Nigerian National Petroleum Corporation (NNPC) has announced the commencement of rehabilitation work in Nigeria’s crippled 210, 000 barrels per day (BPD) capacity refinery in Port Harcourt, Rivers state.
Port Harcourt refinery comprises the old 60, 000bpd plant built in 1965 and the more modern 150, 000bpd plant commissioned in 1989. It has been dormant for seven months. Nigeria’s four refineries have very delinquent maintenance history. Two months ago, Maikanti Baru, NNPC’s group managing director confessed that the refineries had not been rehabilitated in the last 30 years despite billions of dollars flushed down the drain in the name of turnaround maintenance (TAM).
The historic TAM of Port Harcourt refinery is a strange project to be executed by an Italian firm named Maire Tecnimont S.p.A. NNPC claims that when the first phase of the rehabilitation is completed, the refinery’s installed capacity utilisation would rise to 60 per cent. The plant capacity utilisation is expected to surge to 90 per cent at the completion of the TAM.
Nigerians have heard such promises before. The National Assembly approved $1.6 billion foreign loan for the TAM of the four refineries on similar promises by Diezani Alison-Madueke, Nigeria’s immediate-past minister of petroleum.
No TAM was carried out on the refineries and no one knows precisely what happened to the money.
In 2015, the managers of the refineries told a different story when Ibe Kachikwu was appointed group managing director of NNPC. There were claims that local personnel and materials had been used to repair the refineries and that their capacity utilisation had surged tremendously. The miracle lasted a few weeks and fizzled out. The refineries returned to their historic dormancy.
For the TAM on Port Harcourt refinery, NNPC has practically given the Italian firm a blank cheque to execute the contract. There were no competitive bids. No one in Nigeria knows the cost of the project. Even the contractor does not know. Maire Tecnimont would work for several months after signing the contract before giving NNPC the cost of the TAM.
That may be an innovation in the award of contracts in the oil industry. This time first things are done last. NNPC has already taken Nigeria to the next level in contract scamming.
The ownership structure and maintenance of Nigeria’s four incapacitated refineries has been a thorn in the flesh of NNPC in the last three years.
Various options had been considered at different times as Nigeria spends $30 billion annually on refined petroleum products import. At first, Ibe Kachikwu who initially doubled as group managing director of NNPC and minister of state for petroleum resources came with conviction that government was a bad businessman and had consequently mismanaged the refineries through endemic corruption and bureaucratic stranglehold.
As a private sector technocrat he was determined to privatise the refineries.
That line of thought met a stiff resistance from the labour unions in the refineries who were pre-occupied with saving their members’ jobs even at the risk of shutting down the refineries.
The federal government itself rejected the full privatisation formula as a solution to the dwindling fortune of the refineries.
Government’s inability to fund the refineries TAM brought up the idea of joint ownership through which private sector oil firms would finance the TAM while the plant would be managed along the lines of the Nigeria Liquefied Natural Gas (NLNG) in Bony. That also failed.
The third option on the cards was concession. Under that option, the concessionaire would fund the huge cost of the TAM and recover its funds with interest as it runs the refineries after the maintenance. That option received the provisional nod of the men in Aso Rock.
Sometime in January 2019, Kachikwu announced that the federal government had struck a deal to give the concession of the Port Harcourt Refinery to Agip/Eni, the Italian oil giant. Agip was to rehabilitate and manage the plant in collaboration with Oando, a Nigerian oil firm.
From all indications, that option has again been jettisoned. The Italian firm to carry out the TAM of Port Harcourt refinery would obviously be paid directly by NNPC.
The irony of the whole gambit is that Nigeria is wasting its scarce resources in a venture that NNPC lacks the managerial acumen to run. Last year, the refineries lost N132 billion.
The federal government in its rigid statist posture has dogmatically refused to accept the fact that refineries management is not NNPC’s comfort zone.
The blank cheque contract signed with Maire Tecnimont is a calamitous misadventure and should be stopped immediately. If the concession option has failed, the refineries should be sold at market price to the highest bidders.
When the Dangote Refinery in Lagos comes on stream in April 2020 and effectively ends Nigeria’s shameful dependence on imported refined petroleum products, the federal government itself would abandon the refineries to rot away. That is what happened to Nitel’s facilities when GSM firms took competition in the telecoms industry to higher levels.
The first casualties of the federal government’s statist posture on the refineries would be members of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and National Union of Petroleum and Natural Gas Workers (NUPENG) who were so engrossed with protecting their jobs at the expense of Nigeria’s eternal dependence on refined petroleum products imports.
They would suffer the fate of Nitel staff.
