Facts emerged on Monday that the two companies involved in the construction of Warri and Port Harcourt refineries were at no time involved in the Turn Around Maintenance (TAM) since they were handed over to Nigerian National Petroleum Corporation (NNPC), BusinessDay reliably gathered.
The two companies are: JGC Nigeria, was the original builder of the new Port Harcourt Refinery which was completed in 1989, while Warri refinery was constructed by Snamprogetti which was completed sometime in 1976.
In its documents however, NNPC which denied knowledge about the alleged $20 billion spent on TAM of the refineries in the motion adopted by the House of Representatives, disclosed that total sum of $1.873 billion was spent on construction of the four refineries between 1965 and 1989.
According to the Corporation, based on the estimate submitted by reputable local and international consultants for the planned comprehensive rehabilitation of all the four refineries, between $1.4 billion to $2.2 billion will be spent.
It however stressed that: “the award values are not known yet as negotiations are still ongoing. It is important to mention here that refining investment all over the world involved huge costs.”
While stressing that urgency to rehabilitate the refineries in order to restore domestic refining capacity cannot be overemphasized, the Corporation in the document further observed that Nigeria cannot afford to spend “millions of US dollars to import petroleum products which should instead be invested in-country in protects to address the high levels of unemployment and poverty.
“Published figures show that Nigeria spent N2.58 trillion in 2016 to import petroleum products which is equivalent of about 43% of the federal budget of N6 trillion of the same year.
“Immediate restoration of the refineries would address head-on, the problems identified in the attached House Votes and Proceedings dated 21st November, 2017 to ‘reduce huge capital flight to fuel importation, meet local demands and possible export’ as well as reduce the ‘unacceptable high level of poverty in the country which stands at 69%, mainly due to the unsustainable levels of general and youth unemployment, which stands at 24% and 45% respectively,” Anibor Kragha, NNPC’s chief operating officer, refineries and petrochemical said in the letter seen by BusinessDay.
According to the reports obtained by our Correspondent at the ongoing investigative public hearing on the ‘status of the nations four refineries, the Turn Around Maintenance (TAM) to date and regular modular licensed refineries’, held at the instance of Ad-hoc Committee chaired by Mohammed Datti (APC-Kaduna), the new NNPC management has contacted Saipem which acquired Snamprogetti (builder of Warri refinery) on the rehabilitation of Warri and Kaduna refineries.
The Ad-hoc Committee was also in receipt of a page letter dated 23rd March, 2018 from JGC Nigeria, the original builder of the new Port Harcourt Refinery which was completed in 1989, denied involvement in the TAM conducted so far by Nigerian National Petroleum Corporation (NNPC) since inception.
Hirold Suzuki, JGC Managing Director noted that: “with respect to the current NNPC management efforts to carry out Port Harcourt refinery rehabilitation works, JGC corporation had been invited for initial phase of the engagement related to site survey to evaluate the current conditions of the facilities and come up with the possible solution to rehabilitate the refinery as original builder, but we handed over to Tecnimont S.p.A and they have been now engaging the discussion with NNPC over the current PHR rehabilitation works. This, we recommend asking NNPC management about the current information of PHR rehabilitation works/TAM.”
In the same vein, Saipem Contracting Nigeria Limited, which also participated in the construction of Warri refinery which was completed in 1976, denied involvement in the TAM.
According to the company, “Snamprogetti was involved only in the construction of Warri refinery which was completed sometime in 1976. Therefore, after more than 40 years, it is now impossible for us to retrieve the original contract and the related documents for the construction of the mentioned refinery ad per your request.
“Moreover, please also take into consideration that the considered project was executed by Snamprogetti prior to its acquisition by Saipem in 2006, which compounds our challenge in retrieving the related documents after several years.
“With specific reference to Turn Around Maintenance information, please be informed that we are unable to find in our archive, any records to suggest the involvement of either Snamprogetti or Saipem in any turn Around Maintenance of the Warri refinery or any other refinery in Nigeria in the past.
