Despite the humungous spending on the refineries, it is disappointing that it had not yielded the desired results, writes SUCCESS NWOGU
Nigerians have said the Federal Government through the Nigerian National Petroleum Company Limited (NNPCL) has spent about N1.618.037 trillion in about six years on payment of salaries and other operational costs on the nation’s moribund refineries.
They said it was wasteful, paying salaries of workers and others on the refineries that have been comatose for years.
According to an insider in the industry who pleaded not to be named, there are about 5,000 workers who are engaged, both directly and indirectly, in the nation’s four refineries.
Those who expressed dissatisfaction over the money spent include the Operations Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mr Mike Osatuyi; IPMAN Chairman of NNPC depot Ore, Western Zone of Nigeria, Shina Amao; a former Chief Operating Officer (Upstream) of former Nigerian National Petroleum Corporation and Chairman of Dankiri Farms & Commodities, Mr Bello Rabiu.
According to data sourced from NNPCL, Nigeria expended N1.47 trillion on revamping, maintaining and running the four refineries from January 2015 to June 2020.
According to a publication by the Nigerian Upstream Petroleum Regulatory Commission, Nigeria’s four refineries located in Kaduna, Delta and Rivers states, have a combined 445,000bpsd production capacity.
The Port Harcourt refinery, 210,000 barrels per day complex conversion plant is operated by the Port Harcourt Refining Company (PHRC) Limited, a subsidiary of the Nigerian National Petroleum Corporation (NNPC).
The PHRC is made up of two refineries located at Alesa-Eleme, Rivers State. The old refinery has a refining nameplate capacity of 60,000 barrels per day and was commissioned in 1965, while the new plant with a nameplate capacity of 150,000 barrels per day was commissioned in 1989.
The plant utilises bonny light crude oil to produce Liquefied petroleum gas (LPG), premium motor spirit (PMS), Dual Purpose Kerosene (DPK), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO) and High Pour Fuel Oil (HPFO).
The Kaduna Refinery and Petrochemical Company (KRPC) located in Kaduna State, commissioned in 1980, has a nameplate refining capacity of 110, 000 bpd. The plant is run by Kaduna Refining and Petrochemicals (KRPC) Limited, a subsidiary of the Nigerian National Petroleum Company (NNPC) and has a complex conversion configuration.
The KRPC possesses a fuel plant commissioned in 1983 and a 30,000 MT per year Petrochemical Plant in 1988.
The refining plant has two (2) distillation units that utilise Escravos and Ughelli crude oils’ for fuel production and imported heavy crude oil for lube base oil, asphalt and waxes.
Products obtained from KRPC include Liquefied petroleum gas (LPG), Premium Motor Spirit (PMS), House Hold Kerosene (HHK), Aviation Turbine Kerosene (ATK), Automotive Gas Oil (AGO), and Fuel Oil.
The petrochemical plant produces Linear Alkyl Benzene (LAB). Warri The Warri refinery was established in 1978 with a refining nameplate capacity of 100,000 barrels per stream day plant and was debottlenecked to 125,000 barrels per stream day in 1987.
The refinery is located at Ekpan, Warri, Delta State and it is operated by the Warri Refining & Petrochemicals Company (WRPC) Limited, an NNPC subsidiary. The refinery was installed as a complex conversion plant capable of producing liquefied petroleum gas (LPG), premium motor spirit (PMS), dual purpose kerosene (DPK), automotive gas oil (AGO), and fuel oil from a blend of Escravos and Ughelli crude oils.’
WRPC has a petrochemical plant complex that producespolyproyleneand carbonblack from the propylene-rich feedstock and decant oil from the Fluid Catalytic Cracking unit (FCCU).
Detailsof thespentamountdisclosed thatNNPCspent N82.82 billion on the refineriesin2015; and N78.95billionin2016; N604.127billionwasspentontherefineries by NNPC in 2017; N426.66 billion in 2019; N218.18 billion in 2019 and N64.534 billion from January to June 2020.
The refineries are said to have cost the nation about N100 billion in 2021.
