All You Need To Know About Port Harcourt Refinery Rehabilitation

The Port Harcourt Refining Company Limited is in business to optimally process hydrocarbon into petroleum products for the benefit of all stakeholders. The company’s vision is to be an innovative international hydrocarbon processing company of choice.

PHRC Limited is made up of two refineries. The old refinery commissioned in 1965 with current nameplate capacity of 60,000 barrels per stream day (bpsd) and the new refinery commissioned in 1989 with an installed capacity of 150,000 bpsd This brings the combined crude processing capacity of the Port Harcourt Refinery to 210,000 bpsd. It has five (5) process areas – Areas 1-5. The new refinery is made up of Areas 1-4 while the old refinery is Area 5.

IN THE BEGINNING

• On October, 2016, NNPC sought approval to engage Original Refinery Builders (ORB), JGC Corporation, to rehabilitate the Port Harcourt Refining Company (PHRC) to optimal performance and commercial profitability.
• JGC Corporation instead proposed a joint execution approach and thus nominated Messrs Technimont SpA Italy (TCM) as its representatives on the Rehabilitation project.
• The submission by the Messrs Technimont was extremely exorbitant as a result of that single sourcing strategy used. Therefore, NNPC sought and obtained Mr. President’s gracious approval on 22nd May, 2020, for the change of strategy from Original Refinery Builders (ORBs) to selective tendering of Global reputable Engineering Procurement and Construction (EPC) Companies including the ORBs to tender for the Refineries rehabilitation projects.
• The NNPC Tenders Board (NTB) on Friday, 19th June, 2020 approved the shortlist of Thirty (30) Global Reputable EPC companies including the ORBs; ranked by a globally recognized resource tool of the Refining and Petrochemical Middle East for the selective tendering of the EPC phase of PHRC Rehabilitation Project.

(https://www.refiningandpetrochemicalsme.com/lists/top-30-epc-contractors-2019).

THE TENDERS

• At the deadline of bid submission, Ten (10) companies responded to the Prequalification Request out of which Messrs. Linde Engineering & Messrs. Chiyoda Corporation declined to participate in the tendering process, while Messrs. DAEWOO Engineering and Construction only indicated interest as a Sub-Contractor.
• Only seven (7) EPC Companies made submissions and their bids were virtually opened and endorsed via Microsoft Teams/Zoom on Friday, 24th July, 2020 in the presence of the bidders, Infrastructure Concession and Regulatory Commission (ICRC), Bureau of Public Procurement (BPP), Nigeria Extractive Industries Transparency Initiative (NEITI) and other Internal NNPC stakeholders.
• The bids were, thereafter, evaluated in line with the approved evaluation criteria by the approved evaluation sub-committee (inclusive of external Representative) from the 27th to 29th July 2020. A cut-off mark of 75% was required to progress to the next stage of the tendering process.

THE PREQUALIFIED BIDDERS

• Subsequently NTB approved the 7 under listed EPC companies to progress to the technical/Unpriced and commercial.

1. TechnipFMC
2. Saipem
3. Marie Technimont
4. Hyundai Engineering Company Ltd
5. Petrofac
6. Tecnicas Reuinidas
7. Worley Parsons

• A Certificate of “No objection” to the Contract strategy was requested for and obtained from BPP on 14th August 2020.
• The Technical/Unpriced and priced commercial was published to the EPC companies on the 14th September 2020 with a bid closing deadline of 23rd November 2020.
• A total of 4 EPC companies declined further participation arising from their inability to submit competitive tenders due to a variety of reasons including challenges with their sub-contractors, the COVID-19 and the tight bid submission period.
• Following Clarification Meetings held with the bidders, the bid closing deadline was extended to 30th November 2020. Along the tendering process, 12 clarification requests were received from the bidders and responded to accordingly. However due to requests from the bidders for submission of alternative bids, the ITT document was amended to accommodate alternative bids and communicated to the bidders. Furthermore, the PHRC Technical Audit Report was shared to all the 7 EPC Companies as well.
• At the bid submission deadline of 30th November 2020, only one company, Messrs Technimont, submitted a proposal for the Refinery Rehabilitation.
• The submission of a proposal by just one company was considered not satisfactory by NNPC.

NNPC Management in line with the PPA 2007, approved the re-tender of the project to all the prequalified 7 EPC Companies with a bid submission deadline of 7 January, 2021 to enable NNPC have a competitive commercial offer; also to ensure transparency and fairness of the process and to all bidders.

THE WAY FORWARD

Since the approval of the Federal Executive Council (FEC) has for the sum of $1.5 billion for the rehabilitation of the largest refining company in the country, the Port Harcourt Refinery, the rehabilitation will be done in three phases of 18, 24 and 44 months, as the contract has been awarded to an Italian company, Technimont S.p.A, a global leader in refinery maintenance.

The funding has three components from Nigerian National Petroleum Corporation (NNPC) Internally Generated Revenue (IGR), budgetary allocations provisions and Afreximbank.

The Minister of State, Petroleum has also assured that local content is fully involved in the job.

The rehabilitation of productivity refinery will commence in three phases. The first phase is to be completed in 18 months, which will take the refinery to a production of 90 percent of its nameplate capacity.

The second phase is to be completed in 24 months and all the final stages will be completed in 44 months and consultations are approved and I believe that this is good news for Nigeria.

Addressing the problem of refineries maintenance, which has dogged the nation’s four refineries over the years, The Minister of State Petroleum, Sylva has said the refineries would be handed over to operations and maintenance firms to manage for the country.

He added that the management aspect for the refurbished refineries was part of the conditions given by lenders of the funds for the maintenance project, adding that the condition had been embedded in the agreement.

“On the other very germane question about operations and maintenance, that has been a big problem for our refineries, as we all know, that was also exhaustively discussed in Council and the agreement is that we’re going to put a professional Operations and Maintenance company to manage the refinery when it has been rehabilitated, Sylva said.

“In any case, it is actually one of the conditions presented by the lenders, because the lenders say they can only give us the money if we have a professional operations and maintenance company, and that already is embedded in our discussions with the lenders and we cannot go back on that.

He said the issue of funding for the project had been sorted out, explaining that “I want to answer that the funds are all in place and work will commence forthwith.

“There are components various components to the funding: there is funding from NNPC internally generated revenue, there is funding from the budget and there is also debt funding. For the lenders, we are dealing with AFREXIM and they are very committed to us, we have actually concluded discussions with AFREXIM,” he said.

On how the country settled for an Italian company, instead of the original builders, he said “we found out from the original refinery builders that they are not in the business of rehabilitating refineries, they are in the business of building refineries. So they actually pointed us to a rehabilitation company that we’re dealing with now.”

He also said the interest of local contractors has been covered in the maintenance project, saying “NCDMB is fully part of the contracting process and has safeguarded the interest, adequately, of our local contractors, so our local people will be fully involved with the Tecnimont S.p.A.”

He assured that the other refineries in Kaduna and Warri would also be rehabilitated, explaining that their works would commence before the end of the current administration.

“On the last question, which is when the other refineries will also be rehabilitated? Discussions are ongoing. We want to take one at a time and I want to assure you that before the lifetime of this administration expires, work on all the refineries would have at least commenced,” he said.

The Corporation and its leadership should not be deterred and should remain focused in the pursuit of excellence and taking the Corporation to greater heights.