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Energy: Nigeria’s Refineries Mess
By Stephen Ubanna
For much of last year and now, there have been rumours making the rounds that President Muhammadu Buhari, a retired army General has earmarked Nigeria’s three non-performing refineries with a processing capacity of 445,000b/d, crude, located in the oil cities of Port Harcourt and Warri, in south –south Nigeria including the Kaduna refinery in northwest geopolitical region for sale after rehabilitation.. He has reason to do so.
Past and present Administrations had spent billions of the North American Continent country of the United States dollar to carry out regualar Turn Around Maintenance, TAM, of the refineries with nothing to show for it. The refineries have suddenly turned into a mess and a major drain-pipe to the country’s scarce foreign exchange.
Take for instance, the late General Sani Abacha Administration alone was said to have spent $216million to carry out the TAM, of the refineries, which was said to have been handled by President Muhammadu Buhari, a retired army General, in his capacity , as the Chairman, Petroleum Trust Fund, PTF, an agency of government that was very powerful under the Administration.
The Abdulsalami Administration, a retired army General Administration was said to have also spent $92 million to carry out the TAM, of the refineries while in the sixteen uninterrupted years that the Opposition Peoples Democratic Party, ruled the country, it was said to have spent N246 billion to carry out the TAM of the refineries. This is in addition to the $57 million that was said to have been spent by the Late President Umaru Yar’Adua’s Administration which was said to have contracted a Nigerian firm to carry out the TAM of the refineries in 2007.
Mohammed Sanusi Barkindo, an Engineer, and a one-time Managing Director of the behemoth, the Nigerian National Petroleum Corporation, NNPC, had reportedly said that the Corporation spent $200million on the TAM, of the 125b/d Kaduna refinery alone.
The huge amount that had been spent on the three Non-performing refineries, TAM, with nothing to show for it over theyears may have informed why the Corporation at the instance of the Kaduna state born Nigerian President , who incidentally is overseeing the ministry of Petroleum Resources, in 2015, had invited the original builders of the refineries from the Asian country of Japan to carry out the TAM, of the refineries, with hope that they would do a good work but that was how far they could go.
It was reported that Chiyoda Enggineering & Construction Company of Japan,the original builders of the refineries had turned down the offer , but however, recommended the Italian oil service Company, Saipen to do the job.
In spite of the good work that was said to have been done by the Italian firm on the PortHarcourt refinery, it was still working in a piecemeal. The situation was all the same at the Warri and Kaduna refineries, forcing the government to resort to offshore refining of part of its 445,000b/d oil allocation for local refining and engage in full blown importation of Petroleum products.
Aware of the situation of the Nigerian refineries and in its plot to enter into the Nigeria oil sector, theChinese state oil Company had said that they will carry out the TAM , of the refineries built with Japanese technology between $1.4 billion and $1.8billion but the deal may not have been concluded. But the Chinese state oil firm had found its way into the nation’s oil sector owning oil blocs and executing major jobs for NNPC, over the last five years.
Given that the 2023 general elections is just around the corner, may have informed the Nigerian President has thrown his weight to see to the rehabilitation of the country’s three ailing refineries as promised during his 2015 and 2019, general elections, electioneering Campaigns that had won him the Presidency. The Federal Executive Council, FEC, recent approval of $1.5billion for the Rehabilitation of the 150,000 b/d,PortHarcourt Refinery speaks volume.
Already the contractor has been asked to mobilise on site immediately to start work. Given an insider information to the Rehabilitation work, Temipre Sylva, a former governor of oil –rich Bayelsa state and minister of state, Petroleum Resources had said that the first phase of the rehabilitation work of the refineryand will be completed in 18 months which is expected to take the refinery to a 90% of its processing capacity . The second phase of the contract, he had said , will be completed in a two – year time while the final phase of the rehabilitation contract of the refinery will be completed in 44months.
Nyesom Wike, the PDP, governor, of Rivers state is not amused by the government gesture. The governor , who has been a strong critic of the Buhari Administration may have made a mockery of the promise to rehabilitate the PortHarcourt refinery , when he tweeted ‘’I will not rejoice for the approval of $1.5billion for the Rehabilitation of the PortHarcourt refinery’’, noting that ‘’it was not the first time the government had made such promises of rehabilitating the multi-billion dollar refinery , without fulfilling it. He may have dropped a bombshell that ‘’promises of this nature are only pointers that elections are around the corner’’.
Prior to the FEC, approval of the $1.5 billion for the rehabilitation of the Port Harcourt refinery, Mele Kolo Kyari, the Managing Director of NNPC, had hinted that efforts to repair the Port Harcourt refinery is underway after a pre-finance bid of $1 billion, was oversubscribed.
He had sad said that the Corporation is also making efforts towards securing an additional $2billion loan in financing the overhaul of the Warri and Kaduna refineries by June, 2021. The two refineries have a capacity of 125b/d each.
Kyari, the 46 year-old, NNPC, boss may have shocked Nigerians when he said that ‘’the repayment of Finance raised for the rehabilitation of the refineries will be from its profits and fuel cargoes from the refineries and not in oil cargoes, as was the case in the past.
This may have informed why the Corporation had initiated Negotiation for Commercial contract terms with Shell Petroleum Development Corporation, SPDC, and other oil producing Companies in the country to allow for more investment in the sector to flow. It could not be ascertained if a deal on the Commercial terms of oil production had been agreed with oil majors who many believe are no longer in investing in the nation’s oil sector as they have started selling off their oil blocs to other Companies.
Heirs Holding s, founded by Tony Elumelu, a Philanthropist and Group Chairman, United Bank For Africa, a Pan African Bank, had Negotiated a successful deal with SPDC, ENI, an Italian oil firm and Total, described as three oil Majors in the country to take over control of their 45% stake in Oil Mining Lease, OML 17, Onshore Oil field.
SPC, had had sold its 30% of its stake in the OML17, which has a production capacity of 27,000b/d of oil and estimated reserves of 1.2 billion barrels of oil equivalent, at $533million to the Elumelu owned Oil Conglomerate. The deal, The Value News was informed also includes an Oil offtake contract with Shell’s trading arm, and indication that the British Oil giant is gradually pulling out from Nigeria, despite moves by the Nigerian government to Negotiate new Commercial term contract to allow investment flow in the nation’s oil sector.
The Total Group had sold its 10% stake in the lucrative OML17, while ENI, through the Nigerian AGIP Oil Company, NOC,its subsidiary operating Company in Nigeria had completed the transactions with Heirs Holdings to take over control of its five percent shares in the oil bloc. The oil majors may have made their money to pull out from the OML17, after years of exploitation in the oil bloc. The total transactions had, amounted to $1.1 billion, which many consider as a huge profit to the oil majors.