“The above notwithstanding, please be also informed that we have been contacted and are currently undertaking an evaluation of the Warri and Kaduna refineries and are yet to conclude the exercise. When the exercise is concluded, we will submit our report to the Nigerian National Petroleum Corporation,” Innocent Ogbu, Saipem’s Stakeholder Relations and Analysis Manager said in the two page letter to the Ad-hoc Committee.
In its report, Central Bank of Nigeria (CBN) recommended the introduction of compelling policy that will ensure local refining of at least half of crude oil and natural gas produced in the country.
This, according to Uwatt Uwatt, CBN Director, Research Department, would help to scale down $36.371 billion spent between 2013 and 2017 and reduce importation of refined petroleum products and under recovery.
“Data available from NNPC shows that domestic consumption of PMS rose sharply from 4.5 billion liters in 2013 to 23.5 billion litres in 2014, but fell slightly to 22.9 billion liters in 2016. In contrast, the volume of refined products from the local refineries stayed between 4.5 and 4.9 million metric tons from 2010 to 2013.
“By 2016, it had dropped by circa 50 percent to 2.6 million metric tons. This creates a huge supply gap that is met solely from importation of refined petroleum products. Data from the National Bureau of Statistics indicates that PMS imports alone rose from 15.21 billion litres in 2010 to 19.14 billion litres in 2015, falling slightly to 17.22 billion in 2016, on average.
“Mr Chairman, we are all very aware that financing the importation of these refined petroleum products comes at a huge cost to our economy because of the quantum of the foreign exchange required. To put this more succinctly, the share of oil sector foreign exchange utilization for imports (of which refined petroleum products forms the largest portion) as percentage of total tangible imports has been hovering around 30% for the past five years.
“Data from the CBN shows that from 2013 to 2017, the total foreign exchange utilization for imports amounted to 119.409 billion, while total foreign exchange utilization for imports in the oil sector stood at $36.371 billion or 30.5%. This is particularly huge and has attendant ramifications for monetary and price stability; the external reserves and value of the domestic currency,” the document read.
The apex bank further observed that: “besides the huge forex expenditure on importation of refined petroleum products, subsidy payments have also constituted a huge drain on the nation’s fiscal revenues, and financing the government deficit is a major concern for the monetary authority. For example, between January and December, 2017 alone, the NNPC expended about N144.53 billion on subsidy payments through under-recovery (NNPC monthly report, Dec. 2017). This is despite the 2015 hike in the pump price of petroleum products, which was meant to pave way for complete removal of subsidy.”
Speaking earlier, Mohammed Datti, chairman, Ad-hoc Committee investigating the status of the nations four refineries, the Turn Around Maintenance to date and regular modular licensed refineries’ explained that the Committee was mandated to ascertain the viability of continuing investments of public funds on the nation’s four refineries and allocation of 445,000 crude utilization for same purpose.
The committee during the investigation I’d to determine the current utilization level of Warri, Kaduna and Port Harcourt refineries; carry out a comprehensive investigation on the TAM carried out to date on the refineries and identify the private and corporate individuals that have refused to utilize the licenses (regular and modular), the readiness and status of all current license holders and report back to the House for further legislative action.
While expressing displeasure over the plot by some individuals to frustrate the investigative hearing, Datti issued one week ultimatum to the all the stakeholders to comply with the directive of the Committee.
“It is also clear to this committee that some individuals are bent on frustrating the outcome of this investigation by way of withholding information and in some cases providing scanty and misleading information and data after forwarding to them a prepared template to respond to the committee accordingly.
“At this stage, I have to state that the powers of this committee to conduct this type of investigation are derived from sections 88 and 89 of the 1999 constitution of the federal republic of Nigeria (as amended) and the House Rules. The committee will therefore invoke its full powers to avert any attempt to undermine the House in this noble cause,” Datti stated.
