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Idle NNPC refineries lose N227.4bn since shutdown

Idle NNPC refineries lose N227.4bn since shutdown

Despite not processing any crude oil since June 2019, the refineries owned by the Federal Government and operated by the Nigerian National Petroleum Company Limited (NNPC) recorded a total loss of N227.4 billion, official data collated by BusinessDay have shown.

The refineries posted a loss of N63.3 billion from September 2020 to August 2021, according to NNPC data.

This, according to data from NNPC monthly reports, represents a 47 percent decrease from the N119.6 billion loss recorded from September 2019 to August 2020.

All the government-owned refineries, located in Warri, Kaduna and Port Harcourt, have been sitting idle since June 2019. They recorded a combined loss of N164.1 billion from June 2019 to August 2020.

“Even if the business is not operating, the corporation will continue to pay the employees’ salaries because they are civil servants with contracts of employment,” Ayodele Oni, partner at Bloomfield Law Practice, told BusinessDay.

“The national oil company still has other financial obligations; if they signed a long-term contract, they will continue to pay under those long-term contracts, regardless of the refineries’ operating capacity,” he added.

Data from the report showed that Port Harcourt Refining and Petrochemical Company, Warri Refining and Petrochemical Company, and Kaduna Refining and Petrochemical Company recorded operating deficits of N26.89 billion, N21.2 billion, and N15.18 billion, respectively in the period under review.

The three refineries processed no crude in the period, and their combined yield efficiency was zero percent, owing largely to ongoing refinery rehabilitation, according to the report.

Read also: How Nigeria’s oil sector walked to a cliff’s edge

“The declining operational performance is attributable to ongoing revamping of the refineries, which is expected to further enhance capacity utilisation once completed,” the NNPC said in its latest report.

Joe Nwakwe, a former chairman of the Society of Petroleum Engineers Nigeria Council, said he gathered that the NNPC had reduced staffing levels at the refineries significantly.

“It is important to recognise that a shut-in plant will still have some costs, staff on ground, and insurance, among others,” he said.

The NNPC said it had been adopting a merchant plant refineries business model

since January 2017, which takes cognisance of the products worth and crude costs.

“When the Petroleum Industry Act starts working in full effect, the NNPC will become a limited liability company, and it will be advisable for the government to privatise the sector. “The government is actually trying to bring the refineries up and running,” Oni said.

The country relies wholly on imports to meet its fuel needs as its refineries have remained in a state of disrepair for many years despite several reported repairs.

BusinessDay reported on March 17 that Nigeria, Africa’s biggest oil producer, saw its petrol import bill hit an all-time high of almost N4 trillion last year, nearly double that of 2020, citing official data.

The amount spent on the importation of Premium Motor Spirit (petrol) in 2021 jumped by 97.01 percent to N3.96 trillion from N2.01 trillion, according to data from the National Bureau of Statistics.

In November 2020, Mele Kyari, group managing director of NNPC, said the refineries were shut down because operations were no longer sustainable.

The Federal Executive Council had in March last year approved the plan by the Ministry of Petroleum Resources to rehabilitate the Port Harcourt Refinery with $1.5bn.

The Federal Executive Council, in August 2021, approved the sum of $1.48 billion for the rehabilitation of both Warri and Kaduna refineries.

Timipre Sylva, minister of state for petroleum resources, said $897,678,800 would be spent to repair Warri refinery while Kaduna refinery will gulp $586,902,256.

“The completion of the rehabilitation of Warri and Kaduna refineries is going to be in three phases. First phase will be completed within 21 months, in 23 months phase two will be completed and in 33 months, the full rehabilitation will be completed,” he had said.

Sylva said in February this year that at the end of this year, all the refineries would be operating at a certain capacity.

“I cannot tell you what capacity it will be operating by the time we leave but they will all be at least partially functional and we expect that since governance is a continuum, the next government will take up from wherever we stop and get it to the finishing line,” he added.