The Value News

Rehabilitation Of Dilapidated Refineries: NNPC Old Song As The Corporation Signs $876 million Deal On OML 65 With SPDC

By Stephen Ubanna

Abba Kolo Kyari, Group Managing Director, GMD, Nigerian National Petroleum Corporation, NNPC, who energy experts described as working round the clock to fix the nation’s dilapidated refineries to operate at optimal capacities, appears to have  sent a signal to the 34 indigenous  and foreign oil traders which won the award for the highly sought after  contracts  to  exchange  crude oil for imported fuel that the deal would be over by 2022. This is because the Corporation has begun moves to rehabilitate the country’s three dysfunctional refineries with a refining Capacity of 445, 000 barrels of crude oil per day which may no  longer give room for fuel importations.

As a prelude to the rehabilitation of the ailing refineries, which had been working in bits and fits over years,  Kachukwu Ibe, a former minister of State, ministry of Petroleum Resources, had revealed last March that  NNPC has already  hired Italy’s Maire Technimont to handle the rehabilitation  of the Port Harcourt Refining and Petrochemical plant at the first instance. The Corporation was said to have awarded  the contract to the Italian firm at the sum of $50 million to carry out  the checks and equipment inspections  for the plant in readiness for the rehabilitation work.

 Recall that Mainkanti Baru, an Engineer, and a former GMD, of NNPC, had earlier  made Nigerians to believe  that the Port Harcourt refinery work would last for six months  starting from the month of  March, 2019, an indication it ought to  have started optimal production  between now and October  inorder to reduce the cost of importation of petroleum  products into the country.

 The assurance by Baru, the former GMD of NNPC, about plans  to re-stream the Port Harcourt plant and other broken down refineries  may have given Ibe, then  minister of State, Petroleum Resources, hope, that  it   would save the country millions of dollar in fuel imports.  The last time, the Port-Harcourt plant was said to have been rehabilitated was about 19 years ago  under former President Olusegun Obasanjo but that was how far he could go until he left office on May 29, 2007.

  The country’s past experience with the Offshore Processing Arrangement, OPA, initiated by then President Goodluck Jonathan Administration   in 2015 to supply petroleum products in the country may have exposed the high level of corruption involved in the Oil SWAP  deal as the country  crude oil was Comercially undervalued. The Nigerian Extractive Industries Transparency Initiative, NETTI, in one of its reports had revealed that the  nation  lost over $723 million or N221.5 billion   through the OPA.    

The Value News findings show that  the Corporation under the former Management led Baru ,  had entered into discussions  with different  consortiums  to rehabilitate its  dilapidated refineries  which it  had agreed to pay the contractors  through  off take  of refined petroleum   products  rather than cash.

Investigation shows that the completion of the  overhaul of the Port Harcourt plant  would be quickly followed with the rehabilitation  of that of Warri Refining and Petrochemical plant while the Kaduna refinery, in the north west geopolitical region would be last to undergo the rehabilitation exercise .

Indeed, many had expected that  Ibe and Baru, the former NNPC boss , who intiated the rehabilitation  exercise would be given the opportunity to see it to the end  but the katsina state born Nigerian born President thinks differently. He has  rejig  his Cabinet  for his second term in office which  had introduced fresh hands including Timipre Silver, a former governor of Bayelsa state, as the  new minister of State, Petroleum Resources while he retains his positions as the senior  minister of the ministry.

 Until, Ibe ,was dropped as a minister of state, in the ministry of Petroleum Resources, he and Baru, the  former GMD, of NNPC, who  retired after 35 years in the service , last July, had  failed  to tell Nigerians,  the state of the Port Harcourt project, let alone , when work would  start on the  Warri or Kaduna refineries.

But barely, two months in office, Kyari, who recently embarked on a facility tour of the Port Harcourt plant, had reassured Nigerians that the refineries , located in Port Harcourt, Warri and Kaduna, would  resume full  production in 2022 which analysts described as NNPC old song. His optimism was said to have been based on the feelers received from the Contractors that that the full rehabilitation of the plants  would commence  on January , 2020.

 Ndu Ughamadu, Group General Manager, Public Affairs Department, PAD, says the ’’strong  determination and Commitment  of the Corporation’s GMD, to restore the nation’s ailing refineries back to life in order to deliver ‘’ real time value  and address the petroleum products needs of Nigerians’’ is unequalled in the Corporation history,  nothing that there was no cause for alarm.

