Amidst the lingering fuel scarcity experienced in many parts of the country, Nigerians were again jolted by the news that Kaduna Refining and Petrochemical Company (KRPC) had been shut down. Later, details emerged that the refinery was shut down due to the non-availability of crude oil.
The Executive Director, Services (EDS), of KRPC, Dr. Abdullahi Idris, who disclosed the development said the fuel plant of the refinery which was commissioned in 1980, was functioning at 60 per cent capacity but had to be shut down due to non-availability of crude oil. Idris explained that before it was shutdown, the KRPC produced four million litres of petrol, 2.5 million litres of Diesel and 1.6 million litres of Kerosene per day. He added that the plant had undergone a major Turn Around Maintenance (TAM) in 2013 and currently had a workforce of 1,004.
Prior to the shutdown of the refinery, findings revealed that its very important lube breaking unit had suffered neglect over the years. The faulty facility has reportedly led to the loss of N23 billion of base oil which is the major ingredient for the production of lubricants.
The Next Edition gathered that the base oil unit of the refinery which is the only one producing by-product for lubricants first indicated mechanical faults in 1994 and had since been abandoned leading to the lubricant market depending on importation of the by-product. The Executive Secretary, Lubricants Producers Association of Nigeria (LUPAN), Emeka Obidike, described the development as not good enough for the lubricant market.
It could be recalled that in October last year, the Nigerian National Petroleum Corporation (NNPC) shut down the same Kaduna and Warri refineries citing operational costs and maintenance issues.
The Group Managing Director of NNPC, Maikanti Baru, had during an inaugural pipeline security conference last year hinted that all the refineries would be shut down for a comprehensive rehabilitation to bring them to standard.
His words: “As you know, it has been the perception of the public that the repairs of the refineries are never done thoroughly. So, this time, our intention is to shut down the refineries when we are ready, and then fully bring them back to what they should be as new refineries. We intend to focus on the repairs of the refineries with all that it takes to ensure that by the time we are done by 2019 these refineries will be as good as new.”
He said NNPC had inaugurated eight committees to oversee the complete revamping of the refineries in line with the directive of President Muhammadu Buhari.
The committees included workstations for rehabilitation, stakeholder management, financing, legal, procurement, pipeline, crude oil supply and security, and staffing and succession planning.
He added that the corporation had received over 28 Expressions of Interest from private funding sources for the refineries’ rehabilitation project.
The recent shut down of Kaduna refinery and the plan by NNPC to carry out another round of Turn Around Maintenance scheduled for this year has further beamed searchlight on the state of the nation’s refineries and the colossal sum spent over the years by successive governments on Turn Around Maintenance which stakeholders have often argued would be enough to build new refineries.
Findings by The Next Edition have revealed that a total of 1.853 billion dollars had been spent to build the refineries.
A breakdown shows that the Port Harcourt refinery built in 1985 at $850 million has a 150,000 bpd capacity; the125, 000 bpd Warri refinery was built in 1978 at $478m while the 110,000 bpd Kaduna refinery was built in 1976 at the cost of $525 million.
Similarly investigations have revealed that while $1.853 billion was spent to build the four refineries, a total of over $1.6 billion (N264 bn) had gone into the maintenance of the four refineries in the name of Turn Around Maintenance since 2000 till date. About $308 million was spent for the same purpose by the military governments of late Generals Sani Abacha and Abdulsalami Abubakar who both spent $216 billion and $92 billion respectively on TAM.
Also recall that in 2007 after the abortive sale of the refineries by late President Musa Yar’Adua, NNPC awarded $57 million contract to a Nigerian firm for maintenance of all the refineries.
In 2009 the corporation spent another $200 million on the maintenance of the Kaduna refinery. Another N99 billion was allegedly spent in 2015 for maintenance of the refineries
In 2012, the then Acting Director of Warri Refining and Petrochemicals Company, WRPC, Engr. Samuel Babatunde, disclosed that the Federal Government had budgeted N94.2 billion for the Turn Around Maintenance, TAM, of the Warri refinery, while an almost similar amount ($463 million) was budgeted for TAM of the Port Harcourt refinery.
In 2013, $1.6 billion was budgeted for TAM for the four refineries, with the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, stating that over 75 per cent of the spare parts maintenance on the Port Harcourt Refinery had already arrived the country, while the original builder of the refinery had been paid $32 million for the TAM. She stated that the TAM for the Port Harcourt refinery would cost $147 million while modernisation of the refinery would cost $406 million. In the early days of 2015, the NNPC contracted local engineers to fix the four refineries for N99 billion. The refineries only functioned for less than two months before shutting down.
Managing Director of Port Harcourt, Bafred Enjugu, was once quoted as saying that the last time there was a routine intervention on the facility was in 2000. He explained that the components had reached the point where they had to be replaced, as opposed to the routine turnaround maintenance, which is basically servicing.
Ugo Nwokedi, a stakeholder in the petroleum sector said corruption was the major reason the refineries had failed to work in spite of the money spent on their maintenance over the years. He said the stumbling block to the refineries working was public officials who award or monitor contracts for maintenance. He added that most times the money ended in private pockets and in some cases contracts were awarded to cronies and they end up doing shabby work and the circle continued.
