Breathing life into the refineries

T

he Federal Government is at it again. Steps are being taken to pump money once more into the nation’s obsolete and gravely dilapidated crude oil refineries that have defied all manners of repair standards.

 

 

The pronouncement by the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mele Kyari, that the country would make a fresh attempt to fix the plants, does not in any way excite anybody except those who benefit directly from such maintenance that had gulped billions of dollars in decades.

The four refineries located in Port Harcourt, Warri and Kaduna have cost the country more money in repairs than what was used in constructing them. Originally with a nameplate capacity of 445,000 barrels per day, it is on record that as at today, even with the series of fund gulping Turn Around Maintenance (TAM), consolidated capacity use as at June last year was 2.14 per cent with an operational deficit of N17.42 billion ($48 million). This, according to records, was based only on the Kaduna facility, the others being offline. Kaduna was running at 8.7 per cent of capacity.

 

 

The plan ahead in the current dispensation is to get the plants back at peak capacity by 2022. To describe this as another shaky promise is not too far from the truth considering the fact that several of such promises had been made in the past with a section of Nigerians demanding that they be sold to private investors while government makes effort to build another or at least regulate the existence of modular refineries.

 

 

Specifically, rehabilitation works for the Port Harcourt refineries will be done in two phases, with both the ENI and the original builders participating in the process. At the end of the first phase, the Port Harcourt refinery is projected to reach 60 per cent capacity utilization, increasing to a minimum of 90 per cent.

Drawing from a proximate experience, the immediate past Minister of State for Petroleum Resources, Ibe Kachikwu, also set out a number of plans for the refineries, but none came to fruition, even when he predicted that the country’s refining capacity would be 1.1 million bpd in 2020 with Dangote’s private anchor coming onboard.

 

 

No doubt, there is actually a great need for the refineries to be brought back to life, but the issue, however, is the hopelessness that had played out in the past years. Looking into what had been spent on importation of fuel in the form of subsidy, every right thinking investor would opt for a quick rehabilitation or possibly building new refineries.

 

 

Obviously, Kyari’s intention like some others in the past is well intended as it is even an embarrassment that a country as big and well-endowed resource wise as Nigeria still relies on the outside world to get its crude refined and brought back into the country with traces of corruption strewing the process.

 

 

Last year alone, fuel subsidy cost Nigeria N648 billion ($1.8bn) even as the country has pegged pump price of Premium Motor Spirit (PMS) at N145 a litre. From Federal Government’s projection, we are likely to spend another N450 billion ($1.24 billion) on fuel subsidies this year. In a country where infrastructures are demanding huge financial attention, it is time government actually put an end to such wastage.

 

 

But even at that, there is still need to be circumspect in taking another decision to plunge the country into another round of rehabilitation, especially considering the age of the plants.

 

Of the four prominent refineries, for instance, the oldest, located in Port Harcourt, with nameplate capacity of 60,000 barrels per day, was commissioned in 1965. Between then and now, there have been series of transformations in technology, spare parts and other engineering technical know-how.

 

 

Those with knowledge of how such plants wear out over time believe that rehabilitating the poorly performing refineries only seems like a good strategy on paper, which, however, does not make any economic sense as too many things would have gone bad.

 

The struggle, desperation to get the plants to work again is always a priority for every administration with none getting fruitful. The immediate past administration of President Goodluck Jonathan also carried out an extensive tour of the plants only to emerge with a damning report on the neglect and the fact that time and technology had moved far ahead of them.

 

 

From what has unfurled so far even right here in the country, the Dangote Refinery and Petrochemical project is enough proof to show that crude refining plants, over the years, had moved from the fashion of the old bedraggled carcass that the government is still struggling to beat back to life.

 

 

For over 20 years, the equipment were not changed or maintained. Contracts were given out by previous governments, but the people who got the contracts did not know what they were doing because of the state the refineries were at the time.

 

 

Even to get the original builders to carry out a complete technical assessments of them to determine the corrections that needed to be done has not been fruitful.

 

 

As it is, the only way to fix the refineries is to rebuild them from the start as there is need to change that model completely and find ways to rebuild the refineries from the ground up.

Why we may not be privy to the full arrangement the current administration is putting in place to get the plants back to reasonable capacities, we, however, call for caution so as not to waste more money in an attempt to bring a dead horse back to life.

 

 

It is also not too late for the government to sincerely begin to take steps towards building another refinery instead of the yearly rituals of attempted TAM that only line contractors’ pockets.

Related posts

Leave a Reply