Buhari approves N2.047trn for NNPC refineries in six years
…as FEC approves $1.5bn for Port Harcourt refinery rehabilitation
The approvals made by President Muhammadu Buhari who is also the Minister of Petroleum on rehabilitation of the Nigerian National Petroleum Corporation (NNPC) refineries between 2015 and 2021 increased to N2.047 trillion in 2021, following the approval of another $1.5billion ( N381 per Dollar) yesterday by the Federal Executive Council ( FEC) for the rehabilitation of Port Harcourt Refinery with a refining capacity of 210,000 barrels per day.
This N2.047 trillion approved by President Buhari translates to N1.47 trillion spent between 2015 to 2020 and fresh approval of $1.5 billion ( N571 billion)
Minister of State for Petroleum Resources, Timipre Sylva, made the fresh approval known yesterday when he briefed State House correspondents on the outcome of the Council meeting held at the Presidential Villa, Abuja.
According to him, the rehabilitation will be done in three phases of 18, 24 and 44 months.
The minister stated that the rehabilitation was in fulfilment of Federal Government’s desire to resuscitate the country’s refineries to reduce the cost of processing petroleum products as well as boost the economy.
He said, “The Ministry of Petroleum Resources presented a memo on the rehabilitation of Port Harcourt Refinery for the sum of 1.5 billion dollars, and that memo was 1.5 billion dollars and it was approved by council today.
“So, we are happy to announce that the rehabilitation of Port Harcourt refinery will commence forthwith. It is in three phases.
“The first phase is to be completed in 18 months, which will take the refinery to a production of 90 per cent of its nameplate capacity.
“The second phase is completed in 24 months and all the final stages will be completed in 44 months and consultations are approved.
“I believe that this is good news for Nigerians. The rehabilitation of refineries have commenced.”
The minister also disclosed that an Italian company would undertake the repairs and a maintenance company would also be put in place, to ensure effective maintenance culture.
“The contractor that was approved by council today is Tecnimont, SPA of Italy.”
However, since the botched attempt made by former Pres. Olusegun Obasanjo to sell the refineries, more than N2 trillion had been spent on rehabilitation of the nation’s ailing refineries but they failed to operate above 20% installed capacity.
Late President Umaru Yardua reversed the sale of the refineries sold by Obasanjo to Bluestar Consortium comprising Dangote Oil ( 55%), Zenon Petroleum (25%) and Transcorp ( 5%) and Rivers State Government ( 15%). The Bureau of Public Enterprises ( BPE) was accused of selling the assets wrongly. Bluestar purchased the Port Harcourt refinery and the Kaduna refining and Petrochemical company.
To improve the refining capacity, late President Yar’Adua appointed Engineer Abubakar Yar’Adua, a downstream expert as the Group Managing Director of the NNPC. He received the mandate for the refineries to operate optimally within a year. However, GMD Yar’Adua promised Nigerians that the refineries optimal capacity will be restored within nine months. Unfortunately, he was fired by late President Yar’Adua for failing to improve the capacity of the refineries within the period as pledged.
Meanwhile, the recent NNPC report shows that N1.47 trillion was spent on the four refineries between 2015 and N2020. Breakdown of the figures revealed that the NNPC, in 2015, expended N82.82 billion on the refineries; while in 2016, N78.95 billion expenditure was spent on the refineries.
In particular, it stated that N604.127 billion was spent on the refineries by the NNPC in 2017; while the amount expended on the refineries dropped to N426.66 billion in 2019; dropping further to N218.18 billion in 2019.
It also stated that the NNPC declared N64.534 billion expenditure on the three refining complex from January to June 2020. The three refining companies are Warri Refining and Petrochemical Company, WRPC and Kaduna Refining and Petrochemical Company, KRPC, both having one refinery each; while Port Harcourt Refining Company, PHRC has two refineries.
From their combined installed capacity of 445,000 barrels per day, the reports further put the capacity utilization of the three 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, the 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 to an operating deficit of N13.46 billion.”
According to a recent NNPC Monthly Oil and Gas industry report:
“In December 2019, the three refineries processed no crude and produced -619 metric tonnes (MT) of finished products; 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.”
However, Sylva has assured Nigerians about the ability of the contractor to restore the capacity of Port Harcourt refinery with the rehabilitation contract.
According to him, “Talking about operations and maintenance, that has been a big problem for our refineries and that was also exhaustively discussed in council and the agreement is that we are going to appoint a professional operations and maintenance and operations company to manage the refinery when it is finally rehabilitated.
“It is actually one of the conditions presented by the lenders, because the lenders said they can give us the money if we have a professional operations and maintenance company and that already is embedded in our discussions with the lenders. We’re not going back on that,” he said.
According to Sylva, the needed fund for the rehabilitation work has been earmarked, saying the funding will be shouldered by the federal government, Nigeria National Petroleum Corporation (NNPC) and Africa Export-Import Bank AFREXIM.
The minister assured that rehabilitation works on Kaduna and Warri refineries would also be carried out on or before May 2023.
According to the NNPC, the country’s PMS requirement by 2025, Nigeria needs 1.52 million barrels per day.
This implies that on completion of the Port Harcourt refinery rehabilitation with the $1.5 billion approved by FEC, Nigeria will still depend on importation since the coming on stream of Dangote Refinery and Petrochemical has again being delayed.
