For the umpteenth time, Nigeria is trying yet again in 2021 to get its refineries working in an attempt to wean itself off imported fuel.
Africa’s biggest oil exporter 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 is scepticism about the latest effort.
“I don’t see the refineries coming on board in 2021,” Joe Nwakwue, chairman, Society of Petroleum Engineers (SPE), told BuisinessDay. “The refineries require significant work and most of the agreements to repair them are still on paper, no actual work have 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 offer hopes of domestic refining.
Apart from the state-owned refineries, Africa’s biggest oil-producing country is expecting combine refining capacity of over 623,000 barrels of oil per day to be completed before the end of 2021.
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They include the over 600,000 barrels per day capacity from Dangote Refinery; 10,000bpd from Niger Delta Petroleum Resources Refinery (NDPR); 7000bpd from OPAC Refinery; 5,000bpd from Waltersmith Refining and Petrochemical Company Limited, and 1,000bpd 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 had 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.
“We want to make them work and that is why we are doing full rehabilitation,” Mele Kyari, NNPC’s group managing director, told Channels TV, last year.
Overtime, 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 much resources without any commensurate result.
In 2015, on assumption of office as NNPC GMD, Ibe Kachikwu, had described the refineries as scraps, saying 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 which 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 $1 billion by NNPC Board of Directors was obtained in July 2020.
Another major effort to revamp the refineries was the signing 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 invitation to tender to bidders was earlier scheduled for September 14, 2020, the award of EPC to best globally reputable EPC Contractor in December 2020, mobilisation to site in the first quarter of 2021 and pre-commissioning of plant has been scheduled to hold in the first quarter of 2023.
