In a strategic effort to crash fuel prices and guarantee energy security, the Nigerian National Petroleum Corporation (NNPC) has carried out a detailed audit of the government’s ailing refineries and mobilised funds and technical resources to restore them to full operating capacity within the shortest possible time.
The move has been applauded by industry experts and consumers, especially now that government has discarded the contentious subsidy regime and embraced full deregulation, where market forces determine the price of petroleum products.
While energy challenge has remained the blight of the nation’s economy for decades, global records show that Nigeria is about the only major oil-reliant country without local refining capabilities.
This scathing development has consistently drained its lean foreign reserves through scandalous deals that entail exporting premium crude oil and importing low-grade refined products in return.
To change the ugly narrative, the Group Managing Director of the NNPC, Mr. Mele Kyari, at a recent interview disclosed that all the nation’s four refineries (Kaduna, Warri, Port Harcourt and Indorama Petrochemical, Eleme), are set for major rehabilitation. The four refineries have a combined capacity of 444,000 barrels per day.
The NNPC boss explained that they were deliberately shut down, having been starved of the mandatory routine turnaround maintenance and major rehabilitation, despite the huge chunk of money voted for them over the years.
Kyari said: “What you call rehabilitation is different from turnaround maintenance (TAM). TAM is a routine endeavour. When you talk about rehabilitation, that means you have colossal loss of capacity in the refineries. It means you’ve not done TAM properly, you’ve not replaced parts as and when due and it has gotten to a point where you’re not able to operate the refineries in the full installed capacities.
“Every refinery is expected to operate at least 90% of installed capacity.
“With all the TAM down, it was impossible to run any of these refineries at 90 per cent capacity. Our estimate was that we could run at 60 per cent capacity but if we do that, it’s simply value destruction. You take a $100 crude and bring out $70 product, it doesn’t make sense.
“We want to make them work and that’s why we’re doing full rehabilitation. Refineries are like aircraft. I’ve visited refineries that are over 100 years old that are still still functioning. Refineries don’t die like cars or other assets”, he explained.
To save cost and hefty consultancy fees, in the programme to rehabilitate refineries, the NNPC has looked inwards and leveraged on local competence by appointing its engineering subsidiary, National Engineering and Technical Company, NETCO/KBR as Owners Engineer (OE) for the Port Harcourt and Warri refineries in May.
The NNPC management has also issued invitation to tender for the repair of Port Harcourt refinery and signed a $1.5 billion prepayment deal that will see it selling crude to some oil trading companies in exchange for the prepaid money. The financing package, called Project Eagle, was backed by the African Export Import Bank (Afreximbank).
Another major effort to revamp the refineries was the signing the engineering, procurement and construction (EPC) contract to boost the country’s liquefied natural gas output by more than 30 per cent.
Construction activities will begin in the first quarter of 2021 and financial close will be achieved for the Port Harcourt by November 2020.
For the Warri and Kaduna refinerie, following the conclusion of stopping, Owners Engineers have been selected for KDR and NETCO. The financing of Warri and Kaduna has advanced to term sheet level with Luke Oil and other commercial banks. This process will lead to issuing of tenders for EPC contract to list EPC contractors that have been cleared by BPP. These are for the refineries.
For the associated pipelines for crude and produce transportation, public tenders have been done to partners on build, operate and transfer. The completion target is before 2023.
Before getting to this point, detailed technical inspection of PHRC by Technimont SpA (the representative of the Original Refinery Builder) was completed in October 2019.
Subsequently, NETCO and KBR were appointed as Owners Engineer and Project Management Consultants in May. Shortlist of bidders for the EPC project was approved in June, while approval of financing of the project to progress with Afrexim Bank to raise $1b billion by NNPC BoD was in July.
In August, prequalification of bidders was done, while a Certificate of No Objection from Bureau of Public Procurement (BPP) for the provision of EPC services to progress to the next phase was issued in August.
Issuance of Invitation to Tender to bidders was on and the award of EPC to best globally reputable EPC Contractor took place in December 2019.
Mobilization to site is expected to be on the first quarter of 2021 and the precommisioning is expected to be in the first quarter of 2023.
