Huge amounts of taxpayers’ money have been spent on them without results; and current contracts to rehabilitate the refineries in Port Harcourt, Warri and Kaduna will overflow into the next seven years.
Aside from specific budgetary allocations for major projects such as the turn-around maintenance (TAM), the idle plants have remained a cesspool of money-guzzling. Enormous recurrent expenditure is incurred by them through personnel costs and overhead. Yet, the nation remains a net importer of petroleum products to meet its domestic demands with huge subsidies on petrol hitting over N4 trillion annually.
This possibly explains why many Nigerians were unamused by the recent disclosure from the Minister of State for Petroleum, Timipre Sylva, that the rehabilitation of the 60,000 barrel per day (bpd) Port Harcourt refinery is being completed – to resume operations this first quarter of 2023.
The Managing Director/CEO, Taurus Oil & Gas Limited, Dr Nnaemeka Obiaraeri, said there is nothing to celebrate about rehabilitating a 60,000 bpd refinery after about eight years. “This is their usual political abracadabra; 60,000 barrel per day refinery will barely give us four million litres of PMS per day. This is nothing compared to the over 38.5 million litres we consume in a day in Nigeria”, the former staff member of NNPC said in a note to THEWILL.
An engineering and financial consultant, Ibilola Amao, said the news of the 60,000 bpd refinery in Port Harcourt “is not consistent with the reality” considering the scenario in the nation’s governance and the oil and gas industry today.
While giving an update on the Port Harcourt refinery during the Ministry of Petroleum Resources 2022 scorecard presentation in Abuja on January 9, 2022, Sylva shifted grounds: He claimed that the promise (originally) made was not to complete the rehabilitation of the refinery by May 2023 but that the fuel plant will be rehabilitated by the end of Q4 2022.
It is on record, however, that in September 2022, Sylva who spoke to Journalists after a Federal Executive Council (FEC) meeting, assured Nigerians that the country’s biggest refinery would become functional by December 2022. The minister, this time, admitted that the timeline was no longer feasible, hence the adjustment in the programme.
“The promise was to start the fuel plant, which is the 60,000 bpd component of this activity by the last quarter of 2022, but it is not practical. So, we will start it off in the first quarter of 2023, otherwise every other process is going on,” NNPC Group Managing Director, Mallam Mele Kyari, who accompanied Sylva during the briefing, stated.
Sylva, who concurred with Kyari that the refinery would begin work before March, explained that the government had continued to buy stakes in most privately owned refineries in the country because of the need to ensure the nation’s energy security.
For instance, Sylva disclosed that the Dangote Refinery in which the national oil company holds 20 per cent shares, Waltersmith where it has 30 per cent, and Duport where it holds 30 per cent, would come on stream this year.
But ground-shifting is the pattern of behaviour of the Petroleum Ministry and the NNPC Limited as several project timelines have not been achieved and, in some cases, ended in a confusion.
On August 3, 2022, Sylva, told Journalists that FEC had approved $1.48 billion for the rehabilitation of both Kaduna and Warri refineries. He added that 15 percent of the contract sum had been disbursed to the contractors: Saipem SPA, and Saipem Contracting Ltd to be executed in 3 phases across 77 months (over six years).
On October 27, 2022 (barely two months after), Special Adviser on Media & Publicity to the President, Femi Adesina, in a statement, said President Muhammadu Buhari during his visit to Seoul, South Korea, expressed delight as he witnessed the signing of the MoU between NNPC and Daewoo Group on the rehabilitation of Kaduna and Warri refineries and constructing NLNG Train-7 project.
THEWILL contacted the NNPC spokesman, Garba Deen Muhammad, to clarify if this is a joint venture with Saipem SPA, but he did not respond.
An oil and gas expert who would not want his name published because of his closeness to those in authority, said “the whole thing is confusing and does not speak well of the Buhari Administration which is winding down in a couple of months. This ought to be properly explained to Nigerians. It will generate avoidable controversies like the others in the past.”
Similarly, FEC approval of $1.5 billion for the rehabilitation of the Port Harcourt refinery in March 2021 – six years into President Buhari Administration, triggered a wave of criticisms and opposition from several analysts and important stakeholders. Among those who vehemently opposed the idea was an investment banker and founder of Stanbic IBTC Bank Plc, Mr Atedo Peterside, who was on the National Council on Privatisation (NCP) between 2010 and 2015.
