BusinessDay

From legal and illegal refineries, Nigeria’s economy takes a beating

Nigeria is burning cash to rehabilitate its four refineries that currently do not produce enough petrol to run their facilities as it battles to rein thieves breaking pipelines to siphon fuel for their illegally refineries, leaving the economy bleeding from both ends, BusinessDay analysis shows.

Non-profit Socio-Economic Rights and Accountability Project (SERAP) recently said it was suing the Nigerian government for failing to probe over N1.48 trillion reportedly spent maintaining the country’s four refineries between 2015 and 2020.

SERAP contends that the money may have been stolen, mismanaged, or diverted into private pockets.

The Nigerian Upstream Regulatory Commission (NUPRC), the upstream petroleum and gas regulator, said the country was losing an estimated N995.2 billion ($3.27 billion) every year to the activities of oil thieves breaking open pipelines to steal crude.

These activities, according to the Nigerian Natural Resources Charter, are estimated to account for over 200,000 barrels per day (bpd), or 10 percent of Nigeria’s daily oil production.

The market for Nigerian stolen crude has morphed into industrial scale operation with reports indicating in some terminals, over 90 percent of the crude sent through the pipeline is stolen before it gets to the terminal.

The large numbers of casualties resulting from illegal refining operations speaks to a large-scale operation. In 2021, the Nigerian National Petroleum Corporation (NNPC) disclosed that over 45,347 people who were involved in oil vandalism and related acts had lost their lives from 2001 to the first half of 2019.

To hold government officials to account, SERAP is urging the court to compel them to provide details on how N1.48 trillion was spent in five years fixing refineries that pump air.

Read also: NNPC to be fully privatised in one or two months – Kyari

The suit filed on behalf of SERAP by its lawyers Kolawole Oluwadare and Adelanke Aremo stated that Nigeria has made legally binding commitments under the UN Convention against Corruption to ensure accountability in the management of public resources which ought to be fully upheld and respected.

In the suit number FHC/L/CS/806/2022 filled last week at the Federal High Court, Lagos, SERAP is seeking “an order of mandamus to direct and compel President Buhari to investigate the spending on Nigeria’s refineries, and alleged mismanagement of public funds budgeted for refinery maintenance since 1999”

SERAP is also seeking “an order of mandamus to compel President Buhari to ensure the prosecution of anyone suspected to be responsible for the importation and distribution of dirty fuel into Nigeria, and to identify and ensure access to justice and effective remedies to affected victims.”

The organisation also noted that it is in the public interest to ensure justice and accountability for alleged corruption and mismanagement in the oil sector, which has resulted in the importation and distribution of dirty fuel and protracted fuel scarcity in the country.

According to the SERAP, the government reportedly spent about N82.82 billion in 2015; N78.95 billion in 2016; N604.127 billion in 2017; N426.66 billion in 2019; N218.18 billion in 2019, and N64.534 billion expenditure recorded from January to June 2020 citing publicly available sources.

Giving further detail on the cost of maintaining the refinery, SERAP noted that N10.23 billion was spent in June 2020 on three refineries that processed zero crudes. Also, in 2021, the government approved $1.5 billion (about N600 billion) to repair the Port Harcourt refinery.

The inefficient refineries have spurred the rise of illegal refining common in Nigeria’s oil-rich Delta region, where impoverished residents tap pipelines to produce fuel to sell for a profit.

Since these makeshift operations are constructed on the fly, they pose serious risks to the operators and the environment. According to an article in The Conversation, distillation units in an illegal refinery are constantly supplied with heat from the burner without temperature and pressure control making it highly flammable.

Discarded bathtubs commonly pass for condensation units and since they are unsuitable, they raise the temperature and pressure and when it exceeds the cooling tube materials’ capacity, the tubes could explode.

The poorly designed condensation units do not ensure complete condensation of the vapour products to liquid and when the operators with scant knowledge of health and safety carry out unsafe practices like smoking or using a cell phone, chances of explosion worsens.

Last month, more than 100 people reportedly died from an explosion at an illegal refinery between Imo and Rivers states. Nnaji Ifeanyi, Principal Relief and Rehabilitation Officer, National Emergency Management Agency (NEMA), said the death toll rose to 110 from 80 as more people succumbed to injuries.

On account of rampant crude theft, among other challenges, International Oil Companies are abandoning onshore and shallow water assets while local operators who are taking over these assets are lamenting.

Nigeria has been unable to meet its production quota under OPEC for the past six months, investors are finding African peers better destinations and even as these Niger Delta communities suffer the environmental impact of illegal refining operations.

According to the NNPC boss, poor prosecution of offenders, ineffective law enforcement, high unemployment in the communities, and poor governance were fuelling the practice.

“Unfortunately, in recent times, the combination of crude oil theft, illegal refining, and pipeline vandalism has become a major threat to Nigeria’s revenue projections,” Kyari said.

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