Abba Kolo Kyari: GMD, NNPC

Kyari  was said to have  made it clear to those  cares to listen that ‘’ making the refineries to operate  at optimal capacities  was a Presidential mandate  that  the Corporation  would leave no stone unturned  to actualise’’, stressing that  a ‘’timely delivery  of the public asset  was one of his top priorities as the GMD, of NNPC.

Aware that Nigerians would hold him by his word if he fails to deliver on the project by 2022, he has vowed  to close   out  all the necessary  conditions  that may forestall the delivery of the rehabilitation exercise as planned. The good news was that the Corporation is getting all the necessary financial support  from the  current Administration of Buhari, , the  workforce and the contractors: Technimont and the project consulting Company, ENI/NAOC, which had been very encouraging.

The presentation of La Mattina Carmelo, Technimont project Manager,  on the progress  of work at the Port-Harcourt plant during his visit t the plant speaks volume.  Carmelo had said  that the Inspection  aspect of the project was over 90%  while the final report  and the EPC  proposal has reached 75%.

The technimont project manager  was said to have told the NNPC team led by the GMD at the Port Harcourt refinery that it  would  deliver on the first phase   of the rehabilitation  work  within three weeks from the time of the visit. Daniele Tamburini,  the Project Manager of ENI and NAOC, the Consulting firm,  who could not his feelings, confirmed  that Technimont,  had complied so far,  with the global standard of refinery rehabilitation.

He maintains  that there  no cause to worry  about the PortHarcourt  project as his Company  was ready to receive the full report  of  the scooping   for final assessment  and support  for  the Corporation  to deliver the project  as promised Nigerians,  Technimont, ENI and NAOC, were the original builders of the Port Harcourt refinery.

Perhaps to ensure that the nation’s  refineries would no longer  face the current  technical problem in the future  that would warrant the engagement of original Contractors to revamp the plants, instead of the indigenous Engineers taking over the job,  Kyari has given a matching order   to the indigenous workforce  and other professionals  working in the refineries  to ensure that  they were fully engaged  by the Contractors  to participate actively  during  the rehabilitation  exercise.

This may have informed why  the NNPC GMD advised  the Indigenous Engineers working on the project along side the Technimont Engineers  ,to ensure they participate   actively  participate in the rehabilitation of the refineries meant to facilitate  capacity building  in the nation’s oil  and facilitate  gas Industry  as well as  reduce  cost of hiring foreign Contractors  to rehabilitate the refineries whenever technical problem arises.

‘’This is the only way  the country could enjoy  an uninterrupted  production  curve  that will grow the  oil and gas  sector of the economy’’, he had said. The indigenous Engineers  may have taken it as a challenge as they were said to  be giving the Technimont , ENI and NAOC  Engineers a close marking on the job as they have refused to play role of job boys, giving Nigerians hope that the NNPC workforce may soon take over the responsibility of the repairs or the rehabilitation of the refineries when the need arises , without waiting for the Engineers from Technimont or ENI and NAOC to arrive to fix broken down equipment in the course of production..  This is a cheering  news to Kyari and his Management team.

In a related development, Ughamadu, a General Manager and the Corporation Spokesperson  had said that it  has signed about  $876 million deal with Shell Petroleum Development Company, SPDC, for the funding and alternative financing of  Nigerian Petroleum Development Company,  NPDC, a subsidiary of NNPC, operated OML65.  

An elated Umar jiya, NNPC, Chief Financial officer, who signed for the Corporation , disclosed that  the package entailed a Comprehensive financing solution  that would address the complex issues involved in growing NPDC production over the years. Giving his expertise, he disclosed ‘’ it would help minimize  its cost of capital and maximize its value preservation’’.

He listed the gains of the deal to NPDC,  to include drilling and completion  services of the oil Well, building capacity  and technology transfer, as well as generating employment opportunities for the teeming unemployed Youths in the country.

More importantly,  he said , it would also struck a balance between  risk and reward  which would the investors  a rate  of return  that would be commensurate  with their funding of the brownfield project which, Geologists  said had significant exploration risk.

The project according to sources was expected to ramp up NPDC Production at the OML65   from 900 barrels per day to 60,000 barrels per day  with average  production   over field life  at about  40,000 barrels per day, an indication of more money for the  Company.  

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