Port Harcourt, Warri refineries and checkered history of TAM
The Port Harcourt Refining Company (PHRC) and the Warri Refinery and Petrochemical Company (WRPC) with installed capacities to refine 335,000 barrels per day, are currently in near comatose state due to lack of crude to refine, shortage of spare parts, poor maintenance, and bureaucratic upheavals.
Both refineries have had a checkered history of irregular Turn Around Maintenance (TAM), which has left these vital infrastructural facilities to deteriorate. Ideally, TAM ought to be a periodic occurrence taking place every two or three years.
Despite crude oil being the country’s mainstay since the 1970s, the Federal Government’s lack of maintenance and investment in these critical national assets has been responsible for the importation of petroleum products for domestic use for many years now.
A source at the Port Harcourt refinery, who pleaded anonymity told The Guardian that production at the refinery ceased since March 2019 to enable Eni and Maire Tecnimont of Italy do a proper evaluation of the plants to determine the extent of damage and repair required.
“We are not producing petroleum products, but are undergoing the first phase of rehabilitation. So, we cannot be producing when engineers are looking at the plants and what should be replaced. The contractors are working in the first stage, which entails looking at the machines, opening them up and finding out, which is bad, which is good, what needs to be changed, and the likely cost. But they have not arrived at the cost of the TAM yet. The situation is like taking your car to the mechanic for fixing. It is only when the mechanic is done that he will say this is what needs to be done to bring the car back to shape.” he said.He explained that the first phase is expected to be concluded next month, after which a proper TAM, which was last done in 2000 will commence.
“We hope to get it right this time and return the refinery to at least 90 percent production capacity. We are supposed to have expanded already. At least each oil producing state is supposed to have even if it is a small refinery of about 40 barrels a day, which would, at least, cater for its immediate locality,” he said.
The Port Harcourt refinery with capacity to refine 210, 000 barrels of crude oil per day, was designed to produce Liquified Petroleum Gas (LPG), Premium Motor Spirit (PMS), Kerosene (aviation and domestic), Automotive Gas Oil (AGO – diesel), Low Pour Fuel Oil (LPFO), and High Pour Fuel Oil (HPFO).
Made up of two refineries, the old one was commissioned in 1965, with an initial capacity of 35,000 b/d, which was later expanded to 60, 000 barrels per day in 1972. The new refinery was commissioned in 1989 with an installed capacity of 150, 000 per day. This brings the combined crude processing capacity of the refinery to 210, 000 per day to meet local consumption of petroleum products and for export.
Interestingly, in 2007, the President Olusegun Obasanjo-led administration sold the refinery to Blue Star Oil at the price of $561m. The deal was quickly reversed by late President Musa Yar’Adua.The Petroleum and Gas Senior Staff Association of Nigeria (PENGASSAN), and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) have consistently insisted that successive governments have willfully allowed the refineries to rot away in a bid to sell it as scraps to their cronies.
It would be recalled that the Federal Government during the administration of President Goodluck Jonathan, contacted Chiyoda Group of Japan, which built the refinery to carry out a TAM, but the company declined due to the prevailing insecurity in the Niger Delta.
Instead, the Japanese conglomerate recommended Maire Tecnimont of Italy for the job. In 2012, top management of Maire Tecnimont Group had visited Port Harcourt for an on-the-spot assessment, but the TAM never took place.
The NNPC had imported all equipment necessary for the TAM, but The Guardian findings revealed that these equipment, including pumps, compressors, air fill coolers, heat exchangers, trays and others were abandoned at Onne seaport since 2010, despite the huge demurrage incurred. Interestingly too, the NNPC was said to have budgeted N76.779b for the rehabilitation of the refinery in 2013, which never materialised.
The inability of the Federal Government to seal a deal with Maire Tecnimont to fix the refinery was perceived as a ploy to pave way for its sale. To corroborate this suspicion, the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in November 2013 hinted that the sale of the refineries would commence in the first quarter of 2014.
Intrigues over plans to sell the refinery had been remotely blamed for the sack of the former Group Managing Director of the NNPC, Andrew Yakubu. Yakubu visited the refinery on August 1, 2014 and was assured by the refinery workers that they were prepared to go ahead with TAM if the government provided the required equipment, which had been at the Onne wharf warehouses. A decision was reached with the GMD. A day after the meeting with the refinery workers, Yakubu was sacked.
Prior to 2015 general election, soldiers were deployed around the refinery, fuelling speculations by workers that government was out to use them to repel any possible protest when the refineries are finally sold after the general elections, if the Peoples Democratic Party (PDP) retained power at the centre.
But to the amazement of the workers, a few weeks after President Muhammadu Buhari was declared the winner of the presidential election, all of the 48-trailer load of materials for TAM, which had been at the seaport since 2010 were hurriedly transported to the refinery.
The Guardian gathered that Maire Tecnimont proposed to carry out the TAM at $297m under President Jonathan. But by 2015, the management of the refinery allegedly spent about $10m on the rehabilitation of the refinery that enabled the Area 1, which is made up of the Crude Distillation Unit (CDU) and the Vacuum Distillation Unit (VDU) regarded as the mother unit that produces kerosene, diesel and other feedstock for Area 2, to become operational.
Rehabilitation work was also allegedly completed in Area 2, which is made up of Naphtha Hydrotreatung Unit (NHU), where Naphtha is hydro-desulphurised; the Catalytic Reforming Unit (CRU), responsible for upgrading naphtha to reformate which has a higher octane value; the Kero Hydrotreating Unit (KHU) where kero is treated to make it acceptable for aviation use. The Area 3 that is made up of a FCC, where Vacuum Gas Oil (VGO) and heavy diesel oil are cracked to obtain more valuable products PMS was not achieved.
Former Group General Manager, Corporate Planning and Development Division, Dr. Joseph Ellah, said in the downstream section such as refining and petrochemicals, there is sufficient evidence to support the view that a sale of substantial equity to core refiners would improve the way refineries are managed.
According to him, this will help to inject additional capital for maintenance and rehabilitation and pave way for possible profits provided that enabling competitive climate is created.“In consideration of the epileptic performances of our refineries and the huge financial requirements for their rehabilitation, we could go along with the phased privatisation provided the final ownership structure will retain a respectable percentage of government equity, of up to 40 percent. Government would then be a major minority shareholder. The old Port Harcourt refinery was structured that way in the 1960s and operated efficiently under the management of Shell BP before the NNPC acquired it,” said Ellah.
The Warri refinery, the first Nigerian government wholly owned refinery was commissioned in 1978. It has also suffered from serious underinvestment for the past decades in terms of TAM.Built to process 100,000 barrels of crude oil per day, it was later de-bottlenecked to process 125,000 barrels per day in 1987.
The last TAM, according to a source at the facility was done in 1994, by MORPOL, Lee Engineering, E-OFF Company. After millions were spent, it failed completely. It was gathered that staff members later carried out the maintenance work in 1994. That also was a failure and money was allegedly embezzled.
“There has not been a comprehensive TAM at the Warri refinery for decades. There was a small TAM that was carried out by workers and that is the reason that the facility has been shutdown since last month. We are told that once Eni and Tecnimont are done with the evaluation of the Port Harcourt refinery, they will come here. After the evaluation, they will then start the real TAM, which will take about three years. Nigerian political leaders cannot manage refineries. What they need to do is JVC with Shell and others to run the refinery like the NLNG.” He revealed that for now, only nitrogen plant products that are sold to Shell and other companies are operational for now.