One of the indigenous companies that have benefited from the regime of turnaround maintenance of the refineries is the Chrome Group owned by Emeka Offor. He was awarded contract to rehabilitate Port Harcourt refinery during the tenure of former President Olusegun Obasanjo.
Indeed, a major fall out of the malfunctioned refineries has been the fuel subsidy regime which investigation have revealed has been fraught with large scale fraud leading to the nation spending huge sums on subsidy with the beneficiaries daily smiling to the banks.
Nigerian Extractive Transparency Initiative (NEITI) 2012 audit report revealed that Nigeria spent about N4.5 trillion in seven years as subsidy on petroleum products imported into the country. The body said the amount is more than enough to repair our refineries or build new ones.
According to its audit report of the refineries between 1999 and 2004, “The importation process, including the tendering, contracting and procurement practices, fell short of current good practice standards, and it is questionable whether they fully protect interests in many areas of the process. There was lack of written procedures.”
The Senate is currently probing the secret payment of trillions of naira by the government without approval by the legislatures.
It could also be recalled that the discovery by Farouk Lawan-led parliamentary probe on fuel subsidy in 2014 unveiled how two persons who were not oil marketers but got government allocation of 15,000 metric tonnes and were eventually paid N1.9bn as subsidy for products not supplied.
National Coordinator of Protest to Power Movement (PPM) and a Co-Convener of Say No Campaign (SNC), Jaye Gaskia, blamed the whole scenario of the refineries not working on corruption and failed governance. He said the fuel subsidy regime which had been of immense benefits to the cabals against the interest of Nigerians was the reason why the refineries could not be allowed to work.
He decried the fact that despite the more than $20 billion reportedly spent on Turn Around Maintenances of the four domestic refineries they were still working below average capacity utilisation. He said until government showed sincerity in ensuring that the nation’s refineries worked in optimum capacity to meet local consumption, “we would still depend on imported refined products with huge cost frittered away as subsidy.”
The National Public Relations Officer of The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Seyi Gambo, wants government to show commitment towards carrying out a comprehensive Turn-Around Maintenance of the refineries. He stressed that the staff union was opposed to selling the refineries as scrap even if government considered privitisation as the best option.
He said that PENGASSAN was not happy that Nigeria, reputed to be the 13th largest oil producing nation, was importing fuel for domestic consumption.
Also commenting, Ibrahim Ali Mohammed-Dabo, a Professor in the Department of Chemical Engineering, Ahmadu Bello University, who led a team that built a mini-refinery said the major problem with the Nigerian refining system had been corruption.
“We have been budgeting money to do this but when the money comes it is not used for purpose it was budgeted for,” he said.
The House of Representatives had last year kicked against the bid by NNPC to spend $1.8 billion on the maintenance of the refineries across the country. The law makers had queried the rational of further expenditure on the country’s four refineries and the daily allocation of 445,000 barrels of crude to the facilities as they perform poorly. They cited the previous sums running into N264 billion spent on turn around maintenance in the past years yet the refineries were still performing below optimum capacity.
Nigeria is the fifth largest exporter of crude oil in the world, but reportedly spends over $16 million per day importing refined petroleum products.
Minister of State for Petroleum, Ibe Kachukwu, said last year that he would resign if he did not end fuel importation in 2019. Nigeria consumes 53.4 million PMS daily and spends $2.49 billion on Petroleum Products importation in three month
According to the National Bureau of Statistics (NBS), Nigeria within the first three months of 2017 spent $2.49 billion (N761 billion) on importation of refined petroleum products. The petroleum products imports statistics for the first quarter (January-March) of 2017 showed that 4.05 billion litres of Premium Motor Spirits or petrol (PMS), 1.31 bn litres of Automotive Gas Oil (AGO) or Diesel and 41.06 million litres of Husehold Kerosene (HHK), valued at N566.96 billion, N187.56 billion and N5.92bn respectively, were imported into the country in the quarter.
Ibe Kachukwu, in trying to justify the importation of fuel which has been going on in the past two decades had once told newsmen in that importing petrol, is cheaper than producing the product in the country’s refineries. He said that even if the current set of refineries were working on a 100 per cent basis, they would only be able to account for 20 million litres of PMS per day, about 50 per cent of the country’s total consumption which according to him implied that the country would still resort to importation to meet up with the shortfall. He stated that until the upgrading and total refurbishment of the refineries were concluded and the pipelines were fixed, it would be uneconomical and very expensive to refine PMS locally. He however reiterated the fact that local refining of PMS would make much more economic sense if all the refineries would undergo full repairs and Turn-Around Maintenance, TAM, and when new refineries were set up in the country through the co-locative initiative.
The minister disclosed that the country required $500 million, about N100 billion to fix all the refineries.
This was irrespective of the fact that almost similar amount was spent on fixing the refineries at the twilight of the Goodluck Jonathan’s administration.
However as the controversy over the continuous turnaround maintenance of the refineries still lingers, stakeholders are waiting with anticipation the Dangote refinery which many believe will up the production capacity and fuel supply in the country.