Sell the worthless refineries!

A report that Nigeria’s four refineries are currently operating at just 5.55 per cent of their combined installed capacity of 445,000 barrels per day means that the refineries are barely producing 24,698 barrels per day, indicating gross under-performance, which demands the political will to sell the refineries at this time.

This is not surprising, given that over the years, the refineries have, practically, performed below 50 per cent of their total installed capacity, which is at the root of the perennial fuel scarcity that has plagued the country, as well as the massive importation of petroleum products.

It won’t be an overstatement to claim that the country has no refineries hence, operators want the importation of fuel products to continue. The only remedy, however, might be the expectation that the new Dangote refinery in Lekki, Lagos, would bring relief once it comes on stream soon.

But for that glimmer of hope from Lekki, Lagos, the country would continue to suffer from lack of functional refineries to satisfy domestic demand of petroleum products, which entails heavy reliance on importation. Sadly enough, the 5.55 per cent production figure given above, is the highest that the four refineries have reached in six months according to NNPC data.

A breakdown of the March monthly oil and gas report showed that the refineries, which are located in Port Harcourt, Kaduna and Warri, have continued to record deficit, with losses for the period under review rising to N16.03 billion. Specifically, the Kaduna refinery reportedly recorded a deficit of N5.37 billion and Warri N5.56 billion in March, against combined revenue of N7.7 billion during the month.

The NNPC attributed the low operational performance to the ongoing revamping of the refineries, which is expected to enhance capacity utilisation when completed. This is another balderdash, given the fact that this story of turn-around maintenance (TAM) has become a routine we called a ‘scam’ the other day.

Available data shows that the refinery in Kaduna and the two plants located in Port Harcourt, have not operated beyond a quarter of their nameplate capacity for long now, mainly due to sabotage attacks on pipelines carrying crude to the plants as well as technical problems after many years of neglect.

The NNPC announced recently 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. No one is certain that the TAM by an Italian firm would be a success story.

Indications are that Nigerian refineries are the worst in Africa not withstanding that the cost of Turn Around Maintenance (TAM), expended is nearly the total cost of building the refineries. For instance, whereas, a total of $1.853 billion was reportedly spent on 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 then Minister of State for Petroleum, Ibe Kachikwu, admitted recently, at a gathering of oil chiefs in Abuja, that no conclusive turn around maintenance has been done on our refineries over the last 10 to 15 years, which is why the plants are left in a “far dilapidated” condition. This is a classic story of collapse of governance in a critical sector. Yet no one has been punished for this gross dereliction of responsibility.

For example, Kachikwu lamented that our refineries have not been maintained at the same level like those in the neighbouring countries such as Ghana and Cote d’Ivoire, noting that their refineries that are about the same age with Nigeria’s, are working at 90 per cent capacity.

Algeria’s Skikda refinery built in 1983 is currently Africa’s largest refinery with a daily production of over 320,000 barrels has reportedly gone full-scale maintenance. Five years ago, the Algerian state oil firm, Sonatrach, closed the refinery for six months to carry out maintenance.

In the same vein, South Africa’s SAPREF Durban refinery built 52 years ago with a daily production capacity of up to 180,000 and Egypt’s Mostorod Refinery with 142,000 daily production capacity, are ranked above Nigeria’s plants due to their world-class maintenance culture. Thus, at the root of Nigeria’s refining problems is lack of maintenance nurtured by corruption.

So, doubtless, except the refineries are revamped, there are fears that when the Dangote refinery with a capacity of 650,000 per day commences production, Nigeria’s existing refineries may cease to operate having continued to record huge deficits over the years.

The Dangote refinery is thought to have the capacity to meet 100 per cent of the domestic requirement of all liquid petroleum products including gasoline, diesel, kerosene and aviation fuel, leaving the surplus for export.
This newspaper has repeatedly argued that it is improper to expect government to continue to fund the maintenance of refineries that cannot work.
Meanwhile, the modular refineries model we once noted is still relevant, in this regard. Instead of destroying them, government should streamline and license the private operators as their production can complement the national supply chain.
We are, therefore, still persuaded that government should have nothing to do with the refineries anymore. We are consistent in our suggestion that government should not hesitate to sell the unprofitable refineries to private investors that can manage them. Government should no longer have business in the business of managing refineries.