Nigeria’s non-functional refineries
The disclosure by the Group Managing Director of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari, that no single refinery in the country is working at the moment is shameful and shocking. Kyari revealed this when he appeared before the House of Representatives Joint Committee on Petroleum Resources (Downstream) investigating the high cost of diesel and cooking gas across the country.
According to him, though the corporation has decided to do a “quick fix” on the moribund refineries, especially the Warri refinery in Delta State, there is no assurance that any of them will start working at optimal level anytime soon. He also offered no guarantee of the security and stability of petroleum products supply in the country, amid ongoing scarcity, saying the situation globally is uncertain and many countries around the world are currently preserving their excess volume. Besides, the operation of illegal refineries, estimated at over 200 across the country, has contributed to the non-functional state of the refineries. Nonetheless, there is hope that the situation will improve when production commences by the end of July. At present, Nigeria is producing below its OPEC quota.
However, the shocking disclosure by the GMD of NNPC on the state of the nation’s refineries is unacceptable. The four refineries in the country located in Port Harcourt, Warri and Kaduna, have a combined capacity of 445,000 bpd. It is disheartening that none of them is working at the moment, according to the NNPC. Also uncertain is the fact that nobody knows, not even the Ministry of Petroleum Resources, how much capacity would be restored after the repairs. About $1.5billion is reported to have been earmarked for the rehabilitation of the Port Harcourt refineries, $897.6million and $586.9 million for the Warri and Kaduna refineries’ repairs, respectively. The amount, experts say, would have been enough to build about six new refineries. The effect of deploying millions of dollars for the rehabilitation of the four refineries is that Nigeria’s cost of production, already seen as one of the highest in the world, will worsen. There seems to be lack of accountability and transparency in the management of the refineries.
Last year, NNPC accessed a loan of $1billion for the rehabilitation of the Port Harcourt refinery. But the pipelines that will feed crude to the refinery are likely to be vandalised. Nigeria loses about 200,000 bpd on account of vandalisation of pipelines. The government must address the issue of pipeline vandalisation and oil theft. Shell’s Bonny pipeline system is said to be the hardest hit. The Bonny oil pipeline system, which is the highest pipeline network in the Niger Delta that transports oil, water and associated gas from the Eastern and Central Delta to the Bonny oil and gas terminal, has been adversely affected.
Unless the sabotage of crude pipelines is stopped, the $1.5billion earmarked for the rehabilitation of the refineries would do little to advance the desire to refine petrol for local consumption. It will also make the issue of subsidy removal more contentious in the months or years ahead. There is need to tackle other challenges that have made the working of the four refineries a tall order for the relevant government agencies. The challenge of oil bunkering is yet to be tackled.
Let government apprehend and prosecute those profiting from the non-functioning of the refineries. The ugly situation has increased the amount spent on importing refined petroleum products, which in turn, has raised the pump price of petrol from N165/litre, to more than N180/litres in many parts of the country. The scarcity of the product persists in Abuja and Lagos, among other cities. Until priority attention is given to the rehabilitation of our moribund refineries and fix them, the problems in the oil and gas industry will remain. Last year, the government signed over $2billion contract for the rehabilitation of the refineries, starting with the Port Harcourt refinery, but it is yet to start working.
Unfortunately, successive administrations have claimed to have spent humongous amount on the Turnaround Maintenance of the refineries, totaling N3.8trillion in the last 15 years, and N1.47 trillion between 2015 and 2020, still no appreciable results have been achieved. If government cannot manage the refineries, it should either concession them, or enter into Joint venture model to revamp them, or sell them outright to private investors. There is no need spending so much money to rehabilitate the refineries without achieving the desired results.
