With FG Payment Of $194m For Port Harcourt Refinery, Dikko Is Set To Deliver

By Adewole Kehinde

The Port Harcourt Refining Company Limited is a subsidiary of the Nigerian National Petroleum Company (NNPC) Ltd and its management is saddled with the task of getting the plant up and running to full capacity to fulfill local fuel needs of the nation.

The Refinery Complex comprises two refineries at Alesa-Eleme near Port Harcourt in Rivers State.

Port Harcourt II (New Refinery) is a complex, conversion refinery with a nameplate distillation capacity of 7,500,000 MTA (150,000 bpd). It came on stream in 1988 and was originally intended to serve as an export refinery. It has been subsequently dedicated to domestic market service given frequent interruptions in supply from the other three refineries in Nigeria. Port Harcourt II has considerable clean fuel capability, including lead-free gasoline.

The processing performance has been below design capabilities in terms of both refinery throughput and the yield of a higher valued product slate. The refinery has seldom operated above 50% of design capacity and the 1990’s saw a gradual decline in refinery throughput with proportionately increasing yields of lower value fuel oil products.

Following the Turn Around maintenance carried out in 2000, throughput improved its level of performance. Until 1995, the yield performance of the refinery was in line with design. The design expectations were 33% gasoline, 42% middle distillate with just 19% fuel oil and 5% for fuel loss, plus 1% LPG.

Poor maintenance of facilities and inadequate manpower has over the years been the major reason for epileptic performance of the refinery.

With a capacity to refine 210,000 barrels per day out of the local capacity of 450,000 the refinery, if well operated, will cater for the large market existing for petroleum products in Nigeria and West Africa.

On 1st of December, 2020, the Nigerian National Petroleum Corporation (NNPC) opened a new chapter in its refineries rehabilitation project with the public opening of bids for the Engineering, Procurement, and Construction phase of the rehabilitation of the Port Harcourt Refining Company (PHRC).

I was so excited to read on Sunday that the Federal Government has processed $98m and N17.2bn as partial payments for the ongoing rehabilitation of the Port Harcourt Refining Company.

For the Federal Government to have made an initial payment of $194m, being the 15 per cent advance payment required for the rehabilitation of the facility, to Tecnimont SpA of Italy, shows that the Government is fully ready for Deregulation of the oil industry backed by the Petroleum Industry Act.

It is no longer news that the rehabilitation has been financed by an equity contribution by the sponsor and loan by lenders (AfreximBank) according to information gathered from the Nigerian National Petroleum Company Limited.

The Engineering, Procurement, Construction, Installation and Commissioning contract price remained at $1.397bn lump sum with $162m as provisional sum, bringing the total project cost to $1.559bn, as approved by the Federal Executive Council.

It will be recalled that the Federal Executive Council approved the contract for the EPCIC of the Port Harcourt refinery on 17th March 2021, and work on the facility commenced in 2021.

FEC approved the award of the PHRC EPCIC contract to Tecnimont in March, and the contract agreement was signed on 6th April 2021.

I came across a report on Friday which says, “Advance payment of 15 per cent ($194m with 70 per cent in US dollars and 30 per cent in naira) has been paid to Tecnimont as a contractual requirement.

“Advance payment guarantee of $300m has been provided by Tecnimont. Milestone One (10 per cent) payment ($98m and N17.2bn) has been processed for payment. The project has 14 payment milestones with deliverables attached.”

On the status of the rehabilitation, the report said the overall project cumulative planned progress was 10.7 per cent, but noted that actual cumulative progress was 6.3 per cent.

“Contractor is to issue a mitigation plan to address this variance and to ensure that the project is completed within schedule,” the NNPC report said.

Some challenges were identified by the PHRC management in the report. It said the COVID-19 outbreak with the current Omicron variant had created travel disruptions and supply chain challenges worldwide.

Another challenge was the concerns on the East-West Road and the loss of project man-hours on the road associated with movement to and from the refinery.

The report, however, maintained that the project completion period for the entire rehabilitation work was 44 months from the effective date, which was April 6, 2021.

It said the contractor was complying with the provisions of the Nigerian Content Development Act, adding that there was active participation of Nigerian companies as sub-contractors in the project.

It said a Memorandum of Understanding was signed between the contractor and community leaders detailing expectations by the host communities from the contractor.

“There has been zero unrest so far due to the robust community relation engagement between owner/contractor and the host communities,” the report said.

The commencement of the rehabilitation of the Port Harcourt Refinery in 2021 received commendations from industry players and observers, going by the work being done at the facility.

It is no longer news that Tecnimont had since mobilized to site with its sub-contractors, as 15 percent advance payment was made to the contractor after the submission of advance payment guarantee.

The managers of the refinery said the rehabilitation was aimed at restoring the plant to a minimum of 90 percent nameplate capacity utilization.

Investigation revealed that the Port Harcourt Refining Company would supply 11 million litres of Premium Motor Spirit popularly called petrol, to the domestic market. This means the PHRC is expected to produce about 3.96 billion litres of petrol annually.

The excellent news is that the facilities are under an accomplished and experienced technocrat in the person of Engr. Ahmed Dikko

I am confident that Engr. Ahmed Dikko will bring the Port Harcourt Refining Company up and running for the benefit of all Nigerians.


Adewole Kehinde is the Publisher of Swift Reporters and can be reached via 08166240846, 08123608662

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