“FG should halt $1.5 billion approval for repair of Port Harcourt refinery and subject this brazen & expensive adventure to an informed national debate. Many experts prefer that this refinery is sold ‘as is’ by BPE to core-investors with proven capacity to repair it with their own funds,” Peterside posted on his twitter handle.
This followed an earlier query on his twitter handle: “In 2019, PH Refinery contributed zero revenue, but incurred costs of N47bn; almost N4bn a month! Instead of ending this nightmare through a #BPE core investor sale, #NNPC wants to enmesh Nigeria into a deeper financial mess by throwing $1.5bn (incl. debt) at a problem it created?”
The huge amount of money borrowed to fix the moribund refineries will add to the N77 trillion debt load that the Buhari Administration will transfer to Nigeria’s next leadership.
While speaking on an NTA programme on February 1, 2022, Sylava noted that he was hopeful that the Buhari regime would be able to complete 60 per cent of the repair of the two Port Harcourt refineries before leaving office while the ones at Warri and Kaduna would take much longer.
Sylva said, “We agreed from the very beginning that the completion date will overflow into the next administration but we agreed that there are milestones. We expect that by the end of this year, in Port Harcourt, we expect to achieve at least 60 per cent of the capacity production from Port Harcourt.
“We are hoping that by the end of next year (2023), the rehabilitation will have been completed. Warri and Kaduna started after Port Harcourt refineries and of course, it is going to progress at a slower pace
“But I believe that at the end of the year, all the refineries – Port Harcourt, Warri and Kaduna – will be operating at a certain capacity. I cannot tell you what capacity it will be operating by the time we leave but they will all be at least partially functional and we expect that since governance is a continuum, the next government will take up from wherever we stop and get it to the finishing line.”
The Nigerian National Petroleum Company (NNPC) Limited spent N100 billion on the rehabilitation of the nation’s refineries in 2021 the establishment showed in its presentation to the Federation Account Allocation Committee (FAAC) meeting on its funding performance for the year (2021).
According to the state oil firm, the fund was used to revamp the facilities throughout the year. Although the specific refineries were not stated, according to the funding report, NNPC said it spent N8.3 billion every month in 2021 to revamp the refineries.
The facilities under the NNPC’s management include the Port Harcourt Refining Company (PHRC), Kaduna Refining and Petrochemical Company (KRPC) and the Warri Refining and Petrochemical Company (WRPC). The refineries have a combined installed capacity of refining 445,000 barrels of oil per day.
Previous rehabilitations notwithstanding, an earlier audit report of the national oil company had revealed that the nation’s three refineries recorded N1.64 trillion cumulative losses in their 2014 to 2018 operations. The NNPC had said the three refineries processed no crude because of the rehabilitation works being carried out on them.
The report stated that the combined losses from the Port Harcourt Refinery and Kaduna Refinery were N208.6 billion in 2014; N252.8 billion in 2015; N290.6 billion in 2016; N412 billion in 2017 and N475 billion in 2018.
Currently operating at zero capacity, NNPC had shut down the facilities stating that it would adopt the Build, Operate and Transfer (BOT) model to run the refineries. The activities will overflow into the next seven years while the nation continues to import refined petroleum products with proceeds of its crude oil export.
On assuming office in May 2015, President Buhari pledged to revive the refineries to optimum capacity, In December 2016, the NNPC said the refineries would work at ‘full blast’ by 2017.
The then NNPC spokesperson, Ndu Ughamadu, said in a statement that the corporation would embark on a comprehensive rehabilitation of the refineries to achieve optimal capacity utilisation.
But in September 2017, the then NNPC’s Group Managing Director, Maikanti Baru, again said the refineries would be shut down for overhaul.
The immediate past General Manager, Group Public Affairs Division, NNPC, Kennie Obateru, had explained in April 2021 that the rehabilitation of the Port Harcourt refinery would make part of the facility to start delivering refined products by September 2022.
However, NNPC GMD, Mele Kyari later explained that the nation’s refineries were deliberately shut down because their operations were no longer sustainable.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
