If you think getting a $1.5bn cheque for producing nothing is virtually daydreaming, you haven’t met Nigeria’s Port Harcourt refinery.
So much of Nigeria’s resources have been wasted under elaborate maintenance that leaves the refineries poorer than they were and their managers richer than they should have been.
Originally scheduled for completion in 2019, the refurbishment and upgrade of the Port Harcourt Refinery, located in Nigeria’s oil-rich Niger Delta region, have remained at the promised stage of every administration since 1999. …CONTINUE READING
BusinessDay’s findings showed the refinery under the management of the Nigerian National Petroleum Company (NNPC) Limited has again failed to commence operations after about seven postponements.
The move comes about four years after an approval of a $1.5 billion contract to Italian Marie Technimont in April 2021 for the renovation and modernisation of the refinery.
Umar Ajiya, chief financial officer at NNPC, had on August 20, 2024, announced September 1, 2024, as a new date for the commercial commencement of Port Harcourt refinery.
According to him, the petroleum products will be ready for testing before it is usually supplied to the domestic market in September 2024.
Heineken Lokpobiri, minister of state for petroleum resources (oil), said on May 29, 2024, that the Port Harcourt refinery would start petrol production within the quarter ending August 2023.
“They (NNPC) give me reports weekly. The reports I have on my table before I came here is that hydrocarbons have been introduced,” the minister said on Channels Television’s May 29 Special programme on the first anniversary of President Bola Tinubu.
“The report available to me from the NNPC shows that within the next quarter, hydrocarbons will be refined and sold to the public,” he added.
This was not the first time the minister would tell Nigerians the Port Harcourt refinery would come on stream.
Era of missed deadlines
On the many previously failed deadlines given by the current administration for the operationalisation of the Port Harcourt refinery, the minister said he should not be blamed for the failed deadlines.
“I met the rehabilitation works on the ground and told Nigerians what I was briefed,” he said.
Last August, shortly after Lokpobiri was sworn in as minister, he pledged that the Port Harcourt refinery would be back on stream by December 2023.
In December 2023, the minister announced to Nigerians that the Port Harcourt refinery had “commenced operation after years of underperformance, closure, and turnaround maintenance,” yet not a drop of refined petroleum product was discharged at the refinery.
Most Nigerians have lost count of the different dates given by government officials for the resumption of refining activities at the Port Harcourt refinery.
In July, Mele Kyari, group chief executive officer of the NNPC, stated categorically that the refinery would come into operation in early August.
Kyari had earlier said in 2019 that the NNPC would deliver all the country’s four refineries before the end of former President Muhammadu Buhari’s administration.
While appearing before the Senate recently in July 2024, Kyari boasted, “I can confirm to you, Mr Chairman, that by the end of the year, this country will be a net exporter of petroleum products.
“Specific to NNPC refineries, we have spoken to a number of your committees, and it is impossible to have the Kaduna refinery come into operation before December. It will get to December, both Warri and Kaduna, but that of Port Harcourt will commence production early August this year.”
BusinessDay recalls that the 210,000 barrels per day Port Harcourt refinery was said to have reached what the NNPC called ‘mechanical completion’ of rehabilitation work in December 2023.
The NNPC had stated that the facility would start refining 60,000 barrels of crude oil daily after last year’s Christmas break.
Later in January 2024, Kyari said the refinery was being tested and would be ready by the end of January.
During the second month of the year, the Shell Petroleum Development Company of Nigeria Limited completed the supply of 475,000 barrels of crude oil to the Port Harcourt refinery, raising the expectations of marketers that production was set to commence.
This came a few weeks after the NNPC had said it was seeking to engage reputable and credible operations and maintenance companies to run the Port Harcourt refinery. NNPC did not disclose whether or not it had secured bidders to run the refinery.
In mid-March, Kyari said the Port Harcourt refinery would commence operations in two weeks’ time – precisely in April.
“We are serving this country with honour and dignity. And we will make sure that the promises we make on the rehabilitation of these refineries will take place,” Kyari stated after he appeared before the Senate Ad-hoc Committee investigating the various turnaround maintenance projects of the country’s refineries.
As the April deadline elapsed, independent petroleum marketers told The PUNCH that the facility would begin production by the end of July.
Sceptics’ suspicion
Past attempts at revitalising the refinery have been plagued by cost overruns, delays, and allegations of graft.
The spending of $1.5 billion for repair of Port Harcourt refinery, $897.6 million for repair of Warri refinery and $586.9 million on the Kaduna refinery repair raises eyebrows, with critics questioning whether it is a profitable venture considering Nigeria’s precarious fiscal challenges.
They point to the refinery’s history of breakdowns and operational inefficiencies, suggesting throwing money at it might be akin to pouring water into a sieve.
“NNPC Ltd did not do much construction of any sort in the 30 years between 1990 and 2020 and a lot of organisational knowledge has certainly been lost in this period,” said Dimeji Bassir, an oil and gas industry executive.
“We can infer therefore that the refinery revamp projects being spearheaded by NNPC are much bigger than the individuals leading them, particularly with little to no operational history to leverage—in planning and executing the projects—along with ingrained cultural inefficiencies to contend with,” he added.
A report by the Nigerian Extractive Transparency Initiative (NEITI) puts the average capacity utilisation of Nigerian four refineries at 8.55 percent in 21 months. In the period, there was no production for seven months.
Former President Olusegun Obasanjo said the running of state-owned refineries is shrouded in ‘corruption.’
Money guzzlers
An analysis of documents submitted by the NNPC to several legislative committees’ hearings on the subject matter, press statements and clarifications by past oil ministers, heads of the corporation and media reports, showed that the Federal Government has spent at least N400bn on the refineries in the last 16 years.
This is different from about $308 million reportedly spent for the same purpose by the military governments of the late General Sani Abacha ($216 million) and retired General Abdusalami Abubakar ($92 million).
Soon after the late President Musa Yar’Adua stopped the sale of the refineries in 2007, the NNPC reportedly announced that it had awarded a contract to a Nigerian firm to carry out comprehensive turnaround maintenance on all the refineries. The contract sum was said to be $57m.
In 2009, Mohammed Sanusi Barkindo, the then-group managing director of the NNPC, also announced that the corporation spent $200m on the maintenance of the Kaduna refinery.
Tim Okon, a former group executive director, corporate strategy of the NNPC, told a Senate committee in 2015 that when the corporation invited the original builders from Japan and Italy for the turnaround maintenance, they declined and recommended Saipem, a foreign firm operating in Nigeria, to carry out the maintenance on their behalf.
Way out
Eche Idoko, publicity secretary of the Crude Oil Refiners Association of Nigeria, expressed concerns that the Federal Government expended $1.5 billion to rehabilitate the Port Harcourt refinery, yet the facility has yet to start production despite six postponements.
He spoke further, “The $1.5bn spent on the Port Harcourt refinery could be used to develop 10 modular refineries to be able to produce PMS of a minimum of 10,000 barrels per day. That is about 100,000 barrels a day.
“And if you have 100,000 barrels per day, at least, with the Dangote refinery, you would have solved that problem. We would have enough to begin to export,” he stated.
-Source: Business Day
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