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Halt plan to overhaul the refineries!

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The recurrent urge, especially, each time a new helmsman takes charge of the Nigerian National Petroleum Corporation (NNPC), to overhaul the four underperforming refineries, despite the failure of previous turn around maintenance (TAM) activities is curious. And the nation should take note at this crunch time.  

Given that huge amount of money is involved in the overhauling process, it is not clear whether the aim is to misappropriate the money or to really revamp the refineries, as previous attempts have failed to yield any positive results.Obviously, the latest move may not be unconnected with the fact that a new Group Managing Director (GMD), Mele Kyari, is on board and, like his predecessors, would like to flag the TAM option, irrespective of the outcome. This is an issue a diligent National Assembly should quickly examine. 

Curiously, the last session of the House of Representatives stopped the NNPC from embarking on another round of TAM due to past unproductive attempts. It is not clear whether the restriction has been lifted and what has changed to warrant another capital intensive TAM of an unprofitable petroleum refining complexes.

According to data released last May by the NNPC, the four refineries operated at just 5.55 per cent of their combined installed capacity of 445,000 barrels daily (b/d), meaning that they are barely producing 24,698 b/d, which amounts to gross under-performance that explains why oil-rich Nigeria depends heavily on imported petroleum products.

Nigeria’s refineries, which include the Kaduna refinery, the two plants in Port Harcourt and the Warri refinery, have, for long, not operated beyond a quarter of their nameplate capacity for sometime due to sabotage attacks on pipeline carrying crude to the plants as well as technical problems following years of neglect.

Ordinarily, that should demand a drastic overhaul of the entire refinery system. But the question is whether or not that could be done diligently. Experience shows that this is hardly the case. Money would be spent with nothing to show for it.What should the people expect, therefore, when the Federal Government, the other day, said it had begun the overhauling of the refineries, commencing with the Port Harcourt refinery.

The NNPC said it planned to review operations of the refineries, support condensate plants and open the midstream sector.The NNPC announced in March that it had secured the services of Italy’s Maire Tecnimont, to handle the overhaul of the 210, 000 b/d Port Harcourt Refinery complex, with oil major, Eni, appointed as technical adviser. Maybe, that would bring a turnaround in the refinery’s unimpressive performance. Indications are that Nigerian refineries are the worst in Africa not withstanding that the cost of Turnaround Maintenance (TAM) already expended is nearly the total cost of building the refineries.

For instance, whereas, a total of $1.853 billion were reportedly spent in building the refineries, it has been revealed, reliably, that over $1.6 billion has so far been spent on maintenance of the four refineries since 2000. Nigeria’s Port Harcourt refinery, just like its counterparts in Kaduna and Warri, has witnessed the worst maintenance. The only publicly known TAM carried out on the Port Harcourt refinery was a routine maintenance on the facility in 2000 (19 years ago).

The GMD of the NNPC, while speaking on “Harnessing oil and gas potential for national development” at the yearly conference of the Association of Energy Correspondents of Nigeria (NAEC), said Nigeria remains a net importer of petroleum products due to the current state of the refineries and the long absence of private investment in the refining sector. Kyari, who was represented by the Chief Financial Officer (CFO) of the Corporation, Umar Ajiya, said the refineries had not been rehabilitated for a long time, adding that rehabilitation programme would aid local production. “Our plan is for Nigeria to become a net exporter of petroleum products by 2023,” he said.

He emphasised the need for an enabling environment to attract the right investment that is being subdued by the nation’s fiscal regimes. Worldwide, private sector involvement in refinery operations is the-in-thing. That is why private sector ownership of the refineries has been advocated if the refineries would work.

Experts have said, and this is not surprising, that refineries cannot be run properly in Nigeria because of the way they are organised. Elsewhere, refineries, they argue, are run by companies independent of the government. The companies understand the market and how a refinery is supposed to be run.

But in Nigeria, the refineries are owned and run by government in a sort of monopoly, they argue, except now private investors are venturing into the business. The Dangote’s $9 billion refinery under construction in Lekki, Lagos represents this new thinking. Every now and then, the NNPC claims to be doing turn around maintenance. Unfortunately, TAM has become a cesspool of corruption. It is not clear how much has been budgeted for the latest round of TAM. The other day, the NNPC put the cost of TAM at $1.8 billion. Is this still the cost or has it changed?

There is no country, among those whose refineries are functional, that always talks of TAM. Regular maintenance is fixed as part of the scheduled plan. Refining should be able to make enough money for the plant maintenance.It is out of tune to expect government to bring money to maintain refineries that are not working. Government ought not to have anything to do with the refineries in the first place. A lot of money has been wasted in the past; how do we continue to waste more and make the same mistake?

Government should not be involved in another TAM. No amount of maintenance by government will revive the refineries. This newspaper has consistently maintained a position that the refineries should be sold to private investors, as government should have no business in this refinery business. Reason: Nigeria’s government has not been successful in any business enterprises. The National Assembly should stop this wasteful venture and encourage private investors to buy the refineries.


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Mele KyariNNPC
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