₦airaland Forum

The expansive premises that house three of the country’s refineries looked like a ghost town. While the Port Harcourt Refinery Company Ltd, which was visited on July 1, 2015, boasted a sprinkling of people engaging in some business and economic activities, the Warri Refinery and Petrochemical Company Ltd was almost empty and devoid of activity on July 3.

Some parts of the refineries had rotted away, symbolic of the decay that had befallen them over the years.
Right from the first entry point, manned by stern-looking soldiers who would not have you into the premises without an identity card, the state of inactivity at Warri refinery was glaring. Since the refinery was not functioning, most businesses in the premises had closed shop.

“This place used to be very busy when the refinery was working,” a worker at the Warri refinery, Mr. Mike Okpo, told our correspondent with a sense of disappointment. “It used to be like a marketplace. You would see a lot of trucks coming from Niger Cat to load products. Small businesses were also going very well. But nothing is happening now.”

The very lively state of the premises then must have lured a number of banks such as UBA, Fidelity, Diamond, First Bank, Zenith and Ecobank there. But the banks too took a beating from the lull in activity, as marketers no longer patronised them as before.

At the Port Harcourt refinery, the business of some independent marketers had been crippled by the erratic operation of the refinery over the past few years.

Last year, each of the Kaduna, Port Harcourt and Warri refineries operated at less than 20 per cent of their installed capacity, according to data obtained from the Nigerian National Petroleum Corporation.

Port Harcourt refinery had the lowest average capacity utilisation in 2014 at 12 per cent, with zero capacity utilisation in January, March, July, October and November. In 2013, it was a mere 6.63 per cent.

Kaduna refinery had an average capacity utilisation of 12.87 per cent last year, with no production in June, September, October, November and just 4.19 per cent in December. It recorded 29.22 per cent capacity utilisation in 2013.

At the Warri refinery, there was no processing of crude in January, September, November and December last year, making its capacity utilisation to fall to 19.32 per cent from 35.22 per cent in 2013. Only 1.42 per cent of the refinery’s capacity was utilised in October 2014.

This year, the refineries did not process any crude oil, condensate or slop from February to June. In January, Kaduna and Warri refineries recorded capacity utilisation of 8.12 per cent and 33.04 per cent, respectively, while that of the Port Harcourt refinery was zero, according to the NNPC.

The refining complex at Port Harcourt is comprised of two refineries. The Old Port Harcourt Refinery has a processing capacity of 60,000 barrels per stream day, while the New Port Harcourt Refinery has a capacity of 150,000 bpd. The company produces Liquefied Petroleum Gas (cooking gas), Premium Motor Spirit (petrol), dual purpose kerosene, Automotive Gas Oil (diesel) and fuel oils.

It was gathered that the old refinery in Port Harcourt had not been operational since seven years ago, with many of its parts corroded by the chemical left in the refinery after it was abruptly shut down.

The refinery in Warri, which was built in 1978 to handle 125,000 bpd, is a complex refinery with an associated, but now moribund, petrochemical plant designed to produce polypropylene and carbon black.

The Kaduna refinery, which was inaugurated in 1980, can process 110,000 bpd supplied by a 600-km pipeline from the Delta and is designed to handle imported heavy crudes. The plant produces fuels, lubes and linear alkyl benzene.

In the beginning

Shell and BP in 1965 established the first refinery in Nigeria, in keeping with one of the conditions of Oil Mining Lease granted to Shell-BP at that time, which mandated them to establish a refinery on the attainment of oil production capacity of 500,000 barrels per day.

The two companies incorporated a company named Nigerian Petroleum Refining Company which was owned on a 50/50 basis. The refinery had an output capacity of 38,000 bpd.

According to ex-top NNPC executives, Messrs Mike Olorunfemi, Akin Adetunji and Ade Olaiya, following the indigenisation exercise of the early seventies, the Federal Government acquired 60 per cent of the NPRC. The remaining 40 per cent equity of the refinery was acquired by the government in 1978 and vested in the Nigerian National Petroleum Corporation.

By 1973, post-war reconstruction and increasing demand prompted the expansion of the capacity of the Port Harcourt refinery to 60,000 bpd. The Federal Government also approved the establishment of two refineries, with one to be sited in the hinterland and the second in the coastal area of the country. Kaduna and Warri were chosen.

By 1974, Nigeria required additional refining capacity in excess of 200,000 bpd. The government therefore approved the debottlenecking of Warri refinery to increase its capacity from 100,000 bpd to 125,000 bpd and the fuel plant of the Kaduna refinery from 50,000 bpd to 60,000 bpd.

