Is NNPC’s Promise to Fix All Refineries by 2022 Empty?

-By Fred Ojiegbe

The Nigerian National Petroleum Corporation (NNPC) recently said it will begin full rehabilitation of the nation’s three refineries by January 2020.

The Group Managing Director, Mallam Mele Kyari who said this during a facility tour to the Port Harcourt refinery noted that the move would help the Corporation to refine crude oil at optimum capacity by 2022.

According to him, making the refineries to operate at optimal capacities is a mandate that NNPC as a Corporation will leave no stone unturned to actualize, because a timely delivery of the asset is a priority.

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“We will stick to time, we will deliver this project by 2022. We will commence actual rehabilitation work in January 2020.

“We will do everything possible between October and December to close out all necessary conditions for us to deliver on that project.

“I believe that with the support that we have from the shareholders – government of this country, the entire staff of this company and the contractors, I believe it is doable and we will deliver the project,” the GMD said.

Speaking further, Kyari said, “The NNPC leadership has promised this country that our refineries will work, therefore, we must work not to disappoint over 200million Nigerian stakeholders.”

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Valuechain reports that the Corporation in a March 2019 statement explained that it had commenced first phase of the rehabilitation of the 210,000 barrels per day Port Harcourt Refinery complex that comprises the 60,000 barrels per day old Refinery built in 1965 and the 150,000 barrels per day, new Refinery, commissioned in 1989.

According to the Corporation, the first phase of the Port Harcourt rehabilitation contract which would run for six months will involve detailed integrity check and equipment inspection of the Port Harcourt Refinery complex beginning from end of March, 2019.

The integrity test comes as a forerunner to the second phase of the rehabilitation project which entails a comprehensive revamp of the complex aimed at restoring the refinery to a minimum of 90 percent capacity utilization.

The first phase of the Port Harcourt refinery rehabilitation project which is being executed by Milan-based Maire Tecnimont S.p.A, in collaboration with its Nigerian affiliate, Tecnimont Nigeria is expected to be delivered within weeks from now.

NNPC said it further segmented the rehabilitation to begin with Port Harcourt Refinery Complex and then progress to Warri and Kaduna Refinery complexes using the same methodology.

“We will make sure that within the life of this administration, before Baba’s tenure (President Muhammadu Buhari) ends in 2023, we will deliver on the four refineries,” NNPC GMD Mallam Mele Kyari said in his maiden address as NNPC chief in July.

Going by all these promises from the NNPC, all the refineries are expected to refine crude at optimum capacity by 2022.

However, the antecedents of the NNPC especially around the refineries may leave Nigerians in doubt over the Corporation’s ability to deliver on this promise once again?

Catalogue of Failed Targets, Promises
Valuechain investigations showed that in 2012 when NNPC reportedly kicked off a planned Turnaround Maintenance (TAM) of the refineries, then petroleum minister Diezani Alison Madueke had promised that by the beginning of the fourth quarter of 2014, the TAM project would have been completed and all the refineries would be refining 370,000 barrels per day, which is about 90 percent of the 445,000 barrels per day combined capacity of all the country’s refineries.

That plan never saw the light of the day with the then government citing exorbitant bills for the TAM from the original refinery builders and several other excuses why the rehabilitation failed.

Valuechain reports that the abysmal state of Nigeria’s refineries located in Port Harcourt, Warri and Kaduna was a major concern for President Muhammadu Buhari when he took office in May 2015.

The implications of the refineries’ poor performance is the country’s over-reliance on import of most of its refined petroleum products with the attendant effect on pump prices and subsidy recorded by the Nigeria National Petroleum Corporation (NNPC) on premium motor spirit, otherwise called, petrol.

The Buhari government on realisation of this fact therefore promised to again fix and get the refineries to work up to 90 percent of their installed capacity by 2019.

In 2015 when Dr. Ibe Kachikwu took office as GMD of the NNPC he set December 2016 deadline for the refineries to perform above average.

“The GMD toured the refineries and has set a deadline of December for the refineries to produce optimally. If that doesn’t work, these refineries will be shut for a year to undergo comprehensive rehabilitation,” NNPC said in 2015.

This did not happen as all the refineries struggled to remain afloat and were unable to churn out products in significant quantities.

“We have been able to do a pie chart that shows that by 2019 we should be able to deliver (get the refineries working). Even if in 2019, I don’t achieve the target I still would have been able to reduce importation substantially, it is better than not doing anything.” Kachikwu said at a conference in Houston, United States May 2017.

Kachikwu as Minister of State for Petroleum Resources and Chair of the NNPC board, in 2017, set December 2019 deadline for the plants to perform optimally, but the target will no longer materialise in 2019.

Why Refineries Rehab Continues to Fail
Despite several interventions to revamp the existing plants, the three refineries in Port Harcourt, Warri and Kaduna are still not in the shape as promised.

The refineries’ rehab deadline set earlier under the current administration has not been kept despite claims by the NNPC that for the first time in 20 years there was both the political will and the economic climate to ensure effective retrofitting of the refineries.

Immediate past Chief Operating Officer, Refineries, of the NNPC Mr Kragha Anibor, said at a conference earlier in January 2019 that the major problem why the corporation can’t bring the refineries to work was funding.

Efforts by the federal government to revamp the ailing refineries through private investors funding of the repairs and operations of the facilities have also encountered rancorous opposition by Nigerians, just as the option of selling them have also met strong opposition.

It will be recalled that the NNPC had to abandon its earlier private sector funding strategy due to onerous conditions demanded after more than twelve (12) months of negotiations.

The federal government would need about $1.2 billion to repair and bring the three refineries to full capacity, estimates by a government committee on the refineries show. But since the government does not have such money due to other competing demands, it would need financiers to fund the repairs and recoup their investments later.

NNPC has resolved to immediate direct funding from internal cash flows and how it intends to achieve this remains unclear at a time the global oil industry is grappling with uncertainties in crude oil prices and fluctuating production.

However, there is huge optimism the current GMD Kyari will deliver on the promise by that time, going by his antecedence and integrity as attested to by various stakeholders in the industry in the wake of his appointment as the 19th GMD.

Stakeholders Comments, suggests Way Forward
Commenting on the issue, the publisher of Valuechain Magazine, Mr. Musa Bashir Usman said in his opinion, the nation’s legislators will take the larger share of the blame for our comatose refinaries.

“Part of the legislators’ constitutional role is to have oversight supervisory role on various Ministries, Depertments and Agencies of the federal government. That is the wisdom of having committees in both lower and upper chambers of the national assembly. Their work is to hold the various public office holders accountable through constant monitoring and evaluation of their day to day work. Apart from law making business, this is the reason why they are elected by the citizens of Nigeria.

So, one can easily conclude that our legislators are not doing their work well that is why they give window for weaker public institutions that keep issuing failed promises. If our legislators will rise up to their functions and eschew any material gain by working for the interest of the masses of this country, I assure you everything will start working in this country. They (Legislators) should monitor the public office holders and hold them accountable, if that is done, our refineries will work, transperency and accountability will be entrenched thereby reducing the work load of EFCC and ICPC,” he said.

He called on the NNPC to form a supervisory committee that will monitor the rehabilitation process from beginning to the end.

“So that at the end of the day they will be able to give independent feedback to NNPC/Federal Ministry of Petroleum Resources about the rehabilitation progress periodically. Members of that committee should consist of some of the civil rights organisations, retired technocrats in the industry and members of the media. That is the only way we will achieve the 2022 deadline. Without that, I think it is still going to be business as usual,” he advised.