The plan by the Federal Government to rehabilitate the Port Harcourt refinery at a whopping cost of $1.5 billion has attracted diverse reactions from Nigerians, with most of them opposing the plan. The Minister of State, Petroleum Resources, Chief Timpreye Sylva, disclosed that the decision to rehabilitate the refinery was taken at the 38th virtual meeting of the Federal Executive Council (FEC) presided by President Muhammadu Buhari.
According to the Minister, the rehabilitation of the refinery, the largest in the country, will be done in three phases of 18, 24 and 44 months. The contract was awarded to an Italian firm, Tecnimont Spa, said to be expert in refinery maintenance. Also, the funding, the minister disclosed, will be sourced from the Nigeria National Petroleum Corporation (NNPC), Internally Generated Revenue (IGR), budgetary allocations and Afreximbank, a leading finance institution based in Cairo, Egypt providing the bulk of the funding. The contract details also revealed that local content will be involved in the final execution of the project. Also, the Group Managing Director NNPC, Mele Kyari, has defended government’s position and why it preferred to repair the refinery instead of investing in new refineries or divesting part of government’s shareholding in the nation’s four refineries. According to him, the country does not have the financial muscle now to build a new refinery going by the prevailing economic situation.
Besides, he argued that building a new refinery now would cost the country a hefty $10billion, which is far beyond the $1.5bilion earmarked for the rehabilitation of the Port Harcourt refinery. Beyond that, he explained that Nigeria would have to live with the current importation of petroleum products, especially petrol, for at least another four years if the country embarks on building a new refinery, which many Nigerians consider the best option.
Despite the government’s explanation, we believe that the decision to repair the Port Harcourt refinery with $1.5billion is not tidy. We think that other contingency factors were not factored in before the Federal Executive Council arrived at its decision. The indisputable fact remains that the Port Harcourt refinery and the other three have continued to incur incalculable losses. For instance, the Port Harcourt refinery incurred over N47 billion, almost N4billion monthly in 2019, and generated no revenue during the same period. A better option would have been for the refinery to be sold to investors. But the government thought otherwise. It is, therefore, wasteful to refurbish the refinery with such a colossal amount.
So far, available statistics showed that the government had spent over $1.6billion on Turn-Around Maintenance (TAM) of the four refineries located in PH, Warri and Kaduna without any sign of improvement. It is disheartening that as the fifth largest exporter of crude oil in the world, Nigeria spends over $16million per day in importing refined petroleum. In four years alone, the four refineries cost the country $396.3million in maintenance. The total utilisation capacity of the four refineries was estimated at below 40 per cent of the total refining capacity. This makes our refineries the worst performing in Africa.
The poor state of the nation’s refineries mirrors the mismanagement of prized national assets that have put Nigeria in sorry spotlight among oil-producing countries. The Port Harcourt refinery was built in 1965 and operated and managed by defunct Shell BP. Its initial installed capacity was 35,000 barrels per day. Ownership of the refinery was passed to the Federal Government in 1970, and its capacity was upgraded to 60,000 bpd. And in 2020, its refining capacity was only 90, 000bpd out of the combined capacity of 210,000bpd.
There is concern that the amount earmarked for the refurbishment of the Port Harcourt refinery could end up being a waste considering the fact that private refineries are coming on stream soon. For example, the $12 billion Dangote refinery being constructed on 6180 acres of land between the Atlantic Ocean and Lekki Lagoon, which is expected to process about 650,000 bpd of crude oil per day, will soon be in operation. We believe that private sector participation in ventures like refineries is the right thing to do.
It is high time that government stopped money guzzling ventures, especially at this period of cash squeeze. The fact is that the constraints of the Port Harcourt refinery could be traceable to the abysmal performance of the other refineries in the country, in addition to inadequate products evacuation facilities. Overall, government should rethink the decision on the Port Harcourt refinery and come up with better options that are less prohibitive. We believe that contrary to the assertion of the NNPC boss, building new refineries will be a better option.