Records reveal that Nigeria, through NNPC, has in the past 25 years spent billions of dollars in turnaround maintenance of the refineries, the latest being over $396 million spent between 2013 and 2015 with nothing to show for it.
Another reason for the closure of the refineries was because of the difficulties in feeding them with crude oil via the pipelines, which have been frighteningly compromised by vandals.
“That means you’re not able to deliver crude oil to them to operate to the maximum of their capacity. That is not what we want. So, our target is that when they come back to life, they’ll run over 90% capacity. We’re also working with the private sector to establish condensate refineries”, Kyari once said.
In the area of protecting petroleum assets, the Kyari-led NNPC has been suing for peace and mending broken relationships among petroleum stakeholders and host communities to ensure hitch free operations when the refineries eventually roar back to life.
To get them up and running, the incumbent NNPC management has carried out a detailed scoping of Port Harcourt and Warri refineries to determine what is needed to be done in each of the assets.
Earlier in the year, the Senate mandated its Committee on Downstream Petroleum Sector to carry out a holistic investigation on the turnaround maintenance. The resolution was sequel to a Point of Order raised by Yusuf Yusuf (APC-Taraba Central) during plenary.
It also mandated the committee to convene a stakeholder’s conference with the aim of finding the best way to revamp ailing refineries in order to favourably compete in the international market within the shortest period of time.
The Port Harcourt refinery, 210,000 barrels per day complex conversion plant is operated by the Port Harcourt Refining Company (PHRC) Limited, a subsidiary of the NNPC.
The PHRC is made up of two refineries located at Alesa-Eleme, Rivers State. The old refinery has a refining name plate capacity of 60,000 barrels per day and was commissioned in 1965, while the new plant with name plate capacity of 150,000 barrels per day was commissioned in 1989. The plant utilises bonny light crude oil to produce Liquefied petroleum gas (LPG), premium motor spirit (PMS), Dual Purpose Kerosene (DPK), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO) and High Pour Fuel Oil (HPFO).
The Warri refinery was established in 1978 with a refining nameplate capacity of 100,000 barrels per stream day plant and was debottlenecked to 125,000 barrels per stream day in 1987. The refinery is located at Ekpan, Warri, Delta State, and it is operated by the Warri Refining & Petrochemicals Company (WRPC) Limited, an NNPC subsidiary. The refinery was installed as a complex conversion plant capable of producing Liquefied Petroleum Gas (LPG), Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK), Automotive Gas Oil (AGO), and Fuel Oil from a blend of Escravos and Ughelli crude oils’. WRPC has a petrochemical plant complex that produces Polyproylene, and carbon black from the propylene-rich feedstock and decant oil from the Fluid Catalytic Cracking unit (FCCU).
For the Kaduna refinery, it has a name plate refining capacity of 110,000 barrels per day and is located in Kaduna, KadunaState. The plant is run by the Kaduna Refining and Petrochemicals (KRPC) Limited, another subsidiary of NNPC and has a complex conversion configuration. The KRPC possesses a fuels plant commissioned in 1983 and the 30,000 MT per year Petrochemical Plant in 1988. The refining plant has two distillation units that utilise Escravos and Ughelli crude oils’ for fuels production and imported heavy crude oil for lube base oil, asphalt and waxes. Products obtained from KRPC include Liquefied petroleum gas (LPG), Premium Motor Spirit (PMS), House Hold Kerosene (HHK), Aviation Turbine Kerosene (ATK), Automotive Gas Oil (AGO), Fuel Oil. The petrochemical plant produces Linear Alkyl Benzene (LAB).
Finally, the Indorama Eleme Petrochemicals Company Limited (IEPL), formerly known as Eleme Petrochemicals Company Limited (EPCL) was acquired in 2006 from the NNPC during the privatization programme by Indorama as the Core investors. The complex is located at Eleme, Rivers State, and has 22,000 tonnes per annum (TPA) Butene-1, 270,000 TPA Polyethylene, and 80,000 TPA Polypropylene plants that process natural gas liquids (NGL) from Nigerian Agip Oil Company (NAOC) and propylene-rich feed from Port Harcourt refinery to produce a range of Polyethylene and Polypropylene products. IEPL rehabilitated the previously under utilized plant, and through prudent management has over the years stabilized petrochemicals production and is on the verge of expanding the plant complex.