The establishment of a new 150,000bpd Port Harcourt refinery was also approved, with designed facilities to export products in excess of domestic needs.

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Source :-http://punchng.com/2015/11/2934

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From refined products exporter to importer

The Chief Executive Officer, Gacmork Nigeria Limited, Mr. Alex Neyin, said it was sad that Nigeria, which used to refine and sell to other countries, now relies heavily on importation.

Neyin said the current rot can be traced to corruption.

“It was caused by corruption and it started with the government. The government people in the NNPC destroyed the industry. The importation and subsidy scheme is a racket masterminded by the NNPC and the so-called importers,” he said.

Neyin, a former Chevron executive, said, “Every refinery is supposed to have a maintenance schedule, but those schedules were not carried out because people wanted to import.

“So, they let the refineries run down to the point that they cannot produce to meet local demand. We therefore continue to import, and when they import, that is another business for some people.

“Refining is a business that is lucrative if it is properly maintained,” he said, adding that companies such as Shell and Chevron have refineries in other countries, but have decided to stay out of it in Nigeria.

According to Olorunfemi and other analysts, former President Olusegun Obasanjo, who governed from 1999 to 2006, at the onset of his administration, specifically charged the NNPC to speedily attend to the ailing refineries and bring them into full production capacity in the shortest possible time.

Obasanjo had offered to provide the NNPC management with all the resources it would need for this purpose. He further directed that the performance of the NNPC management would be measured by the performance level of these refineries.

“A laudable idea indeed, but a few months into the administration, NNPC management sold a new concept to the president, that given his election promise to bring an end to the queues at the filling stations within a short period of time, the quickest way to achieve this was by flooding the market with imported products while the refineries were being repaired,” Olorunfemi said.

According to the experts, the blue print for this new approach was to expand the products storage and reception facilities of Atlas Cove Depot, which was originally constructed to serve as a modest intervention storage facility for specific products that were briefly in short supply, most especially aviation fuel.

“A consequence of the idea of scaling it up to a huge bulk storage depot was that most of the resources earmarked for the rehabilitation of the refineries were diverted to the depot project.

“Although at the completion of this project and with the additional provision of resources to finance importation, as expected, the queues were wiped out, but the refineries continued to perform dismally since the president’s focus had been redirected. The final outcome would be the queues which have become a permanent feature in the country,” they said.

Before the end of his administration, Obasanjo sold the Port Harcourt and Kaduna refineries, but the sale was later revoked by his successor, late President Umaru Yar’Adua.

The decision by Yar’Adua came after negotiations with the Nigerian Labour Congress and the Trade Union Congress, which had served a two-week ultimatum on the day he assumed office.



********* go on to final report **********

********** read on************
Huge losses to decades of fuel importation

Analysts say the country’s increasing reliance on importation, over the years, for its fuel needs has led to massive capital flight, loss of job creation opportunities and reduction in the contribution of the oil and gas industry to economic growth and development.

The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said, “The key thing is that the funds we made during the years of $100 oil, we spent so much of it importing fuel.”

He said the refineries were at an average 20 per cent capacity and imports also rose considerably, with PMS consumption soaring from 13.5 million litres a day in 2012 to 43 million litres in 2013.

The country earned $424bn oil export revenues from 2010 to 2014, the Energy Information Administration, the statistical arm of the United States’ Department of Energy, said in the report ‘OPEC Revenues Fact Sheet.’

Oni said, “We spent a lot of money that should have gone into repairing the refineries on subsidies. We lost an opportunity to domesticate our downstream segment and depend on local refined products sold entirely in naira. These could have reduced the pressures we are currently feeling on the naira.

“I think corruption is a reality in every sphere, from the truck driver having to pay extra to lift fuel from the refineries to the frequency of fire incidences due to installation of poor safety controls and other reasons.”

A policy analyst on governance, Mr. Ademola Oshodi, said the country had lost decades of potential development due to the enormous cost of imported refined fuel products, diverted crude meant for processing and continuous and massive repair expenditure on derelict structures.

Similarly, the President, Nigerian Association for Energy Economics, Prof. Wumi Iledare, stated that it was greed, elite capture and poverty of the mind that brought the refineries to the state of disrepair.

“We have lost the technological transfer of knowledge; we have lost significant sector contribution of the industry to the Gross Domestic Product. We lost significant contribution of the industry to employment generation. We have lost man-hours looking for petrol during periods of scarcity,” he stated.

Highlighting the corruption in the petroleum products sub-sector, Iledare, said, “Do you know how much money has been claimed for petroleum products that were not delivered?

“Think about the capital flight for not having enough refining capacity and for importing petroleum products.”

