The Crude for Petroleum Products
Exchange Agreements, better known
as crude oil swaps, and Offshore
Processing Agreements (OPAs),
entered into by the Nigerian National
Petroleum Corporation (NNPC) and
oil traders between 2011 and 2014,
are to blame for the abysmally low
output from NNPC’s refineries and
the high importation of petroleum
products into the country, THISDAY
has learnt.
Extensive interviews with officials of
NNPC and industry operators
revealed that contrary to the
perception that has been created for
some time that the nation’s four
refineries were operating at
suboptimal capacity, thus
necessitating the massive
importation of petroleum products,
certain elements within the system,
with endorsement of the former
Minister of Petroleum Resources,
Mrs. Diezani Alison-Madueke,
ensured that the refineries were
starved of crude oil.
Last Thursday, NNPC’s public affairs
unit announced that its four
refineries would resume operations
next month.
Spokesman of the corporation, Ohi
Alegbe, said the refineries – the
210,000 barrels per day (bpd) Port
Harcourt plant, 110,000 bpd Kaduna
plant and the 125,000 bpd Warri
plant – would commence operations
after a successful overhaul of their
facilities.
He said: “The turn-around-
maintenance has been on (going) for
some time. We did not just want to
make any noise about it. The
refineries will start production as
soon as they have delivery of crude
oil for refining.
“Even when the refineries work at full
capacity, they can only produce
around 19 million litres of petrol per
day.”
With Nigeria consuming 40 million
litres daily, to make up for the
remaining 21 million litres, Nigeria
will still have to rely on importation,
he added.
Expectedly, NNPC’s announcement
aroused interest and questions were
asked as to how come the plants,
which had not functioned almost two
decades, were suddenly ready to be
brought back to life under the
administration of President
Muhammadu Buhari.
Investigations showed that efforts to
repair the refineries started when the
management of the plants, under the
supervision of the former Group
Managing Director (GMD), Mr.
Andrew Yakubu, and a former Group
Executive Director, Refineries and
Petrochemicals (R&P), Mr. Tony
Ogbuigwe, worked surreptitiously to
ensure that the plants were
functional. Ogbuigwe was before his
promotion to GED R&P, the
Managing Director of Port Harcourt
refinery.
THISDAY learnt that after the
nationwide protests over the removal
of fuel subsidy in 2012, Alison-
Madueke had promised to fix the
plants using the original equipment
manufacturers (OEMs) instead of
awarding the contracts for their
repair to journeymen contractors.
However, after protracted
negotiations with the OEMs, NNPC
failed to go ahead with the
rehabilitation due to the exorbitant
fees they had demanded for the
repair of the plants.
With no progress made with the
OEMs, Alison-Madueke, in November
2013 announced that the refineries
would be privatised under the
supervision of the National Council
on Privatisation (NCP).
But the NNPC chapter of the Nigerian
Union of Petroleum and Natural Gas
(NUPENG), whose members
threatened to go on strike if the
refineries were privatised, resisted
her push for the sale of the plants.
Frustrated with the impasse, Yakubu,
using his approval limit as the NNPC
boss, but without the knowledge of
Alison-Madueke, started making $2.5
million monthly to the management
of the three refineries and
encouraged them to revamp the
plants with local and external
engineers.
Under this arrangement, the
refineries were fixed about a year
ago and ready to churn out
petroleum products, which would
have slashed the volume of imported
fuel by more than 50 per cent and
significantly reduced pressure on the
country’s foreign reserves.
In addition, the construction of a
power plant for the Port Harcourt
refinery was concluded at the
beginning of the year to enhance its
ability to operate efficiently.
However, instead of ensuring that
crude oil was made available to the
refineries for domestic consumption,
Alison-Madueke, in conjunction with
the Pipelines and Products Marketing
Company (PPMC), increased the
crude oil swaps and OPAs from some
270,000 bpd to 445,000 bpd, thus
starving the refineries of crude oil.
The swaps and OPAs were awarded
to Aiteo, Ontario Oil & Gas Limited,
Sahara Energy, Taleveras Petroleum
Trading BV and Swiss firm, Trafigura,
among other oil traders.
