September 18, 2021

Refinery Rehabilitation: How Kyari Put An End To The Barrage Of Corruption, Poor Management, Sabotage And Lack Of The Mandatory TAM

6 min read

By Adewole Kehinde

I came across a glaring headline “Under Kyari and Dikko, Port Harcourt refinery makes zero revenue, employs 487 new staff, pays N23bn salary in 2020” published by International Centre for Investigative Reporting.

What caught my attention was the subtitled caption “The N1.5bn rehabilitation controversy.”

The report says that rather than privatise the refinery, the NNPC chose to pump an equivalent of 4.5 percent of Nigeria’s 2021 budget ($1.5 billion) into the refurbishment of a refinery that comprehensively lost N206.069 billion between 2017 and 2020.

Based on the wrong assumption in the report of the International Centre for Investigative Reporting, I want to address the benefits the country will get in rehabilitating the Port Harcourt Refinery.

When the Federal Executive Council approved $1.5 billion to fully fix the Port Harcourt Refinery Company Limited (PHRC) after over 20 years of dormancy, many ordinary Nigerians jubilated. But to some vested interests, it is rather the refinery is out rightly sold, a thinking that hurts deeply.

Selling such national asset is bad news to ordinary Nigerians. The gains derivable from the dormant giant refinery in over twenty years are unimaginable bearing in mind its total installed capacity of 210, 000 barrel per day that daily produces 10.4 million liters of Premium Motor Spirit (PMS).

The criticisms against the rehabilitation plan are sufficient evidence that these interests are still lurking around seeking the least opportunity to strike again. If anything, industry watchers have applauded the refinery rehabilitation plan, saying it will create boundless benefits to Nigerians such as meeting local energy demand, growing the nation’s GDP, strengthening the Naira by reducing the demand for Forex to creating thousands of jobs across the entire value chain (crude supply, operating and maintaining the refinery, product supply, etc) including several third-party contractors that will supply outsourced services or goods, the advantages are huge.

Also, locally refined petroleum products will serve as feedstock for small scale local manufacturing but most important is the significant and visible benefit such rehabilitation means to the national energy security of all Nigerians past maintenance had consumed billions of dollars without real-time visible benefits to the nation.

It is not surprising therefore to hear such critics call for outright sale of the refineries they mischievously cited of the sale of Shell Martinez refinery in the U.S when, in fact, they do not realize that the 105 year- old refinery was traded off as part of a crude oil supply and product off- take agreements.

Amid global oil price uncertainties, Nigeria’s case is particularly worsened by the sharp drop in the global demand for its oil due to environmental, social, climate change issues worsened by the ugly effects of COVID-19 pandemic. Nigeria’s tragic story is particularly appalling when considered that our dormant refineries continue to pave the way for unbridled importation of refined petroleum products steadily oiled by rapacious emergency importers and their cronies. It is envisaged that this refinery rehabilitation plan will utilize the rising domestic demand for fuel and the entry of new private players like Dangote and Waltersmith, etc to make Nigeria Africa’s major petrol refining hub using the continent’s bourgeoning middle-class propensity for cars and PMS.

This is where industry leaders such as the team at NNPC Towers led the Group Managing Director (GMD), Mr Mele Kolo Kyari, complementing the Minister of State for Petroleum, Mr. Timipre Sylva, should leave no stone unturned to wrestle the nation from the vice-grip of these few but powerful anti-Nigeria interests. It is for them to continue to summon the courage to save the day for over 200 million Nigerians and generations yet unborn. There is no better time than now to re-write Nigeria’s post-independence chequered history by unravelling the riddle of a leading oil-producing country like Nigeria that is still found among leading oil-importing nations. Mr. Mele Kyari could not have put it any better when he said last year:

Nigerians are already appreciating Mallam Mele Kolo Kyari on his passion to driving the rehabilitation strategy to a logical conclusion, pulling the refineries back on stream and to their nameplate capacities using the Operate & Maintain (O&M) model for all the sleeping refining giants to achieve, at least 90 per cent of total installed production capacity by 2023.