The NNPC had on August 26, 2015 announced the cancellation of the Offshore Processing Agreement entered into with three companies in January 2015, describing it as “skewed in favour of the companies such that the value of product delivered is significantly lower than the equivalent crude oil allocated for the programme.”

Iledare said, “It doesn’t make economic sense, or even political sense, to continue to import petroleum products into the country the way we are doing now.

“When you are spending a quarter of your budget to subsidise petroleum products, which consumers don’t benefit from, the economy will not grow.”

A marketer, who spoke on condition of anonymity at the Warri refinery in July, gave an insight into what the shutdown of the refinery had caused them and other businesses.

“For more than eight months now, the refinery has not come up. It has adversely affected us. We can’t even pay our children’s school fees. If you want to look for house to rent now, the landlord would ask you about where you work. If you say refinery, he won’t give you the house. That is how it has affected lives here.”

No turnaround maintenance for 15 years

For 15 years, the country’s two refineries located in Port Harcourt, with combined capacity of 210,000 bpd, were left to rot by successive governments, until a few months ago when phased rehabilitation commenced at the facility.

Our correspondent gathered that the last time turnaround maintenance was carried out on the refineries was in 2000. The latest turnaround maintenance of the Warri and Kaduna refineries was in 2008, after which they ran at roughly 25 per cent of their capacity, according to the NNPC.

Turnaround maintenance, which is supposed to be done every two years, was said to have been stalled by successive governments who either preferred to continue with crude oil swaps and offshore processing arrangement or to sell off the refineries to favour mostly their cronies.

The crude oil swap meant that the NNPC allocated a certain quantity of its domestic crude oil to oil traders, who in turn sold the crude oil in the international market and imported petroleum products, on behalf of the NNPC for domestic consumption.

For an OPA, the contract holder — either a refiner or trading company— is supposed to lift a certain amount of crude, refine it abroad, and deliver the resulting products back to the NNPC.

The past few years saw an increase in crude swaps and OPAs, which limited the volume of crude made available for the country’s refineries to process.

It was gathered that in 2012, President Goodluck Jonathan’s administration had kicked off the procurement of materials for the turnaround maintenance of the refineries. But even when most of the materials were brought into the country, they were not made available to the refineries.

“The reality is that for over 10-15 years, no serious maintenance has been done on the plants. If you ride a car for 10 years and you don’t maintain it, nobody needs to tell you what will happen to it,” the Group Managing Director, NNPC, Dr. Ibe Kachikwu, said recently while commenting on why the Warri refinery was shut down in late August, a couple of weeks after it resumed operation.

Cry no more, Baba body language will fix it

Botched attempt to sell the refineries

In November 2013, the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had, in an interview with Bloomberg TV Africa in London, said the four refineries would be sold in 2014.

But the announcement was greeted by stiff opposition from labour unions, especially the Nigeria Union of Petroleum and Natural Gas Workers.

NUPENG argued that the refineries “should remain in the control of government for security and strategic reasons,” threatening to embark on a nationwide strike if the refineries were privatised.

The government, apparently in response to the proposed strike, in January, denied that it planned to sell the refineries.

The Chairman, Trade Union Congress, Rivers State Chapter, Mr. Chika Onuegbu, told our correspondent that at the time the government was planning to sell the refineries, they discovered that 80 per cent of the long-lead raw materials for the turnaround maintenance of the refineries were already on ground.

Onuegbu said, “In the case of Port Harcourt, they were in Onne. And so we said, what is government up to? How can you get 80 per cent of TAM items and then you refuse to do the turnaround maintenance, but instead want to sell the refineries? We requested that government should use those materials to do the turnaround maintenance.”

In 2012, the NNPC had earmarked N251bn ($1.6bn) for a new round of turnaround maintenance at the four refineries, to be conducted by the original contractors and completed by late 2014.

Neyin, who is the current chairman of Board of Trustees, Society of Petroleum Engineers, Nigeria Council, lamented that the President Jonathan administration did not fix the refineries.

He said, “He was there for six years. Let’s assume everything had broken down, what does it take to fix refineries? Do you know how much money the NNPC squandered? That money would have been enough to fix the refineries.

“Even people who were given licences to build refineries were allowed to lift crude through NNPC’s corrupt mechanism when they did not build refineries. This is high-level corruption.”

Rehabilitation to the rescue

It was in May this year, just about 15 days to the end of Jonathan’s administration after losing the election, that rehabilitation work commenced at the Port Harcourt refinery.

The rehabilitation was carried out by four indigenous contractors and the technical crew of the PHRC, as the original refinery builders were said to have declined coming for the turnaround maintenance due to security and health concerns.

