By Michael Eboh

News that two of country’s refineries have resumed production, with the third scheduled to resume production in the next few days, might have raised hopes of a speedy resolution of the fuel crisis, but one major issue of concern is how much is the refineries constant shut down, repairs and maintenance costing the nation and when would the refineries be fixed once and for all.

A picture taken on September 16, 2015 shows workers trying to tie a pipe of the first refinery in Nigeria, which was built in 1965 in oil rich Port Harcourt, Rivers State. The Port Harcourt refinery is Nigeria's oldest, built in 1965, nine years after crude was first found under the marshy soil and creeks of the delta, where the Niger river meanders to the Gulf of Guinea. Refineries in nearby Warri and Kaduna in the north central region were built in the years that followed, while a new plant was added to the same site in Port Harcourt in 1989. In recent years, however, it became a byword for corruption, a murky, state-run body where billions of dollars in revenue apparently disappeared. AFP PHOTO
A picture taken on September 16, 2015 shows workers trying to tie a pipe of the first refinery in Nigeria, which was built in 1965 in oil rich Port Harcourt, Rivers State. The Port Harcourt refinery is Nigeria’s oldest, built in 1965, nine years after crude was first found under the marshy soil and creeks of the delta, where the Niger river meanders to the Gulf of Guinea. Refineries in nearby Warri and Kaduna in the north central region were built in the years that followed, while a new plant was added to the same site in Port Harcourt in 1989. In recent years, however, it became a byword for corruption, a murky, state-run body where billions of dollars in revenue apparently disappeared. AFP PHOTO

In spite of recent claims by the NNPC that the resumption of the refineries would help reduce the impact of the fuel crisis and help reduce importation, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, had a few days ago pointed to the contrary.

Particularly, Kachikwu, had in March, stated that at that point in time, importing Premium Motor Spirit, PMS, also known as petrol, is cheaper than producing the product in the country’s refineries.

Kachikwu had told newsmen 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. This means that the country would still resort to importation to meet up with the shortfall.

He stated that until the upgrade and total refurbishment of the refineries are concluded, as well as ensuring that the pipelines are fixed, it would be uneconomic and very expensive to refine PMS locally.

He maintained that local refining of PMS would make much more economic sense if all the refineries undergo full set of repairs and Turn-Around Maintenance, TAM, and when new refineries are set up in the country through the co-locative initiative.

He said: “Most modern refineries are configured in such a way that your stock of PMS outage is a lot higher, 70 to 80 per cent. So when we do import the product, we actually save money; we get it less expensive than when we do it here.

“But having said that, the reality is that until we have alternatives in terms of co-locative refineries which we are looking at; until we finish the total refurbishment to improve and upgrade the refineries, it does not make sense to use it with some of the deficiencies.

“This is because distribution is key. If you have product in Kaduna for example, pumping into the north becomes easy as opposed to moving, as we do whenever we have a crisis – trucks all the way from Lagos and Oghara, out to the north.”

In addition, almost on a yearly basis, billions of naira are spent on the repairs or Turnaround Maintenance (TAM) of the country’s refineries, yet, the refineries hardly operate for up to 90 days in a year. Whenever the refineries resume production after a lengthy repair work, they hardly operate for up to 30 days before they are shut down again; and this cycle continues, year in, year out.

Specifically, a few weeks ago, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, disclosed that the country requires $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.

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 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 had 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 it shut down.

Between 2015, after President Muhammadu Buhari was sworn into office, the country had undertaken two repairs of each of the refineries, as well as several repairs of the country’s pipeline network.

So, it was viewed as irritating in some quarters, when Kachikwu told members of the National Assembly that the country requires $500 million to fix the refineries.

However, realizing that the country is facing a cash squeeze, Kachikwu said the government is considering the co-location option, whereby, private investors are allowed to build new refineries beside the existing refineries, so that they can make use of the existing facilities serving the refineries.

To this end, stakeholders are hopeful that the co-locative refineries’ initiative will address the problem of local refining of crude oil and fuel imports once and for all, and also help the country save the huge resources it is expending on the unending repairs, TAM and servicing of the refineries.

 

 

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