When contacted on the issue, an aide
of the former minister claimed that
the reason crude oil was not made
available to the plants was because of
frequent crude oil theft and
vandalism of the pipelines, resulting
in losses of up to 30 per cent.
“Also, when the crude oil got to the
refineries, the Fluid Catalytic Cracking
(FCC) units were not working, so we
were getting mainly base oils such as
naphtha, low pour fuel oil (LPFO),
kerosene and diesel.
“Meanwhile, petrol, which is PPMC’s
major requirement and accounts for
more than 70 per cent of all
petroleum products consumed in the
country, was not being produced.
“The lack of production of petrol,
which is one of the lightest distillates
from the refining process, also
resulted in another loss of 30 per
cent.
“This in turn impacted on NNPC’s
ability to remit funds to the
Federation Account since monies
from the procurement of crude oil
meant for domestic refining by NNPC
is supposed to go to the federation
for sharing by the three tiers of
government.
“It was based on this that the former
minister called a meeting and
increased the allocation for the
swaps and OPAs such that little or no
crude oil was made available to the
refineries,” the aide explained.
Yet, further investigations by
THISDAY revealed that even though
there were frequent cases of crude
oil theft and vandalism, the crude oil
swaps and OPAs could have been
largely avoided because there is a
subsisting contract to move crude oil
from Chevron’s Escravos oil terminal
to the Warri and Port Harcourt
refineries by marine vessels.
Despite the subsisting contract, the
operator was not allowed to lift
crude oil to the refineries since last
year but continues to be paid by
NNPC.
An oil industry operator, conversant
with the lifting contract by marine
vessels, explained that elements
within the petroleum sector that
preferred the swaps and OPAs
ignored this arrangement because of
the loopholes that allowed traders to
lift crude oil and under-deliver petrol
including the derivatives or base oils
to PPMC.
He explained that the recent probe
by the Department of State Security
(DSS) into the swaps and OPAs had
scared the traders into importing
outstanding cargoes, resulting in the
increased arrival of fuel-laden vessels
at Nigeria’s seaports in recent weeks.
The operator, who preferred not to
be named, confirmed that before the
marine vessel lifting contract was
awarded, NNPC was losing up to 40
per cent of its crude oil to theft and
vandalism of the pipelines.
In order to stop the theft, a contract,
he said, was awarded to an Israeli
company to lift crude oil from
Escravos to the Warri refinery in
February 2011 under a Proof of
Concept Agreement, but it was
unable to meet the terms of the
contract.
“Subsequently, a Nigerian firm,
Ocean Marine Tankers (OMT) Limited
founded by Captain Hosa Okunbor,
Tunde Ayeni and others, took over
the job. At first, OMT started moving
crude oil from the Escravos terminal
to the Warri refinery.
“OMT invested heavily in a very large
crude carrier (VLCC) with the capacity
to lift 2 million barrels, then
transferred the oil to smaller vessels
that moved to the refinery and
offload their content at the plant.
“You would recall when OMT
commissioned MT Abiola and MT
Igbinosa in 2013 in Warri to convey
crude oil to the refinery.
“In spite of this arrangement with
OMT to circumvent oil theft, this was
stopped with the swaps and OPAs,”
he said.
Confirming the development, an
official of OMT said his company had
not been allowed to convey crude oil
with its tankers since last year but
continues to be paid by NNPC.
“When we took over the contract
from the Israeli firm, with the ship-
to-ship transfer mechanism, we
reduced losses to 0.19 per cent as
opposed to the 0.5 per cent
allowable under the contract.
“In fact, the former GMD of NNPC
(Yakubu) was so satisfied with the
arrangement that he classified it as
security contract and extended it to
include the Port Harcourt refinery.
“But since last year, we have stopped
conveying crude oil to Port Harcourt
and Warri due to the swaps and
OPAs,” he said.
When asked how NNPC ensured that
crude oil was not diverted under the
marine lifting contract, the OMT
official said a shipping letter was
issued to his company, permitting it
to obtain a bill of lading to load from
Escravos.
