Nigerian Refineries in abysmal state

No Comments » May 10th, 2012 posted by // Categories: Energy Development Project




Refineries in abysmal state

MONDAY, 07 MAY 2012 10:47

Alison-Madueke cites mismanagement
Labour calls for transparency

THE present state of the country’s four refineries have stirred up the unexpected emotions in some members of the National Refineries Special Task Force (NRSTF) set up by the Federal Government to find solution to the nation’s costly dependence on imported refined products.

The refineries in Port Harcourt, Kaduna and Warri in experts’ estimate could meet more than 80 percent of the nation’s domestic consumption, virtually eliminating the corruption- riddled import regime that will cost Nigeria about N1trillion in subsidies this year alone.
The 22- member committee, chaired by former finance minister, Dr Kalu Idika Kalu, was on an inspection visit to one of the four refineries, the $850 million Port Harcourt refinery, which was commissioned in 1989.

The consortium of JGC Corporation, Marubeni Corporation both of Japan and Spibatignolbs of France, built and fitted the 150,000 barrels a day refinery with four fully functional boilers and four power plants, when they signed a completion certificate with the Nigerian government 60 days after the plant was commissioned and running.

However, when the committee members went there, the boilers had all collapsed, their insulation was gone and the attendant massive corrosion on key units was evident for all to see. Of the four power plants with total installed capacity of 15mw each, only two were running. This is against the advice by the builders that at least three should be running at any particular time and that these should be running at 50 percent capacity, to avoid long down-time, given that it takes at least six hours to warm up the power plant before it can be used to generate power.

Government data suggests that the production at the refinery sometimes falls to an average of 25 percent of installed capacity.

The visiting committee members could hardly believe that this same refinery realised $124 million and $156 million from exporting refined products in 1990 and 1991 respectively.

Staff at the refinery were said to be ill-motivated, the managers have become virtually powerless, unable to order spares or make simple decisions without reverting to their political masters in Abuja and in the process, even maintenance programmes committed to by all, are routinely missed or even abandoned.

The first turn-around maintenance (TAM) was done on time in 1991, the second in 1994, one year late, the third was in 2000 or three years late. The next TAM was planned for 2003/4 but was put off till 2007 and the one planned for July this year has been moved to October and by last week, it had become certain that even this later date would be missed.

Alison-Madueke’s defence
Reacting to the deplorable state of the refineries, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke blamed abysmal performance of the Nigeria’s refineries on mismanagement by the government.

She also said requisite enabling environment was necessary to attract the desired investment on the downstream petroleum industry, particularly, the refinery.

Alison-Madueke said refinery business was very capital intensive, pointing out that any investor coming into the venture would need to be assured of the requisite returns on investment at the end the day.
She said for Nigeria to achieve sufficiency in refined petroleum products, she would have to increase her refining capacity to a certain level.
It is for this reason she said the government was trying to ensure equity participation into the refineries as well as gas pipelines.

“The requisite enabling environment is necessary to bring a lot more equity investment into the refineries and other parts of the oil and gas industry and the economy as well. We are also trying to ensure equity participation even in areas such as the gas pipelines and to ensure that over time, areas such as pipelines, tank farms, depots, etc are put in the private sector domain as much as possible. I think that when that happens, as it certainly will, we will find that it will also begin to address some of the issues of transparency and corruption”, she said.

Alison-Madueke said the current subsidy regime has made refining sector unappealing to major investors, pointing out that the nation’s refining capacity had to be boosted in order to stem the flood of importation of refined petroleum products.

She said: “It has been a very topical issue in recent times that being one of the world’s largest producers of crude, Nigeria would be expected to have sufficiency in refined petroleum products at this time. To do that of course, you would have to increase your refining capacity to a certain level”.
She added: “At this time, Nigeria’s petroleum products are subsidised heavily. In fact, that has been the recent discourse or reason for a major strike in the country, when the country tried to deregulate, take away the subsidy and to help the country to first of all focus these particular natural resources to other parts of the economy, which we felt are much more critical.  And also we didn’t feel the subsidy was actually reaching the section of the population that they were designed for, in the first place; that in fact, they were enriching the middle men in the petroleum industry instead. But  as you will find in many developing countries of third economies particularly in Africa, there is a vicious circle of dependency on the government, it is not just Africa, but in developed countries as well. And so over the years, it became more difficult, I think in emerging economies to remove dependency particularly, where it concerns major infrastructure and logistics, like in this case”.

The minister argued: “With a subsidised price at the end of the line, it makes your refining sector rather unappealing to major investors or to major investments. And building refinery is not a cheap venture at all. And anyone coming into the venture will need of course be assured that it was commercially viable. You will make the requisite returns on investment at the end the day. And this is one of the reasons why we try to deregulate to open up the sector to more and more investment.

Labour’s demand
But the organized labour under the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) felt that He maintained that the current price of petrol at N97 per litre remains high.

The NLC last Tuesday urged the Federal Government to review some of its policies which it said tended to worsen the unemployment and inflationary rates in the country. The NLC also called for the unbundling of the Nigerian National Petroleum Corporation (NNPC).

Abdulwaheed Omar, NLC President, and his TUC counterpart, Peter Esele, said this in Abuja in separate speeches to commemorate the 2012 May Day celebration with the theme “Right to Work, Food and Education: Panacea to Insecurity.”

Omar warning fellow workers stated, “We must remain vigilant because there are some elements in government who learnt no lesson from the massive protests in January. Some of them are already drawing up strategies for a further increase in the price of petrol in the guise of removing the remaining subsidy,” he added.

On the unbundling of NNPC, labour argued that this would enable the corporation to function efficiently.

“The downstream sector as presently constituted is characterised by industry dominance by NNPC and general monopolistic tendencies,” Omar said.
“We need to design strategies for opening up monopoly assets and infrastructure to competitors, who must of course pay economic fees.”

The NLC president decried the corruption in the petroleum sector and called on stakeholders in the industry to put hands on deck to sanitise the sector.

In his speech, Esele decried the rate of “dishonest behaviour” in the oil and gas sector and called for its repositioning for the economic stability of the nation.

“We want to use this unique opportunity of our celebration to say that until Nigeria gets it right with the sector, it will be difficult for the nation to move forward.

“There is no other sector of the nation’s economy that has experienced the kind of sleaze and opaqueness that is going on in the oil and gas industry,” he said.

He stressed the need for the NNPC to be operated like a commercial entity and the need to urgently pass the Petroleum Industry Bill (PIB) to bring professionalism to the sector.

“I can assure you that the PIB committee of which I am a member will submit its report this month. We need to put all hands on deck to ensure the quick passage of the bill,” he said.

He called on the National Assembly and the government to ensure that the recommendations of the House probe on subsidy were implemented.
“We want to categorically state that there is a gang up against the Nigerian people by the oil cartel who are bent on toeing the path of easy money.

“It has been established that it is possible to build refineries in Nigeria and run them profitably,” he said.


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