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Recurring Failed Promises On Refineries: Will Kyari be different?

ByBassey Udo

Jul 31, 2019


None of the Group Managing Directors of the Nigerian National Petroleum Corporation (NNPC) since 1993 has delivered on the promise to rehabilitate the country’s four refineries, despite billions spent on turnaround maintenance (TAM) contracts.

Records on the exact expenditure on the contacts have been scarce. NNPC spokesperson, Ndu Ughamadu, said records of expenditure on TAM are not readily available.

He said the last time TAM was done on the refineries was at least 10 years ago. “What we are doing now is a complete overhaul of the refineries. I don’t have the records of the budget or expenditures, except I ask the refineries,” Mr Ughamadu said.

TAM is a planned partial or full shutdown of one or more units of the refinery for inspection, repair, and maintenance of equipment to ensure safe and efficient operations.

However, findings by this newspaper show between 1993 and 2016, the federal government, through the NNPC, may have spent about $6.065 billon on the rehabilitation of the four refineries at various times.

Between 1993 and 1998, during the Ernest Shonekan-led Interim National Government and the Abdulsalami Abubakar-led Transitional administration, the NNPC had Chamberlin Oyibo (1993-1995) and Dalhatu Bayero (1995-1999) as GMDs. Both spent about $308 million for the repair of the refineries during the period.

Also, between 1999 and 2007, about $1.67 billion was spent on the repair of the refineries. This does not include about $39.7 million said to have been voted by the Abdulsalami Abubakar administration in the 1999 transition budget prepared for the then incoming Olusegun Obasanjo administration.

The Obasanjo administration came with an agenda to reform the oil industry. Part of the National Oil and Gas Policy objectives included the rehabilitation of the refineries to achieve self-sufficiency in domestic fuel supply.

During the period, the NNPC, under the Jackson Gaius Obaseki (1999-2003) and Funsho Kupolokun (2003–2007) as GMDs, awarded various TAM contracts.

The Nigerian Extractive Industries Transparency Initiative (NEITI) Audit Report 1999-2004 revealed no money was released by the government for TAM between 2002 and 2004.

Regardless, findings showed a total of about $2.06 billion was spent during the period.

Bottomless Pit

Former NNPC’s GMD, Funsho Kupolokun, once described the country’s refineries as the ‘proverbial bottomless pit’, apparently for gulping so much resources without any commensurate result.

Out of about $1.74 billion spent between 1999 and 2016 on the refineries, Mr Kupolokun said about $1 billion was spent on TAM.

Abubakar Yar’adua succeeded Mr Kupolokun as GMD of NNPC between 2007 and 2009. During his tenure, the Umaru Yar’adua administration (2008-2010) shut down all the refineries for a comprehensive TAM.

Prior to the decision, the administration revoked the sale of the Kaduna and Port Harcourt refineries in the twilight of the Obasanjo administration to Bluestar Consortium promoted by Femi Otedola and Aliko Dangote.

The administration promised to rehabilitate the refineries using local contractors. The contract was awarded to an Italian firm, Maire Tecnimont, to conduct a six weeks technical audit of equipment at the Port Harcourt Refinery ahead of the TAM.

At the end of the exercise, the condition of the refineries hardly improved. Yet, then GMD of NNPC confirmed about $57 million was spent.

The TAM in Kaduna refinery was scheduled for completion between November 15, 2008, and January 15, 2009. Warri Refinery was to be rehabilitated later.

Mr Yar’Adua was succeeded by Mohammed Barkindo (2009-2010) who announced in 2009 that the NNPC spent about $20 million on the Kaduna TAM, out a total $200 million voted for the TAM in the annual budget.

Shehu Ladan, who took over from Mr Barkindo, spent only seven weeks as GMD of NNPC before being sacked by then President Goodluck Jonathan. His tenure was too short to embark on any TAM on any of the refineries.

He was succeeded by Austen Oniwon (2010-2012) under whom about $900 million was spent on the rehabilitation of the refineries.

Shortly after his appointment, Mr Oniwon outlined “NNPC’s grand plan to refurbish and upgrade existing units of the refineries through the execution of a comprehensive TAM exercise.”

The plan, he said, involved going back to the original contractors who built all the units to ensure an effective and total refurbishment of the plant.

Under Andrew Yakubu as GMD NNPC (2012-2014), about $1.6 billion was spent in 2013 on the rehabilitation of the refineries.

In 2014, then Minister of Petroleum Resources, Diezani Alison-Madueke, said about N251 billion was earmarked for the TAM Port Harcourt refinery.

The minister said another $32 million was already spent on the purchase of materials for the repairs scheduled for completion by the fourth quarter of the year.

Then Group Managing Director of the NNPC, Andrew Yakubu, assured that on completion the refineries would refine about 370,000 barrels of crude oil per day, or 90 per cent of the combined 445,000 barrels per day capacity the refineries.

Kachikwu stakes honour

In 2015, on assumption of office as NNPC GMD, Ibe Kachikwu described the refineries as scraps. He said about $500 million would be required to fix all of them.

The Idika Kalu-led National Refineries Special Task Force, which probed the state of the refineries in 2012, recommended the outright sale of the refineries within 18 months.

Mr Kachikwu fixed December 2019 as the deadline for all the refineries to attain full production capacity to end fuel importation in the country.

At that time, Mr Kachikwu said original builders of the refineries from Japan and Italy demanded about $297 million for the TAM on the refineries.