The 150, 000 bpsd refinery resumed production of refined petroleum products in late July.

“Because of the long years of neglect, the degeneration had become enormous; that was what we discovered. In most of the places we opened up, the scope of the job was more than we thought. But all the same, we are up to the challenge,” the Chairman of Petroleum and Natural Gas Senior Staff Association of Nigeria, PHRC branch, Mr. Fidelis Ighodaye, said.

The Managing Director, PHRC, Mr. Bafred Enjugu, who spoke with our correspondent in Port Harcourt, also said, “Turnaround maintenance happens every two years or 26 months. Now that hasn’t happened and because it has not happened, our facility was subject to a state of deterioration that is normally not tolerable in the industry worldwide.

“The components have reached the point where they have to be replaced as opposed to what we call the turnaround maintenance, which is basically servicing. We have gone beyond servicing to replacement because we have stayed for so long without doing it.

“The last time we had routine intervention on this facility was in the year 2000. That’s quite a long while.”

Enjugu said they were also working on the old refinery and planned to complete the work on it by the end of the year or beginning of first quarter 2016.

“There is a little caveat to that. Because it is such an old plant, we are having difficulties getting some of the components. We can’t find some of the old manufacturing companies again. You have to re-engineer with new manufacturers to fill that gap.

“Also, when you are going to commission it, you will need a lot of crude supply which the existing marine vessel arrangement cannot handle just yet. We will need to get back to the pipelines,” he added.

Noting that if the country’s refineries could produce 60 per cent of the domestic fuel needs, Enjugu said, “In terms of value, that is a lot of money on a daily basis turning the economy around. The economic activities in the country should actually skyrocket.”

At the Port Harcourt refinery, he said they would “cautiously start at 60 per cent which is the barest minimum” and then increase it to about 80 per cent.

According to Oni, the country’s refineries post-repairs could produce about 30 per cent of domestic consumption.

“This is probably not the best at this time, considering the weakness of the naira and oil export challenges. We need to be aiming for over 70 per cent capacity,” he stated.

Crude supply, a major challenge

Following the incessant vandalism of pipelines conveying crude to the refineries, the government introduced the use of marine vessels to supply crude to the refineries.

But the supply of crude through the vessels was halted at a point with no reason given by the Jonathan government.

It was gathered that the government was diverting the crude meant for the refineries to oil traders, who were involved in crude oil swap and offshore processing arrangement.

“The biggest problem this refinery has faced in the past is the vandalism of the pipelines for supply of crude,” the Port Harcourt refinery MD said.

“The top management sought the consent of the Federal Government who provided an alternative means, that is, through marine vessels. Now, that has its own limitations.

“First of all, the jetty facility can only take a certain tonnage of vessels. So that limits how much it can bring at any point in time, as opposed to the pipelines which are largely vandalised,” he said.

As of July this year, he said the last supply of crude they received was on December 11, 2014, which was processed that month and in March this year.

On why crude supply was discontinued in December, the PHRC boss couldn’t tell precisely why the refinery did not receive crude, saying, “But we were in a position to receive crude. That much I can tell you.”

Commenting on the abrupt stoppage of crude supply to the Port Harcourt refinery, Onuegbu said, “Why would you have a refinery that is producing and that has made profit and then you stopped supplying crude to it? But you preferred instead to import or do all kinds of oil swap. It means that there is something we don’t understand.”

President Muhammadu Buhari on August 4 announced the appointment of Kachikwu as the new Group Managing Director of the NNPC.

Early September, Kachikwu made an official tour of the nation’s refineries, starting with the Port Harcourt refinery.

At the PHRC on September 2, the GMD noted that the ongoing phased rehabilitation of all the state-owned refineries would be given an accelerated vigour with the aim of reducing petroleum products importation into the country.

The PHRC MD then said the ongoing phased rehabilitation of the company cost a little less than $10m.

The NNPC GMD, while also speaking at the Warri refinery, gave a 90-day ultimatum to the management of the WRPC to commence full production at the facility.

On September 9, Kachikwu was at the Kaduna refinery, where he said, “We must make the Fluid Catalytic Cracking Unit and the fuel section work in the next three months so that Nigerians will continue to enjoy uninterrupted supply of petroleum products

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So sad we had fools as president from 99 to may 29, 2015.







That's the social studies of the matter.

*********** Nigeria must be saved from the grip of saboteurs*****
Should Buhari privatise refineries?

Over the past few years, there has been debate over whether the refineries should be privatised or not.

“Obviously, the refineries should be removed from government ownership but done transparently,” said Oshodi.