“Like all crude oil lifting contracts,
officials of Chevron, Department of
Petroleum Resources (DPR), NNPC,
the Navy and other security agencies
must verify that we have loaded 2
million barrels to our VLCC.
“Owing to the shallow draft at the
refineries, the VLCC stays offshore
and transfers to the smaller vessels
which then move to refineries to
offload. Then checks are done to
verify that the quantity lifted from
the terminal is the same as the
quantity of crude oil offloaded at the
refineries,” he said.
The OMT official added that at the
end of the month, the refineries also
undertook a reconciliation process to
ascertain that the crude oil delivered
was the same as what was lifted at
the terminals, “because the yield
from the crude oil that is delivered to
the refinery is accountable to PPMC”.
“But like I said, this has stopped since
last year because of the desire to
sustain the swaps and OPAs,” he said.
The company official also alleged that
oil theft and vandalism by criminal
elements that hot-tap the pipelines
have continued unimpeded while
persons who want to disrupt OMT’s
marine vessel lifting contract recently
attacked their vessels.
Further enquiries from NNPC
revealed that its officials are
presently confident that the FCC units
at the refineries have been fixed and
have the capacity to produce petrol
and other products.
One official informed THISDAY that
crude oil accounts for almost 90 per
cent of refining cost, and if the
refineries were allowed to function,
this would significantly reduce the
federal government’s subsidy bill,
because at current crude oil prices of
slightly over $60 per barrel, the
plants could operate at a profit.

Source: Thisday, Sunday, 21 June, 2015

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‎Warri refinery back-up workers petition Buhari over welfare, work condition
WARRI-Back-up workers in Warri Refining and Petrochemical Company have written a petition to President Muhammadu Buhari to intervene ‎in their current work condition stating that management of the company owns them eight months salaries.
In a petition letter to President Buhari signed by Citizen Mike Eromosele,‎the back-up workers said in the course of asking for their salaries and better working condition from the management of WRPC, they are face with harassment and threats as a result of asking adding that lack of union or management to stand for them has worsen their plight.
“As we write you now sir, some of our colleague have been sacked while others are told to forfeit the eight months salaries because NNPC is owing the Federal Government some money.
“The Management of WRPC has introduced what is called slash of salaries and allowance to all Back-up staff without due consultation from or with the back-up to give a consideration on their welfare.
“They also put a cut down (slash) of 25 percent reduction of the backup worker’s stipend without putting into consideration the after effect of it on the well being of the back-up staff.
“For instance, a graduate that is receiving as low as N35,000 as his monthly stipend will be going home with N26,250 as his salary whenever the management decide to pay.
“They claim of not having funds to meet up with our salaries, but we keep seeing the arrivals of new cars for their personal use. We also notice that on daily basis they keep making employment when they cannot pay those of us working here for the past years.
“Because they have engaged themselves in projects that are not profitable making, they constantly carryout capital project with amount of money that are of no benefit to the production process, but which are of personal interest to them, where are they can get their percentages.
“Sir, some of the backup staff in WRPC are graduates with degrees and master in our various fields of learning. Some also are professional skill workers in our technical area of study. Some of us have worked in this organisation for the past six to ten years without knowing our faith in life,” part of the petition reads.
The petition added that the back-up workers were made to‎ pay for pension scheme and National Health Insurance every month from the little stipend given to them alleging that some group of management staff converts this money into their pocket for personal use while living them at the mercy of death.
The petition continues: “It may interest you to know that the working condition is very poor, that we are forced to undertake a given task without the necessary Personal Protective Equipment, (PPE).
“Wehave worked for six years in this company without safety protective equipment and when we ask, we are either sacked or given a query letter for asking the right equipment for the job.
“Sir, we also wish to inform you that some of us are from the host communities, we are faced with daily risk and hazards as a results of the operation of WRPC which the management has in no time given consideration on our health of our children even the once unborn.
“Some of our colleague died on th job as a result of the poor operation system, yet no grants are given to their family members because they see us a third parties.


“We want you sir, to look into these issue with great concern and kind heart so that these salaries owned us will paid and improved upon and allowance be given to us.”