Buhari, Sylva, Kyari, NNPC’s $2.98bn phased refinery repairs hit dead end

 BY BEN EGUZOZIE 

• Local engineers at site sent home
• Funds drawdown dry up 
• One party defaults in commitment – inside sources
• Contractor scales down operations at site
• Plant misses many restart dates 

Former president Muhammadu Buhari who doubled as substantive minister of petroleum resources, assisted by junior minister, Timipre Sylva and Mele Kyari, group chief executive officer of Nigerian National Petroleum Company Limited (NNPCL) who was position to be running ground operations, may have taken Nigerians for a big ride on the repairs and rehabilitation of government owned refineries as work has long hit a dead end.

So as millions of Nigerians trudge under the heavy weight of mounting transportation costs, the fall out of the removal of petroleum products subsidy by President Bola Tinubu in his first major policy directive on inauguration day, any hopes of soon seeing a downward move on petrol pump prices from the restart of production at the Port Harcourt Refining Company (PHRC), the nation’s first and biggest oil refinery, and later Warri Petrochemicals & Refining Company (WPRC) and Kaduna Refining & Petrochemicals Company (KRPC), appear a forlorn dream. 

Restart deadlines for the refineries, in particular Port Harcourt and Warri, have already been missed in March, April, and June this year.

Business A.M. has learnt that funds to continue the $1.5 billion (N600 billion) 44 months phased repairs of PHRC, with a nameplate combined production capacity of 210,000 bpd, as well as the $897 million WPRC have dried up, knowledgeable inside sources told Business A.M. exclusively. 

Our sources, some of whom are the engineers and other skilled and unskilled labour force being used for works at the refineries, informed that one of the funding parties has defaulted in its financial commitment to the rehabilitation works. This will throw up more delays in delivering the projects, thereby adding a wrinkle to the expectations of Nigerians of any lowering of PMS prices later.

One dependable source at the Port Harcourt refinery in Alesa Eleme, about 30 km east of Port Harcourt city centre, told this newspaper on phone that the contractor, Tecnimont SPA of Italy, has drastically scaled down repair operations on the 60,000 bpd refining plant, fearing to incur further debts in payments to workers as daily and weekly emoluments and other logistics.  

The plants (PHRC 1 built in 1965 by Shell, and PHRC 2 inaugurated in 1989) have a combined production capacity of 210,000 bpd. They have been idle since about 2016. The last turnaround maintenance (TAM) was carried out on the plant in 2000.

Similar scenarios, the source further said, are also playing out in Warri (WPRC) and Kaduna (KPRC).

Funding of the refineries’ repairs were to come from many components, including the NNPC Limited, the owning  company, internally generated revenue, budgetary provisions, and the Africa Export-Import Bank (Afreximbank). 

In March 2021, the then federal executive council (FEC) led by former president, Muhammadu Buhari, approved $1.5 billion (or N600 billion) to rehabilitate the Port Harcourt refinery. The contract was awarded to Tecnimont SPA of Italy with a 44-month delivery date. Former minister of state for petroleum Timipre Sylva later said the rehabilitation (of PHRC) was “being completed and [the refinery] would be started by the first quarter of 2023”. This did not go as he had said. 

Similarly, in August 2021, the then FEC approved $1.48 billion to rehabilitate the Warri and Kaduna refineries, $897 million for WPRC and $585 million for KRPC. The contracts were awarded to Messrs Saipem SPA and Saipem Contracting Ltd, in three phases of 21, 23 and 33 months. Former president Buhari had said Warri refinery would deliver fuel before the first half of 2023 (H1 2023). Evidently, this won’t happen. 

In addition, the NNPCL, the owner company of the four refineries (Port Harcourt 1 & 2, Warri and Kaduna) also signed a $740 million maintenance service contract with Daewoo Engineering & Construction Nigeria Ltd for a quick-fix repair of KRPC.

Since late 1980s, none of Nigeria’s four refineries has managed to achieve optimum production. By 2022, the batch of operators and managers who were recruited and trained in 1987 to run the PHRC 2 (then called New Port Harcourt Refinery) inaugurated in 1989 would have clocked 35 years in service, and probably due for retirement, but without for once achieving the feat of running the plant at optimum capacity. Till date, the plant with installed refining capacity of 150,000 barrels per day, and built at the cost of about $500 million, remains Nigeria’s latest effort at building a modern refinery.

Built for export, PHRC 2 products were to be piped to the expanded jetty at Okrika to move products to much bigger vessels stationed off the coast of the Bonny Export Terminal via a pipeline. Later, a new loading Bay was built to handle domestic products distribution to the North through Aba, Enugu, Makurdi, and Gombe.  The new refinery was also programmed to produce raw materials for other sectors in the petrochemicals sector through its Fluid Catalytic Cracking and Alkalinisation units. But the latter never really got off the ground.

Emphasis had since shifted away from the old refinery (PHRC 1) earlier built in 1965 at a location called Area F near the new plant. Operations at the old workhorse had stalled about 1990-1991 shortly after PHRC 2 came on stream. Several efforts to re-stream the plant through a rehabilitation by Soimi SPA of Italy failed spectacularly. A last-ditch turnaround maintenance in 2000 also failed. For 23 years now, the old refinery has been allowed to die a slow death as Nigeria created new billionaires from an opaque and corruption laden subsidy regime. 

Over the years, the politics and economics of illegal petroleum bunkering, convoluted product importation and racketeering, pipeline vandalism, and of late, industry-level crude theft, have combined to cripple Nigeria’s petroleum business which was planned to be the catalyst of the country’s economic transformation.