Furthermore, NNPC’s data showed thatinthefirst10monthsof 2021, its projected budget for pipeline security and maintenance cost of 29.68 billion had been exceeded.
Whereas of the N29.68 billion, N24.724 billion was supposed to have been spent from January to October, NNPC had spent N42.760 billion within the period under review.
In February, NNPC spent N5.813 billion for the purpose; in March it was N5.320 billion; in April, N2.641 billionwas expended, while in May, the national oil company financed the security of the pipelines to the tune of N5.258 billion.
In addition, the company spent N6.174 billion for maintaining its pipelines in June, a whopping N7.352 billion in July; N2.301 billion in September and N7.901 billion in October.
Despite this humungous spending, the refineries had not yielded the desired results.
A 13-month NNPC data from November 2016 to November 2017 when the refineries were operational, they had operated below 42 per cent. Findings showed that the Port Harcourt refinery operated for 11 months andwasidlefortwomonths; its highest capacitywas40percentasof February 2017. Warri refinery worked for seven months and was idle for six months. It had 42 per cent operation in January 2017, which was the highest recorded bythethreerefineries.
Kadunarefinery operated for five months and lost eight months of idling. It delivered 34 per cent in February 2017 as its highest. By November 2017 during temporary fuel scarcity, only the Warri refinery operated at 21 per cent and the twootherswereshut, thedatarevealed.
The three refineries supplied 1.6 billion litres of petrol out of 15.1 billion litres obtained from domestic and offshore importation platforms within the 13 months.
They also supplied 707.87 million litres of kerosene, from the 854.3 million entire supply. While refineries produced 83 per cent of kerosene consumed in 2016 and 2017, they only produced 11 per cent of the entire petrol consumed during the 13 months.
At the end of 2017, the refineries were shut down after performing below 30 per cent of their installed capacity, according to the NNPC data.
However, despite the huge amount expended on the refineries, their woeful performances remained, as NNPC stated that they posted trading deficits of N82.09 billion in 2015; N77.84 billion in 2016, N32.84 billion in 2017, N131.64 billion in 2018 and N149.23 billion in 22019, while in the first half of 2020, they posted trading deficits of N58.736 billion.
From their combined installed capacity of 445,000 barrels per day, the reports further put the capacity utilisation of the refineries at 4.88 per cent in 2015; 11.92 per cent in 2016; 18.13 per cent in 2017; 10.13 per cent in 2018 and a woeful 2.19 per cent in 2019.
Specifically, at the end of 2019, NNPC stated that “no associated crude plus freight cost for the three refineries since there was no production, but operational expenses amounted to N13.55 billion. This resulted in an operating deficit of N13.46 billion.
“InDecember2019, thethreerefineries processed no crude and produced 619metric tonnes, of finishedproducts; comprising -2,593 MT and 1,974 MT by Warri Refining and Petrochemical Company, WRPC, and Port Harcourt Refining Company, PHRC, respectively.
Combined yield efficiency is 0.00 per cent, owing largely to ongoing rehabilitation works in the refineries.”
At the moment, the refineries in Port Harcourt, Rivers State, Warri, Delta State and Kaduna, Kaduna State, with a combined 445,000bpsd capacity, are inoperative.
Government, in August 2021, announced $6.46 billion (about N2.68 trillion) spending for the rehabilitation of the Port Harcourt (old and new) at $1.5 billion (N622.9 billion), Warri refinery at $900 million (N373.8 billion) and Kaduna refinery at $1.3 billion (N540 billion), and for taking 20 per cent shares in the Dangote Refinery project at $2.76 billion (N1.146 trillion).
The Minister of State for Petroleum Resources, Timipre Sylva, in April 2022, said the $1.5 billion rehabilitation work for theold PortHarcourtrefinery would be completed by April 2023 to start refining 60,000bpsd of crude, though the entirecomplexhas210,000bpsdcapacity.
Osatuyi said: “It is wasteful spending. They are doing it because it is governmentmoney. If itispersonalmoney or if it is the money of a company that has shareholders, will they spend it like that? If you ask them, they will say they are using it to secure the factories, using the money to pay salaries and wages and producing nothing.
