For the umpteen time, Africa’s biggest oil producer is trying yet again in 2021 to get its refineries working in an attempt to wean itself off imported fuel.
Crude oil accounts for around 95percent of outgoing goods trade each year, yet Africa’s largest economy and the most populous nation is dependent on imported petrol, despite never-ending rehabilitation and turnaround maintenance.
Now in 2021, the state-run energy company is giving it another shot that, if successful, could end the nation’s reliance on fuel imports. However, the country’s recent track record means there’s skepticism about the latest effort.
“I don’t see the refineries coming on board in 2021,” Joe Nwakwue, chairman of the Society of Petroleum Engineers (SPE) told BusinessDay. “The refineries require significant work and most of the agreements to repair them are still on paper, no actual work has started.”
For Luqman Agboola, head of energy and Infrastructure at Sofidam Capital, it will take more than a miracle to get Nigeria state-owned refineries working in 2021 however the private sector offers hopes of domestic refining.
Apart from the state-owned refineries, Africa’s biggest oil-producing country is expecting a combined refining capacity of over 623,000 barrels of oil per day to be completed before the end of 2021.
They include the over 600,000 barrels per day capacity from Dangote Refinery; 10,000 bpd from Niger Delta Petroleum Resources Refinery (NDPR); 7000 bpd from OPAC Refinery; 5,000bpd from Waltersmith Refining and Petrochemical Company Limited and 1,000 bpd from Edo Refinery.
“If the state-owned refineries are left in the hands of the government, it will continue to experience the same problem, irrespective of repairs,” Agboola said.
Records from Nigeria Natural Resources Charter (NNRC) revealed Nigeria has spent billions of dollars in turnaround maintenance of the refineries in the past 25 years, the latest being over $396 million spent between 2013 and 2015 with nothing to show for it.
Despite the huge amount expended on the refineries, their woeful performances remained, as the NNPC stated that they posted trading deficits of N82.09 billion, N77.84 billion, N32.84 billion, N131.64 billion, and N149.23 billion in 2015, 2016, 2017, 2018, and 2019, respectively, while in the first half of 2020, they posted trading deficits of N58.736 billion.
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“We want to make them work and that’s why we’re doing full rehabilitation.,” Mele Kyari, NNPC’s Group Managing Director told Channel’s Tv last year.
Over time, none of the GMDs of the NNPC since 1993 has delivered on the promise to rehabilitate the country’s four refineries, despite billions spent on turnaround maintenance contracts.
For instance, former NNPC’s GMD, Funsho Kupolokun, had once described the country’s refineries as the ‘proverbial bottomless pit’, apparently for gulping so many resources without any commensurate result.
In 2015, on the assumption of office as NNPC GMD, Ibe Kachikwu had described the refineries as scraps, saying that about $500 million would be required to fix all of them.
Also, the immediate past GMD of the NNPC, late Maikanti Baru, had said no turnaround maintenance was carried out on the four refineries “for an aggregate of 42 years combined.”
To show its commitment to the rehabilitation of the refineries, the Kyari-led NNPC unveiled a timeline of activities that it has been implementing gradually. For instance, in October last year, a detailed technical inspection of the Port Harcourt Refinery was completed by Technimont SpA (the representative of the Original Refinery Builder).
The financing package, known as Project Eagle, is backed by the African Export-Import Bank (Afreximbank) to raise $1billion by the NNPC Board of Directors was obtained in July 2020.
Another major effort to revamp the refineries was the signing of the engineering, procurement, and construction (EPC) contract to boost the country’s liquefied natural gas output by more than 30 percent.
To save cost and hefty consultancy fees, in the programme to rehabilitate refineries, the NNPC looked inwards and leveraged local competence by appointing its engineering subsidiary, National Engineering and Technical Company, NETCO/KBR as Owners Engineer (OE) for the Port Harcourt and Warri refineries.
In addition, the timeline showed that the pre-qualification of Bidders was to have taken place in August 2020, while Certificate of No Objection ought to have been gotten from the Bureau of Public Procurement for the provision of EPC services to progress to the next phase in August 2020.
According to the timeline, the issuance of the invitation to tender to bidders was earlier scheduled for September 14, 2020, the award of EPC to the best globally reputable EPC Contractor in December 2020, mobilisation to the site in the first quarter of 2021, and pre-commissioning of the plant has been scheduled to hold in the first quarter of 2023.
