming for selfish reasons.
According to him, “They usually abandon the refinery that way so that they can make more money from TAM, which usually happens once in about five years. That is where they are sure of making money.”He pointed out that current efforts of the country to source crude from nearby countries by building pipelines may remain unfruitful, especially when the sustainability factor is scrutinised.
“If we invest in laying pipelines to the refinery, how much can we realistically make? What is the plan for the pipelines to be sustainably maintained? This is an international agreement, which is a third option, we need to explore the options within Nigeria, and it is only when we know that those things are not possible that we should talk about going outside the country because that could be very expensive. Just like we are supplying gas to some Africa countries today, Ghana has found gas and may not need us any more. What if we discover oil in the northern region? These are serious economic or business plans we really need to consider,” Adesanya said.
Also commenting on the issue, Head, Energy Research, Ecobank, Dolapo Oni said, the refinery’s dependence on crude delivered by pipeline from the Niger Delta, and other supplies from the Middle East and America are key disadvantages the country may have to battle with.
“That refinery will constantly have a problem because of it distance from any crude oil field. The refinery is also equipped with only one month storage capacity. The implication is that even if crude oil flow stops for only two weeks the refinery is out of supply. Those are the disadvantages we have to battle with,” Oni said.
This perhaps explains why a former Special Adviser to the President on Petroleum Matters (from 2007 to 2010), Dr. Emmanuel Egbogah, earlier told The Guardian that the Kaduna Refinery was as good as scrap.
According to Egbogah, who is also Chairman of Emerald Energy Resources, the refinery has bad features, which were never discussed, especially the fact that Nigeria would have to import heavy crude from Venezuela to refine at the facility, since the country’s light crude is incompatible with the refinery’s technology.
“We would be better off building a new refinery that is functional,” Eghogah said. Iledare, Oni and Adesanya, do not totally agree with Egbogah on the scrapping of the refinery, but are cynical about spending more money on the asset. Both Oni and Adesanya are of the view that the best option for the country was for the Kaduna Refinery to be privatised. “Let the likes of Dangote, Tony Elumelu and Femi Otedola buy it,” Adesanya said. But for Iledare, scrapping or selling off the facility was not it because the NNPC would not have an asset to fall back to.