Because NNPC could not afford the high cost, he said the companies opted out of the contract. To cut cost, he said the NNPC mobilised its engineers and local oil servicing firms to carry out the TAM at below $10 million. In 2016, about $50 million was voted for the same purpose.

Despite all the expenses, the operating capacities of the refineries remained abysmally low, between zero and 20.66 per cent of the combined installed capacity of 445,000 barrels per day. Later he shifted the deadline

During an interview on the BBC World Service programme, HardTalk, Mr Kachikwu vowed to resign his appointment if the refineries do not work to enable Nigeria to end fuel importation by 2019.

In the dying days of his tenure, the minister again shifted the deadline to 2020, when he expected the refineries to refine about 1.1 million barrels per day.

He observed no conclusive turnaround maintenance was done on any of the refineries in the last 10 to 15 years.

It appears the 2020 deadline will not be realistic, as Mr Kachikwu was not among those re-appointed this week by President Muhammadu Buhari into his cabinet.

It is not clear if his failure to return to the cabinet is due to his failure to fulfill his vow on the four refineries.

Experts say it is the standard global best practice for TAM to be conducted routinely on refineries every three to five years to keep them functional at optimal productivity capacity.

In January this year, the immediate past GMD of the NNPC, Maikanti Baru, said no turnaround maintenance was carried out on the four refineries “for an aggregate of 42 years combined.”

With such a revelation from such a highly placed official who should know, what happens to all the promises and expenses on the TAM on refineries by successive NNPC management? Were they empty promises meant to serve as a funnel for scarce resources?

Data obtained from the NNPC showed that the new Port Harcourt Refinery has undergone TAM only thrice since it was inaugurated in 1989. The last TAM was in 2000.

The old Port Harcourt Refinery commissioned in 1965 has only undergone a major rehabilitation work in 1989, with the first and only TAM conducted in 1998. The TAM in Warri Refinery was last carried out in 2004.

Despite the TAMs, the refineries’ utilisation capacities have remained abysmally low. Statistics from the NNPC monthly Financial and Operations Report for May 2019 showed the average capacity utilisation of the three refineries at Warri and Port Harcourt stood at about 5.84 percent.

Only 32,967MT of crude oil was processed during the month, against zero quantity processed in April 2019. Only Warri refinery produced the entire 21,347 MT of refined products for the month. The refinery in Kaduna has been out of production for months.

The South-West Chairman of the Nigeria Union of Petroleum and Natural Gas Workers, Tayo Aboyeji, told Vanguard newspaper that t is “ridiculous” for the NNPC to spend billions of dollars on refineries TAM without anything to show in the past 15 years now.

SN          Name    Tenure TAM

1              Chamberlin Oyibo             1993-1995            $216million

2              Dalhatu Bayero 1995-1999            $92million

3              Jackson Gaius Obaseki   1999-2003            $1.67billion

4              Funsho Kupolokun          2003–2007           $39.7million

5              Abubakar Yar’adua          2007-2009            $57million

6              Mohammed Barkindo    2009-2010            $20million

7              Shehu Ladan      2010       NA

8              Austen Oniwon 2010-2012            $900million

9              Andrew Yakubu                2012-2014            $1.92billion

10           Ibe Kachikwu     2015-2016            $10million

11           Maikanti Baru    2016-2019            NA

                Total                     $6.065 billion

Kyari’s promise

During his inauguration as the 19th GMD of NNPC, Mele Kyari, promised: “We will deliver on the rehabilitation of the four refineries within the life of this administration and support the private sector to build refineries.”

Mr Kyari he will deliver his promise through the building of strategic partnerships to ensure Nigeria becomes a net exporter of petroleum products.

He said Public-Private Partnership in the revamp of the refineries is about the involvement of private individuals in the building of conventional and modular refineries.

Mr Kyari said the NNPC will be accountable and transparent. He said the corporation will make it possible for individuals to order and pay for petroleum products online and get it delivered to their petrol retail stations.

Will he be different?

For years, the NNPC was notorious for being opaque in its operations. Its operational processes were shrouded in secrecy. It was not accountable to anyone. For several years, its various business units were declaring losses.

Since 2015, in line with it its determination to embrace reforms, the NNPC has demonstrated transparency and accountability in its operations.

The corporation has been publishing its monthly Financial and Operational Report since December 2015. The reports include details on all aspects of NNPC’s operations and accounts for public scrutiny.

The NEITI Executive Secretary, Waziri Adio, describes the new NNPC GMD as “a well-known champion of transparency, who shared the principles underlining NEITI’s work and the global EITI on good governance of the oil and gas industry.”

Also, the Secretary-General of the Organisation of Petroleum Exporting Countries, Mohammed Barkindo, described Mr Kyari’s appointment as a testament to his exemplary record and exceptional performance over the years in his career at the NNPC.

Until his appointment, Mr Kyari was Nigeria’s National Representative at the OPEC.

In his farewell speech on July 8, Mr Kyari’s immediate predecessor, Maikanti Baru, expressed optimism he was leaving the corporation in better hands.

“Kyari and his team are the most capable and caring leaders that would take the NNPC to greater heights,” Mr Baru said.

According to him, prior to his appointment, Mr Kyari was one of the ‘institutional memory’ of NNPC. He said apart from effectively managing the Crude Oil Marketing Division of the corporation, Mr Kyari handled the Direct-Sale Direct-Purchase scheme well.

With the scheme, Mr Baru said the NNPC was able to manage the petroleum products supply in the country.

Despite the accolades, however, Nigerians will wait to see if Mr Kyari’s promise on the refineries is not just another in the line of fake promises.

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