As uncertainty continues to surround their proposed rehabilitation, Nigeria’s refineries have extended their losses, recording an operating deficit of N133.9 billion from January 2018 to January 2019.
According to data compiled from Nigeria National Petroleum Commission (NNPC) within a thirteen month period, the three refineries incurred a combine operating deficit of N133.9 billion.
A breakdown showed in January 2018, the three refineries incurred an operating deficit of N13.5 billion, while in February and March a total operating deficit of N18 billion and N11.8 Billion was incurred respectively.
However, in April the three refineries recorded an operating surplus of N6.3 billion while in the month May June and July the refineries returned back to deficits of N20 billion, N14.5 billion and N10.4 billion respectively.
In August, September and October the refineries maintained an operating deficit of N10.7billion, N6.9billion and N9.3billion respectively which turned worse in November, December and January 2019 of N9.3 billion, N9.5 billion, N17.3 billion and N8.3 billion.
The operating deficits of the refineries have left stakeholders querying the rationale behind the decision of the state oil corporation to commence first phase of rehabilitation works on 210,000 barrels per day (bpd) Port Harcourt Refinery which would be followed by Warri and Kaduna refineries in line with government’s effort to attain local sufficiency in refined petroleum products.
Stakeholders said none of the four refineries with 445,000 capacity can reach utmost capacity of 90 per cent even if they are revamped or rehabilitated under the current government as they expressed doubt if the government can mobilize enough resources to carry out the necessary rehabilitation works.
Babajide Soyede, a former general manager of Warri Refinery told BusinessDay that selling the refineries is the best option, adding that fundamentally refineries are potentially profitable if they are upgraded and handled professionally.
“The refineries can be upgraded. It is the size of refinery that is most important and unless all the units are upgraded we cannot have 90 per cent optimization from these four refineries,” he said.
He said if they are rehabilitated they could effectively refine 350,000 barrels and anything above this would be fuel oil.
“The problem is not that the refineries are old or obsolete; the oldest refinery in Nigeria is younger than the oldest refinery in Europe, the problem is who is managing them?” Ademola Henry team leader at the Facility for Oil Sector Transformation (FOSTER) asked.
Although the team leader at the Facility for Oil Sector Transformation (FOSTER) admitted that the upcoming Dangote refinery might make it difficult for government refineries in local market however it will make it more attractive for private investors to run if the industry is deregulated.
“If the efficiency ratios of Nigeria refineries are strong why can’t Nigeria supply petrol to Ghana, Togo, Benin or Niger republic?” Henry, team leader at FOSTER asked.
He noted that refineries are not only meant for refining petrol alone but at least eight other petroleum products including diesel which will have a positive multiplier effect on Nigeria economy if the sector is deregulated.
Previous governments have made spirited efforts to revamp the refineries but they failed because of corruption and lack of political will.
It was only former president Olusegun Obasanjo that attempted to revitalize the refineries by selling them to Aliko Dangote, who lead a consortium of investors which had paid $750m for two refineries, as the Federal Government was finding it difficult managing the facilities as at that time however the sale was unfortunately overturned by late president Shehu Musa Yar Adua .
Since that time it has fuel importation all year round with the refineries barely working above 20 per cent.
In spite of promises by successive governments to improve the performance of the refineries and commit significant resources to their rehabilitation, the four refineries continue to operate at zero percent capacity utilization, as data from NNPC 2019 monthly bulletin showed.
The NNPC has four major refineries, two in Port Harcourt, Rivers State, which combine to form the Port Harcourt Refining Company (PHRC) with a combined installed capacity of 210,000 barrels per stream day (bpsd); the Kaduna Refining and Petrochemical Company Limited (KRPC) with an installed capacity of 110,000 bpsd; and the Warri Refining and Petrochemical Company Limited (WRPC) with an installed capacity of 125,000 bpsd. All the refineries have a combined installed capacity of 445,000 barrels per day.