This project, unlike past models, has independent external stakeholders like Ministry of Finance, NEITI, ICRC, PENGASSAN and NUPENG as stakeholders synergizing with KBR and NETCO as NNPC’s Engineers, to ensure right quality, excellent delivery and within budget to maintain plant integrity for at least ten years.

With $1.5 billion, there will be complete overhaul and replacement of major critical equipment to guarantee plant integrity and maintenance for at least ten years after the initial price was diligently negotiated down from $2.5 billion.

Available Google-sourced global data shows that Aramco Oil Refinery (250,000-300,000 bpd) in Pakistan was estimated at $10bn, Abrue Lima Project (230,000) in Brazil at $12 bin, Pengerang Refinery and Petrochemical Integrated Development, RAPID (300,000 b/d + 3 mtpa) naptha steam cracker) in Indonesia at $27bn and the 650,000bpd capacity Dangote Refinery in Nigeria at US$19 billion.

Nigeria is a major oil and gas producer in the world that does not refine its abundant hydrocarbon resources but heavily imports most of its PMS needs. Popular thinking is that serious countries don’t sell off their strategic national assets such as refineries even to the highest bidder when countries that don’t produce a drop of hydrocarbon still want to own refineries. God save our nation.

It is on record that the NNPC GMD has put a final end to the barrage of corruption, poor management, sabotage and lack of the mandatory turnaround maintenance (TAM) that has made all the refineries inefficient, making them operate at about 40 per cent of full capacity.

No wonder last month that the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari charged members of the Board of the NNPC Greenfield Refinery Limited (NGRL), to explore all available options to bring an end to the current challenge of petroleum products importation.

Mallam Kyari gave the charge weeks ago while inaugurating the Board of the newly incorporated subsidiary of the Corporation, NNPC Greenfield Refinery Limited (NGRL), at the NNPC Towers, Abuja.

The NNPC Greenfield Refinery Limited is a subsidiary of the Corporation set up in December 2020 with a mandate to oversee the establishment and operation of new refineries.

The GMD, who is also the Chairman of the NGRL Board, challenged members of the Board to focus on profitability in order to remain afloat and avoid liquidation.

“As a business, this is a big opportunity for us and this company’s balance sheet must change positively. Going forward, with the Petroleum Industry Act (PIA), I can tell you that if you continue to post negative for three years, you are out. So, there is really no excuse”, Mallam Kyari stated.

He urged the Board and Management Team of the new company to set up a proper structure with the require skills, technology and financing to drive the company’s operations, adding that he was optimistic that the company would be able to achieve its mandate.

“Our company must grow and we can’t do well except we are able to process our production whether it is the liquid or gas. If we don’t monetize it then we have done nothing. This is really a new chapter and we are committed to making it work,” he said.

The NNPC helmsman stated that all the Corporation’s initiatives in the areas of new refineries, condensate refineries and equity acquisition in credible private refineries were geared towards ensuring energy security for the country.

In his remarks, the Alternate Chairman of the Board and Group Executive Director, Refinery and Petrochemicals, Engr. Mustapha Yakubu, declared that the operations of the company would be guided by the principles of cost effectiveness in line with the new Petroleum Industry Act (PIA), noting that profitability would be the key focus.

Speaking in similar vein, the Group General Manager, Greenfield Refineries and Project Division (GRPD) and Managing Director of the NGRL, Engr. Bege Talson, disclosed that the Division was working with third party investors to establish Greenfield, modular and condensate refineries with a combined capacity of 250,000barrels per stream day (bpsd) as he pledged his team’s commitment to run the company profitably.

The Nigerian National Petroleum Corporation (NNPC) must be given all the support to see that the Port Harcourt Refinery is revived and becomes operational once more in order to save the government its scarce Forex revenue, as well as create the much-needed jobs.

Adewole Kehinde is the Publisher of Swift Reporters and can be reached via 08166240846 and 08123608662. kennyadewole@gmail.com

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