• Fri. Sep 29th, 2023

NNPC gives reason why Nigeria’s refineries are not functioning; sets fresh deadline to end fuel importation


Aug 31, 2022

By Bassey Udo

Nigeria’s four refineries located in Port Harcourt, Warri and Kaduna are not working because the Nigerian National Petroleum Company (NNPC) Limited decided to shut them down to curb further bleeding, the Group Chief Executive Officer, Mele Kyari, has explained.

Kyari, who was briefing the media on the transition of the national oil company, hinted at when normal operations at the refineries are expected to be restored, He also gave fresh deadline the NNPC would end the importation of petroleum products in the country.

“Our refineries are not functioning today. We (NNPC) deliberately shut the refineries down, because it didn’t make any further sense to take a $100 per barrel crude oil and put in the refineries and products they brought out was only $70,” Kyari explained on Tuesday at the 49th session of the State House briefing in Abuja.

He blamed the decision to shut down the refineries on several years of neglect by successive administrations, which resulted in their inability to perform optimally, as they were not being operated as businesses.

Despite spending billions of dollars by successive administration on several turnaround maintenance exercises, the four refineries failed to produce enough products to meet growing local demand, resulting the country relying on massive importation to make up for the shortfall.

The NNPC GCEO said a situation where contracts for the replacement of key components of the refineries took more than ten months to receive approval did not make for their optimal operation.

Expressing optimism that operations at the refineries were on course to come back on stream, Kyari said when the rehabilitation exercise, for which $1billion was borrowed from AFREXIMBANK, would be completed by the third quarter of next year, at least 90 percent of their installed refining capacities would be restored.

Although he commended NNPC engineers for their involvement in the rehabilitation of the refineries, he said they would however not be involved in the operation of the refurbished refineries.

Rather, he said the NNPC has put a mechanism in place that would allow a competent contractor to run the plants on an operate and maintenance (O&M) basis.

The two refineries in Port Harcourt have combined installed refining capacity of 210, 000 barrels per day, while Warri Refinery has 125,000 barrels per day installed capacity and Kaduna Refinery has 110,000 barrels per day.

With NNPC putting the country’s daily national consumption of petroleum products at an average of about 74 million litres as at April 2022, Kyari said even if the four refineries are back on stream and producing at 90 percent of installed, the country would still need to import products to meet the shortfall.

However, he said the importation exercise may not continue beyond the third quarter of the year, as the completion of the 650,000 barrels per day capacity Dangote Refinery is also expected about the third quarter of next year.\

With 20 percent equity holding in the Dangote Refinery, Kyari said the NNPC was confident it would be entitled to a right-of-first-refusal on refined products from 20 percent of crude oil supply to the plant.

“With the coming of the global energy transition challenge, we (NNPC) knew that a time will come when we will look for people who will buy our crude and will not find.

“We locked down our ability to sell a minimum of 3,300, 000 barrels of crude oil to Dangote Refinery for the next 20 years. By right, the agreement we signed allows NNPC access to 20 percent of the production from that plant.

“That means, whatever it does, we have a right to take 20 percent of that production as part of our equity. If this refinery comes on stream by mid of next year, this alone has 650 000 refining capacity, and a different technology that allows the production of up to 50 million liters of PMS,” he said.

With a combined production capacities of Dangote Refinery and the four refurbished refineries, Kyari said the country would have enough supply of petroleum products to “completely eliminate any importation of petroleum products into the country from next year”, he said.
“You will not see any more importation of petroleum products into this country next year. When the NNPC is done with our own refineries, there are very many other small initiatives on modular and condensate refineries that are being built, in addition to the Dangote Refinery.

“We are very optimistic that will happen. You will see that this country will now be a net exporter of petroleum products not just to the West African sub-region, but to the rest of the world,” Kyari said.

Lamenting the impact of vandalism and crude oil theft on the downstream sector of the industry, Kyari said this posed the most challenge to the company, particularly its effort to ensure stability in the supply of petroleum products in the country.
Underlining the importance of providing facilities for storage and transportation of petroleum products, the NNPC GCEO highlighted the menace of vandals on the products and crude pipelines.

To highlight the enormity of the challenge, Kyari said none of the major pipelines from Atlas Cove in Lagos to Ibadan in Oyo State as well as others connecting all the 27 fuel depots across the country are taking the petroleum products today.

Citing the example of the pipelines from Warri to Benin, he said the system was shut down over 15 years ago, because every drop of petroleum products usually fed into always gets lost.

“There’s no way you will continue to put products on those lines when the delivered volume is only 30 percent.,” he said.
To forestall the disruption of products supplies, as a result of the sabotage of the pipelines, the NNPC boss said the company was compelled to resort to trucking of products by road.

However, with over 2500 trucks loading products from different depots across the country for deliver at filling stations, he said the trucks, some of which convey about 60,000 litres, pose a different challenge on the roads.

Apart from its investment of over N600 billion on the construction of 27 roads across the country to guarantee smooth distribution of products, Kyari said the NNPC was building a national fuel reserve company to manage a strategic fuel reserve close to the people.
He said build and operate contractors that would be selected to run the reserve company would also manage the risks and the products pipelines on a commercial basis.

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