“It’s no longer about business now, but a reputational issue. The NNPC leadership has promised this country that our refineries will work, therefore, we must work not to disappoint over 200million Nigerian stakeholders.”
That was the promise by Mele Kyari, group managing director of the Nigerian National Petroleum Corporation, NNPC, during his official visit to the Port Harcourt Refinery on Saturday, September 19, 2019, barely two months after he assumed duties on July 7.
But one year after this promise, none of the country’s three refineries is working. Instead, the government has continued to pump billions of naira into the companies to revive them. Consequently, President Muhamma- du Buhari has told Nigerians to brace up as they will pay more for premium motor spirit, PMS, or petrol.
At the independence day celebration in Abuja on October 1, he said: “We sell now at N161 per litre.ChadchargesN362perlitre;Nigersellsone litre at N346. In Ghana, pump price is N326 per litre; Egypt charges N211; Saudi charges N168 per litre.
“It makes no sense for oil to be cheaper in Nige- ria than in Saudi Arabia.”
ThisNigeria investigation showed that the country’s problem was not because other coun- tries charge higher prices for PMS but that Nige- ria cannot refine crude petroleum locally but has become a net importer of petroleum products.
Nigeria has three refineries with a combined installed capacity of 445,000 barrels per day, bpd. The Port Harcourt Refining Company, PHRC, has capacity to process 210,000 bpd; Kaduna Refining and Petrochemical Company Limited, KRPC, 110,000 bpd and Warri Refining and Petrochemical Company Limited, WRPC, 125,000 bpd.
Throughout 2017, none of them functioned fully. WRPC recorded 42.6 percent and 41.7 per- cent capacity utilisation between January and December. KRPC had the lowest performance of just 34.4 per cent.
As at September 28, 2020, WRPC, had been shut for two years while the others were closed last April. Kyari said they were shut down in order to develop a model to upgrade and secure enough funding for them. The Port Harcourt Refineries is expected to resume operations in 2022.
Kyari is dumbfounded about why an oil-producing country like Nigeria became a net importer of petroleum products. According to him, “This reason is very simple, we couldn’t fix our refineries and that’s very difficult to explain. Why can’t we fix our refineries? We started this very many years ago. For 20 years, all attempts to fix the refineries failed for very simple reasons, there is a strategy problem.
“First, we never knew what we wanted to do with it; we didn’t get the right advisory, the right strategy to go through this. And we started a process four years ago to get oil traders to come and help us fix this, that never worked.
“We also have the strategy to make sure that we get in the original refinery builders to help us do it. That is not their job. It’s just like you are buy- ing a car and saying that Toyota must come and repair it for you; that doesn’t work anywhere.”
This paper learnt that before the current shutdown, the refineries had suffered frequent shutdowns in the past for reasons including lack of maintenance, protests by support staff over management’s refusal to regularise their employment, power issues, inadequate crude supply, and militant attacks on allied installations.
By mid-2017, sources said the refineries churned out 5,031MT. Officials would not explain why but oil marketers blamed it on aging equipment, poor management and lack of maintenance.
In September 2019, Kyari said WRPC was scheduled for full rehabilitation beginning in January 2020 and ending in 2022. Later, Timipre Sylva, minister of state for petroleum, said the actual commencement date had been moved to June 2020.
Last year, NNPC spent N218billion on maintaining the WRPC and the two others but recorded total turnover of N69billion.
The situation has continued to deteriorate. And Nigeria continues to spend a huge sum on maintenance when the three refineries did not process any barrel. In a report, NNPC spent N10.23 billion on maintenance last June.
The report said: “In June 2020, the corporation’s three refineries processed no crude and combined yield efficiency is 0.00% owing largely to on-going rehabilitation works at the refineries.
“There was no associated crude plus freight cost for the three refineries since there was no production but operational expenses amounted to ₦10.27 billion. This resulted in an operating deficit of ₦10.23 billion by the refineries.”
WRPC’s share of the loss was N2.68billion; PHRC, N2.76billion and KRPC, N4.79billion.
But this paled into insignificance when compared to the overall N1.649trillion loss by the refineries between 2014 and 2018. A break- down showed loss of N208.6billion in 2014; N252.8billion, 2015; N290.6billion, 2016; N412billion, 2017 and N475billion in 2018.
NNPC reported that KRPC spent N24billion in direct costs but earned no revenue and ultimately recorded N64billion operating loss in 2018. The previous year, it posted N2billion income and N112billion loss.
WRPC, on the other hand, earned N1.98billion; incurred N12.74billion as cost of sales and posted a gross loss of N10.57billion and an operating loss of N45.39billion. PHRC recorded total revenue of N1.45 billion, spent a total of N24.04billion and posted a gross loss of N22.58 billion.
The moribund state of the nation’s refineries has forced many Nigerians to call for their sale. But the experts and managers of the oil corporation do not think so.
Kyari simply called for change in management of the refineries. He said the refineries would no longer be managed by the NNPC after rehabilitation but that a company would be engaged on Operations and Maintenance (O&M) basis.
He said he has a strong determination and commitment to ensure that the nation’s refineries deliver real-time value and address the petroleum needs of Nigerians. He said: “We will stick to time; we will deliver this project by 2022.
“We will do everything possible between Oc- tober 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.”
But critics are not convinced. Two years earlier, Ibe Kachikwu, former minister of state for petroleum, had mouthed the same thing. In an interview with BBC, he vowed to resign if Nigeria continued to import fuel by 2019. In the interview, which lasted 23 minutes, the minister promised to deliver on the completion of the refineries.
When asked when the country was going to be self-sufficient in terms of refining petroleum, he declared: “2019 is the target time… I target 2019. If I don’t achieve it, I will walk (resign)…I put the date and I will achieve it.” One year after, Nigeria does not refine a barrel.
Congress, TUC, told ThisNigeria that no labour leader will accept that the refineries should be sold. “We will not accept selling the refineries because as our national resources, they must be owned by the government and controlled by the people. So, it was totally wrong for former President Olusegun Obasanjo to have sold the refineries. I give kudos to President Umaru Yar`Adua for reversing the sale,” he said (see box).
On the billions of naira spent to maintain the refineries, Olaleye said he has found that there are some costs, whether the refineries are working or not, that the government has to bear. These include the costs for the personnel working at the Nigerian National Petroleum Corporation, NNPC; the engineering personnel attached to the refineries and others to keep the place on.
“As a labour leader, my first responsibility is to protect workers. Whether the refineries are working or not our members are receiving their salaries. So, what we have to do is to go to an advanced level by analysing what is the personnel cost compared to other maintenance costs,” he told this paper.
Indeed, the NNPC report showed that employees’ salaries gulped N23billion in 2018 and N27billion in the previous year. The payments include salaries and wages, death benefit, administrative expenses, among others.
Olaleye revealed that at the negotiation with the government following which the planned strike for last Monday, September 28 was suspended for two weeks, a committee was set up to look into the refinery issue.
Peter Esele, former TUC president and who also served as president of Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, said Nigeria’s refineries can work if round pegs are put in round holes in the rehabilitation process.