He said the current government should encourage more private and foreign investment into the refining business, adding, “This can only be done with the removal of the subsidy or special concession as granted to the Dangote Group at a free trade zone.”

But the PHRC MD disagreed with him. “I will be disappointed. The reason being that I think the right sorts of resources are in place. The workers are very eager. They want to prove themselves, and they have the capacity. There is no doubt in my mind that Nigerians will be able to deliver on this and even beyond. It is a viable business.

“We have made profit in PHRC and I really don’t see why you should give it to a private owner. They can take a cue from Dangote. He wouldn’t go into a business that is not viable. So whoever is interested can go into it. But I am not sure privatising the existing ones is the best way to go,” he said.

Oni, the Ecobank analyst, believes privatisation is good if it is done in a competitive bidding process and good, technically experienced companies are selected.

“Ideally, that would be the best way to go. However, they can also be managed under concessionary terms. I think the ultimate step is to privatise the refineries.

“However, pending that, more transparency is required on the operation of the refineries to better understand their problems, and this could require frequent independent technical audit. The feedstock pipelines that supply the refineries and the evacuation pipelines also need better security,” he said.

The NNPC GMD during an interactive session with newsmen in Lagos stated that any of the refineries that fail to work optimally by the expiration of the 90-day ultimatum would be sold.

Kachikwu was quoted by the News Agency of Nigeria on September 25 as saying, “By the end of December when the 90-day ultimatum will expire, any refinery that does not work optimally will be sold.

“We are losing N2.2tn monthly to refinery inefficiency. As at today, the average refining performance is 30 per cent.”

The TUC chairman, Onuegbu, believes that for privatisation to be effective, it must go alongside other reforms.

“Some of those reforms must ensure that the institutions of governance must be effective to show that the privatisation in itself is not a fraudulent process.”

He said Labour unions believed the NLNG model should be adopted to run the refineries efficiently, stressing the need for enabling environment that will encourage private investors to build refineries.

The way to create the enabling environment is not difficult; it is for government to be first and foremost sincere and committed, Onuegbu said.

Wailers will not see dis one oh

BALLOSKI:
So sad we had fools as president from 99 to may 29, 2015.









That's the social studies of the matter.

More like wicked fat vultures in power ..... Nigerians are in huuuuuuge trouble if we allow ourselves to be continues ruled by the set of wicked individuals directing the affairs of our fatherland. Who are we to blame....but ourselves.

#yawns#


Una well done o

And they said we should keep quite when is conspicuous that they are still the same people. hmm

.

They nearly ruined the country

Realdeals:
They nearly ruined the country

Nearly? The country is in deep shit and people don't seem to realise it.If PMB can turnaround this country within his tenure(s),he is a miracle worker.
What this govt can achieve is stem the tide,refocus the nation on basic tenets of governance and nation building and then see if the entrepreneurial spirit and doggedness of Nigerians can reset her on economic recovery after the govt might have provided to some extent basic infrastructure of power, roads etc.
Nigerians don't realise that even in advanced countries when the basics are provided,loans and credit are a fundamental tool of economic recovery. Where banks are still more of rental outfits in Nigeria and do not provide credit and loans, where wud recovery come from when the govt itself is broke and is battling to do d minimum of providing security, stemming corruption and facing all sorts of distractions from groups and organisations of nuisance value.
My point :this govt has got to tackle rot and revert the tide of almost total ruin wrought by previous govt, particularly the last,which incidentally is the worse in the history of this country, and this may take years, before we start seeing or even envisage economic revival /well-being of citizens.
When pple castigate the govt and agitate that they are not seeing changes as promised, I laugh because it's obvious many don't understand what it means to know that a govt for good 6years,yearly ground this country to a state where other less resilient ones wud have completely gone under and seen daily riots on the streets.
The analogy of where we are now is that of d famed situation that led to d French revolution :people cannot literarilly provide bread on their tables any longer.
This govt needs prayers because there is a lot of serious,daily hardwork and pain ahead.

donodion:
More like wicked fat vultures in power ..... Nigerians are in huuuuuuge trouble if we allow ourselves to be continues ruled by the set of wicked individuals directing the affairs of our fatherland. Who are we to blame....but ourselves.

who are we to blame, blame pdp, obj, gej and madueke

Jesusloveyou:
who are we to blame, blame pdp, obj, gej and madueke

in all sincerity we as s Nigerians should blame ourselves

We elected people into critical positions based on sentiments..; Religion and Tribalism.

Remove these two, allow logical reasoning to prevail and I can assure you Nigeria would be a heaven on earth.

We are just tooooooo damn corrupt.