“If you are the owner of the refineries, can you spend such an amount of money in about six years? If you borrow money from the bank, can you do that? It is because they are getting the money from the federation account of crude oil and that is why they can do that.
If they have done what is right to revive the system, such spending could have been justified and absorbed in the operational expenses and they will still make a profit.
“If it is an individual company, it can not happen that you will keep paying non-productive workers. It was a government company and that was why they could waste the money.
The redundant workers can be redeployed to other places. Government agencies are many. They can be seconded to other places so that they can be productive and that body will not be on NNPC. If it is necessary to recall them when there is work, they can be recalled.”
Amao said: “The spendings are outrageous. Second, what is the possible return they have got from the refineries after spending so much on the refineries on maintenance and repairs long? Let them put it to use and let us see if such money could come back. Then we will not see it as outrageous. If it is not coming back, then people should be questioned.
“That is what we have been doing over the decades. Since I have been in this business, I have been hearing about the maintenance of moribund refineries.
There is no year that you will not hear a big amount of money spent without returns. If I repair my truck often and I am spending close to the money that should get me a used sound vehicle, why should I not drop or sell my vehicle and get a new one on the road?
We should stop fooling ourselves in this country. “There is no justification for continuing to pay salaries to workers who are not productive. It is something that govenrment policy should work on.
Anybody that is due for retirement, or whichever way or relieving him of the job, if there is a system which is not productive again, we should not be fooling ourselves again.
“We are not saying that government should downsize unnecessarily, but if there is a need for such, a better decision should be taken. Like one-man business, if he is not making a profit on his outlet, he will shut it down and get the people there somewhere to be transferred or be disengaged.
Or you tell them, this is the situation of things, we can no longer do this. “But in Nigeria, government will not do it based on nepotism, impunity and other non-profitable considerations. Several people will be in the system, collecting money, embezzling and doing whatever they could.
“Thoseworkers canbe redeployed to other govenrment agencies if there are spaces. I know Nigerians, even if there are spaces to fill, manyof themwouldwanttobedeployed; they would rather want to stay where there are and be making cheap and free money. They will be there unless there is an ultimatum that the place is to be closed.
“Any unproductive sector should be stopped. We should allow those people to go into business. They should be compensated and paid for. They should start something good. Small and medium enterprises are there. They should do something and contribute productively no matter how small to the Gross Domestic Product (GDP).”
In trying to defend the monthly spending, despite the non-functional state of the refineries, Minister of State, Petroleum Resources, Sylva, at anytime insisted that NNPC had continued to pay salaries despite not producing any fuel from the facilities.
According to him, while government shares part of the blame, the unions, which have maintained that nobody should be sacked in the dormant refineries, also contributed to running down the assets.
He said: “We have a situation now of a refinery that has not functioned for three years, yet it’s paying salaries. Every staff is being paid. The refineries haven’t worked for three years. We have carried on paying salaries. Nobody can sack anybody.
“People are getting promoted, but the refineries are not functioning. Unions will not let you. Those are the real issues. A few days ago, MeleKyarijustthreatenedtolay off some contract staff in Kaduna refinery, which has not functioned for three years and the unions wrote to me that they heard that their members were to be sacked and gave threats.
“The unions and their members were the ones managing the refineries. Yes, I know government is to blame. I am not absolving government completely, but they themselves are part of the blame game.
They were managing it.” Delivering a paper entitled: “Challenges of Equitable Refining, Importation, Supply and Distribution of Premium Motor Spirit in Nigeria,” Rabiu said: “Between N11 billion and N12 billion is spent on refineries every month as well as N12 billion spent on pipelines across the country.”
He said it was surprising why the facilities would be left unmaintained and inactive, while they gulp huge amounts of money. He saiditwasmoreworrisomethatonlyDangote was building a refinery of huge refining capacity while the government could not build new ones or maintain the ones it has.
“How many years does it take Dangote to put up his refinery that government could not put the refineries together for 23 years? In fact, we should make this a key point of the campaign for those seeming national offices,” he said.