Refinery: Why Calls For Sale Are Unpatriotic

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The Federal Government, through the Federal Executive Council (FEC) on March 17, 2021 approved the sum of $1.5billion for the rehabilitation of the Port Harcourt refinery.

The approval for its rehabilitation came following the submission of the Minister of State for Petroleum Resources, Chief Timipre Sylva to the council.

Sylva said, the rehabilitation which was awarded to Tecnimont SPA, an Italian company would be done in three phases of 18, 24 and 44 months.

Nigeria’s three refineries in Warri, Kaduna and Port Harcourt with a combined capacity of 445,000b/d were established to ensure energy security for the country.

Unfortunately, these refineries have suffered years of neglect due to delays in conducting mandatory Turn Around Maintenance (TAM) that has resulted in performance decline over the past two decades and they have all been shut down to allow proper diagnosis and rehabilitation.

Of these refineries, the most strategic is the Port-Harcourt Refining Company (PHRC) with a capacity of 210,000 b/d and can produce 10.4 million liters of Premium Motor Spirit (PMS) per day.

The Port Harcourt Refining Company Limited is made up of two refineries. The old refinery commissioned in 1965 with current nameplate capacity of 60,000 barrels per stream day (bpsd) and the new refinery commissioned in 1989 with an installed capacity of 150,000 bpsd. This brings the combined crude processing capacity of the Port Harcourt Refinery to 210,000 bpsd.

The refinery produces the following products: – Liquefied Petroleum Gas (LPG), Premium Motor Spirit (PMS), Kerosene (aviation and domestic), Automotive Gas Oil (AGO – diesel), Low Pour Fuel Oil (LPFO) and High Pour Fuel Oil (HPFO). It also produces UNLEADED gasoline that meets international standard.

The refinery is self-sufficient in power and utilities generated from the Power Plant & Utilities. There are four (4) turbo-generators each with a capacity of 14MW of electricity per hour and four (4) Boilers, capable of generating 120 tons of steam per hour each. The section also generates cooling/service water, plant/instrument air and nitrogen.

Today, the refinery is nothing but a shadow of itself. The performance of the refinery was lowered by Corruption within and outside the system, political and ethnic sentiments while considering appointments, and lack of dedication and commitment on the part of those entrusted with the maintenance and survival of the refinery.

For instance, the routine Turn-Around Maintenance (TAM) which should normally be executed every two years was last carried out on the Port Harcourt Refinery 21 years ago.

Apparently worried by the abysmal performance of the refinery, the federal government recently approved the $1.5billion for it to be rehabilitated. African Export-Import Bank (Afreximbank), as a reliable lender, has agreed to raise $1billion, while the Nigerian National Petroleum Corporation (NNPC) and the federal government raise the balance towards the rehabilitation project.

The rehabilitation, unlike TAM, will involve comprehensive repairs of the plant with significant replacement of critical equipment to ensure the plant integrity is maintained for a minimum of ten years.

Unfortunately, even when NNPC assured that the refinery rehabilitation was a viable endeavour, some personalities like Former Vice President Atiku Abubakar, Gov Nyesom Wike, Activist Aisha Yesufu, Senator Dino Melaye, and Former Gov Peter Obi among others want an outright sale of the refinery.

First, they said, while spending so much to repair an old refinery when it could be easily sold off. But why should a strategic national asset like refinery be sold off just like that?

Again, they argued, although blindly, that the $1.5billion approved for the rehabilitation of the refinery was enough to build a brand-new refinery. A position that the Group Managing Director (GMD) of NNPC, Mallam Mele Kyari has since dismissed, stressing that a new refinery would cost the nation between $7billion and $12billion and that such funds were not available now.

A cursory look at brand new refiner ies built across the world will reveal the following:

US$10bn was budgeted for building Aramco Oil Refinery (250,000-300,000 bpd) in Pakistan. US$12bn was budgeted for building Abrue Lima Project (230,000) in Brazil.

Again, US$27bn was budgeted for building Pengerang Refinery and Petrochemical Integrated Development, RAPID (300,000 b/d + 3 mtpa) naptha steam cracker) in Indonesia, and closer home, US$19bn was budgeted for building Dangote Refinery (650,000bpd) in Nigeria.

Frankly speaking, one is not surprised by these interests. They don’t mean well for the country. We were aware of interests from some foreign countries in the past, and they will stop at nothing to acquire this national asset in order to further impoverish Nigerians.

It should be noted that despite the abundance of hydrocarbon resources, Nigeria is, sadly, the only oil and gas producer in the world that does not refine petroleum products. Instead, the country relies heavily on importation for most of its PMS needs locally. This is not a good record to be proud of.

The pundits also came up with a shallow argument that it was better to sell off these refineries since they can no longer meet up the nation’s refining needs. Which country sells off its strategic national assets, such as the refineries, to the highest bidder? Who sells off their refinery when even countries who don’t produce a drop of hydrocarbon still go ahead and build refineries?

There are quite a number of benefits in bringing the nation’s refineries back on stream. From satisfying local energy demand, growing the nation’s GDP, to strengthening the Naira by reducing the demand for Forex to creating thousands of jobs across the value chain (crude supply, operating and maintaining the refinery, product supply etc) including several third-party contractors that will supply outsourced services or goods, the advantages are huge.

The refined products also serve as feedstock for small scale local manufacturing. The most significant and visible benefit is energy security for the country. Imagine if COVID-19 lockdown became global and Nigeria couldn’t import, it would have been a disaster as there was no capacity to refine crude in-country and as such, there would have been no products at all. That will be a true definition of disaster!

Having learnt from the experiences of previous models, NNPC is now adopting the Operate & Maintain (O&M) Model as a strategy in the execution of the rehabilitation project, which is also one of the key lender requirements.

Unlike what is obtained in the past, the current refineries rehabilitation project is different for the following reasons:

It consists of a governance structure that includes key independent external stakeholders: Ministry of Finance, NEITI, ICRC, PENGASSAN and NUPENG. 

Unlike the regular TAM, this rehabilitation will involve comprehensive repairs of the plant with significant replacement of critical equipment to ensure that the plant’s integrity is maintained for a minimum of ten years.

It is funded through part-loan and part-government, with the financiers actively monitoring the execution of the project.

KBR and NETCO are acting as NNPC Engineers who will be supervising the EPC contract to ensure that the project is delivered on schedule, within budget and at the right quality.

In all, it is elating to see that there is finally a move on the part of government of President Muhammadu Buhari to rehabilitate the Port Harcourt refinery and restore all the numerous advantages that operating the refinery will bring to the Country.

Every well-meaning Nigerian, who wants Job creation, reduced tension and agitation in the Niger Delta would support the laudable effort of government to rehabilitate the refinery for the overall interest of the country.   

 

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