Reviving Nigeria’s Refineries

By Kolawole Adeniyi

On Tuesday, September 15th, some persons allegedly hired by a group took to the streets of Port Harcourt in Rivers State to protest against the state of the country’s refineries.

According to them, the non-functioning of the nation’s four refineries has brought untold hardship to over Nigerians who feed from the refineries and depots, threatening to embark on an industrial action if their demands are not met.

Clearly, these set of persons appear not to have been following events at the Nigerian National Petroleum Corporation (NNPC) since its current Group Managing Director, Mr. Mele Kyari assumed office.

Kyari has in a little over a year ago, not hidden his desire to bequeath to Nigerians a corporation that not only serve the purpose it was founded, but one that aligns with international best practice. He has decided to ensure that the country’s hard-earned resources are not just thrown into the refineries without carrying out a proper due diligence.

One of his focus therefore, has been how to ensure that the refineries start functioning once more, even if the country decides to privatise.

Unlike in the past where billions of naira are expended annually on Turn-around Maintenance (TAM) for the ailing refineries, with nothing to show for it, Kyari on assumption of office, decided to shut down the four refineries in Port Harcourt, Warri and Kaduna, assess the state of their health before rehabilitating them.

TAM is a planned partial or full shutdown of one or more units of the refinery for inspection, repair, and maintenance of equipment to ensure safe and efficient operations. It has been alleged to be one of the avenue that the country over the years has been losing huge amount of money, with nothing to show for it.

But that is one thing the Kyari-led NNPC is guarding against. The focus is to make sure that before any TAM is carried out at the refineries, it is one that would ensure that the expected outcome is derived.

It is on record that none of the Group Managing Directors of the NNPC since 1993 has delivered on the promise to rehabilitate the country’s four refineries, despite billions spent on turnaround maintenance contracts.

For instance, former NNPC’s GMD, Funsho Kupolokun, had once described the country’s refineries as the ‘proverbial bottomless pit’, apparently for gulping so much resources without any commensurate result.

In 2015, on assumption of office as NNPC GMD, Ibe Kachikwu had described the refineries as scraps, saying that about $500 million would be required to fix all of them.

Also, the immediate past GMD of the NNPC, late Maikanti Baru, had said no turnaround maintenance was carried out on the four refineries “for an aggregate of 42 years combined.”

But to show its commitment to the rehabilitation of the refineries, the Kyari-led NNPC had unveiled a timeline of activities which it has been implementing gradually. For instance, in October last year, a detailed technical inspection of the Port Harcourt Refinery was completed by Technimont SpA (the representative of the Original Refinery Builder).

Also, NETCO and KBR were appointed as Owners Engineer and Project Management Consultants in May 2020 for same refineries and the shortlist of bidders for the procurement and construction (EPC) project was reportly approved in June 2020. In addition, it was gathered that an approval of financing of the project to progress with Afrexim Bank to raise $1billion by NNPC Board of Directors was gotten in July 2020.

In addition, the timeline showed that the pre-qualification of Bidders was to have taken place in August 2020, while Certificate of No Objection out to have been gotten from the Bureau of Public Procurement for the provision of EPC services to progress to the next phase in August 2020.

According to the timeline, the issuance of invitation to tender to bidders was earlier scheduled for September 14, 2020, the award of EPC to best globally reputable EPC Contractor in December 2020, mobilisation to site in the first quarter of 2021 and pre-commisioning of plant has been scheduled to hold in the first quarter of 2023.

It is however, worthy to note that while the corporation has commenced some of these activities stated in the timeline, the outbreak of the Covid-19 pandemic has slowed down the plan of the NNPC for the refineries.

The Senate had earlier this year commenced probe into the $396 million expended on TAM of refineries in the country between 2013 and 2015.

Senator Yusuf Yusuf had said, “The country through the NNPC has in the past 25 years, spent billions of US dollars in Turn-Around Maintenance of the refineries, the latest being over $396m spent between 2013 and 2015 without meaningful result.

“The refineries have remained in the moribund state in the last 15-20 years and is almost reaching total collapse due to lack of proposer maintenance of the facilities with a poor average capacity utilization hovering between fifteen percent and twenty-five percent per annum.”

Speaking on the state of the refineries when he took over, Kyari had explained: “First, all the four refineries in three locations are shut down and it was a deliberate decision for two reasons. One is that delivery of crude oil to these refineries is completely challenged because the pipeline network has been completely compromised by vandals and all kinds of people that will not allow us to operate these pipelines.

“That means you are not able to deliver crude oil to these refineries effectively to their maximum capacity. Secondly, what you call rehabilitation is different from the turnaround maintenance. Turnaround is routine which every refinery does but when you talk about rehabilitation, it is that colossal loss of capacity in the refinery and it means you haven’t done the turnaround maintenance properly.

“Typically, every refinery is expected to operate at 90 per cent of its installed capacity. With the best of effort, with all the turnaround maintenance that has taken place, it is impossible to run any of the refineries before the shutdown at that level. Our estimate was to run it at 60 per cent of capacity but if you do that, all you are doing is value destruction. You will take $100 crude into the refinery and bring out $70 product. It doesn’t make sense.”
The Group General Manager, Group Public Affairs, NNPC, Mr. Kennie Obateru, had said the maintenance of the refineries would be extended till the end of 2023. He added that the expectation of the corporation is that by the time the TAM is fully completed, the plants would be able to operate at about 90 per cent.

“The ongoing revamp of the plants is expected to be completed by fourth quarter of 2023. It would ultimately improve the capacity utilisation of the facilities in line with the set roadmap for the rehabilitation to achieve at least 90 per cent capacity utilisation upon completion of the process,” he said.

Beside efforts to revive the ailing refineries, Kyari through his Transparency, Accountability and Performance Excellence (TAPE) agenda, has also been implementing a five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence.

Experts believe that pursuing TAPE is the only way to turn around the corporation and make it competitive.

And true to his words, the NNPC GMD has remained focused on his target, despite efforts by some of his detractors to derail his transformative agenda as was seen in the recent allegation that 48 million barrels of the country’s crude oil was diverted and stolen.

According to Kyari, ensuring energy security is one of the cardinal agenda of the President Muhammadu Buhari administration.

Furthermore, he said closely related to energy security was the rehabilitation and expansion of the local refining capacity.

He said the NNPC has continued to support initiatives towards the actualisation of zero import of refined products by 2024, adding that the corporation has adopted a three-pronged strategy. This includes – revamp, restructure and encourage.

Therefore, the Kyari-led NNPC should be given all the necessary support to ensure that its reforms at the corporation, especially the plan to revamp the refineries come to fruition.

Adeniyi wrote in from Port Harcourt